Bottom line: NetEase’s new California R&D center could become an important hub for its future global growth, while Zynga’s China pull-out reflects the extreme difficulties foreign firms face in the local gaming market.
NetEase opens US R&D center
Just a day after I wrote that online gaming giant Tencent (HKEx: 700) may be planning a major new drive into the US, we’re hearing that its top rival NetEase (Nasdaq: NTES) is also moving into the neighborhood with plans for a new California R&D center. NetEase’s move comes after search leader Baidu (Nasdaq: BIDU) and Tencent both set up US offices last year, though only Baidu actually announced a major new product development center. (previous post) All of these moves represent the Chinese companies’ efforts to tap into the Silicon Valley ethos, which has far more of the skills they will need in their quest to enter global markets outside of China. Read Full Post…
Bottom line: Baidu’s approach of targeting developing markets like Brazil and now the Middle East looks smart due to similarities with China and fewer rivals, while Tencent’s focus on the US looks dubious due to stiff competition.
Internet names in different global approaches
Having become some of the world’s most valuable online companies over the last few years, China’s big Internet names are now looking globally to maintain the kind of growth they’ll need to justify their sky-high valuations. All are trying a number of strategies, but 2 broadly defined camps are emerging: one targeting developing markets like the BRICS, which are less lucrative and more fragmented, but also less competitive; and the other targeting developed markets like the US and Japan that can be very rewarding but are also extremely competitive.
Search leader Baidu (Nasdaq: BIDU) is squarely in the developing market camp, with search operations in Brazil and Thailand, and now new signs it is targeting the Middle East for its next overseas expansion. Tencent (HKEx: 700) appears to be the latter camp, following a high profile entry for its WeChat service into the US last year that now appears to have ended as a very expensive flop. Alibaba (NYSE: BABA) appears to be trying both options, though we have yet to hear of any major spending on any campaigns besides a few small overseas acquisitions. Read Full Post…
Bottom line: The new purchase of 3 smaller rivals by Ourpalm could position the company as a consolidator for China’s fragmented gaming sector, and could be followed by one or more similar purchases in the next year.
Ourpalm buys 3 smaller rivals
A newly announced deal will see online game operator Ourpalm (Shenzhen: 300315) combine with 3 smaller rivals in a relatively large deal that could lay the foundation for a major new player to drive much-needed consolidation in the space. The new company looks interesting for a number of reasons, including Ourpalm’s existing connection with leading movie maker Huayi Bros, which could become an important strategic partner for the company.
Ourpalm could also become a strong platform to absorb some of the smaller Hong Kong- and New York-listed gaming companies that have struggled for investor attention due to stalling profit and revenue growth caused by their lack of scale. Potential players for future tie-ups could include recently listed Hong Kong players like Linekong (HKEx: 8267) and Forgame (HKEx: 484), or New York-listed Sungy Mobile (Nasdaq: GOMO), whose shares have all languished since their IPOs. Read Full Post…
A recent round of virtual “red envelope wars” was making waves in the microblogging realm in this final week before the Lunar New Year, in one of the many recent battles that have seen Internet titans Alibaba (NYSE: BABA) and Tencent (HKEx: 700) lock horns. This particular rivalry has gained wide attention in the Chinese headlines these last few weeks, though it’s worth noting that many others are staging similar copycat promotions following the huge success of Tencent’s original virtual hongbao promotion last year.
Meantime, the hyperactive Xiaomi moved offshore in its own bid to make sure it continues to garner attention, with a flurry of microblogging buzz related to its new move into the ultra competitive US market. Last but not least, several high-tech leaders extended their well wishes to Internet elder Lee Kai-fu, following his return to his Innovation Works high-tech incubator in Beijing more than a year after returning to his native Taiwan for treatment of cancer. Read Full Post…
Bottom line: China’s regulators are unlikely to veto the merger of taxi apps Didi and Kuaidi, and should encourage similar consolidation to allow for creation of Internet firms that can be globally competitive.
Yongche accuses Didi-Kuaidi of creating monopoly
Just a day after China’s leading 2 taxi apps announced their plan to merge, a series of observers are voicing concerns that the marriage would be anti-competitive and should be vetoed on antitrust grounds. The sudden debate about the merger of Kuaidi Dache and Didi Dache isn’t too surprising, since it would create a company that would control the vast majority of China’s market for taxi and private car services. But the regulator will need to decide whether such talk of monopoly is justified, since in many ways the newly merged company is still quite small and will also face strong competition from global rivals. Read Full Post…
Bottom line: The merger of Didi and Kuaidi taxi apps could mark the start of a new round of consolidation between non-core assets of China’s major Internet firms.
Taxi apps Didi and Kuaidi to merge
After 2 years of making nonstop headlines due to their intense rivalry, leading taxi apps Didi Dache and Kuaidi Dache are leading the news once more with a new and quite unexpected merger. But equally interesting was the fact that this merger also marked an unusual shift in the equally bitter rivalry between Internet titans Alibaba (NYSE: BABA) and Tencent (HKEx: 700), which are Kuaidi’s and Didi’s main backers, respectively. That element of the story has huge implications, as it shows that China’s “Big 3” Internet companies of Tencent, Alibaba and Baidu (Nasdaq: BIDU) may be willing to consider similar mergers of their non-core assets, paving the way for a new and much-needed round of consolidation in areas like online video, mapping and group buying. Read Full Post…
Bottom line: New online service platforms from Lenovo and Tencent could both do reasonably well, but will face challenges due to inexperience and product limitations, respectively.
Hisense, Tencent join hands in gaming smart TV
The “platform” concept is becoming a hot area in China’s overcharged Internet world, as companies look for newer and better ways to deliver their products and services over a growing number of devices and online channels. That rush is behind 2 of the latest big moves in the space, one from PC giant Lenovo (HKEx: 992) and the other from Internet titan Tencent (HKEx: 700).
Lenovo’s new foray into online products and services has been in the headlines for the last few months, but I’ve finally received some clarification on what exactly is behind its plans for an online platform with the new name of ShenQi. Meantime, Tencent is aiming to boost its leading position in the online gaming space through a new tie-up with household electronics giant Hisense (Shanghai: 600060). That tie-up looks set to produce a new gaming TV that could compete with more traditional consoles from Microsoft (Nasdaq: MSFT) and Sony (Tokyo: 6753). Read Full Post…
The Super Bowl may be the most watched TV program in the US, but it’s still relatively unknown in China due to the lack of popularity of American football. But the sport gained at least a few Chinese fans with its latest airing, as top executives from the likes of PC giant Lenovo (HKEx: 992) and online video firm LeTV (Shenzhen: 300104) tuned in to watch this year’s match-up that saw the New England Patriots defeat the Seattle Seahawks.
Meantime, an executive from the struggling Sina Weibo (Nasdaq: WB) was busy criticizing rival Tencent (HKEx: 700) for the latter’s freeze-out of several major Internet firms from its hugely popular WeChat instant messaging platform. Finally, we’ll end this week’s round-up of tech executive chatter with buzz that hints a former online literature pioneer may be preparing to emerge from a forced retirement, as he returns after a tough business battle of the sort that’s quite common in China. Read Full Post…
Bottom line: Alibaba’s Meizu investment is likely to spark a round of similar buying by major Chinese Internet firms, but could jeopardize Meizu’s access to the latest Android technology from Google.
Alibaba invests in Meizu
E-commerce giant Alibaba (NYSE: BABA) is finally making a smart acquisition to revive its flailing smartphone initiative, with word that it’s investing a hefty amount in the well-respected second-tier player Meizu. This particular investment comes just 2 months after another similar deal that saw security software specialist Qihoo 360 (NYSE: QIHU) form another tie-up with smartphone maker Coolpad (HKEx: 2369), and could auger a new wave of similar investments by Baidu (Nasdaq: BIDU), Tencent (HKEx: 700) and perhaps one or two other cash-rich Internet companies.
The news could provide some new breathing room for companies like Meizu and Coolpad, since they and many of their domestic peers are probably losing big money due to intense competition in China’s overcrowded smartphone space. But this new buying spree could also mean that competition is unlikely to abate anytime soon, since wealthy companies like Alibaba and Qihoo are unlikely to give up easily on their new smartphone initiatives. Read Full Post…
Bottom line: China’s Internet companies should create a code of conduct to ensure fair competition, and the regulator should step in when they abuse their market dominance to promote their other products.
WeChat freezes out Alibaba
Internet giant Tencent (HKEx: 700) was in the headlines for much last week, as reports circulated that it had cleansed its popular WeChat mobile messaging platform of several services from rival Alipay, the popular electronic payments unit of rival Alibaba (NYSE: BABA). Tencent certainly isn’t alone in this kind of “freeze out” behavior, which has become a unique characteristic in China’s brutally competitive Internet landscape. Read Full Post…
The following press releases and media reports about Chinese companies were carried on February 10. To view a full article or story, click on the link next to the headline.
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Qualcomm (Nasdaq: QCOM) Pays $975 Mln, Resolves China Antitrust Dispute (English article)
Alibaba (NYSE: BABA) Places China Smartphone Bet With $590 Mln Meizu Deal (English article)
Hisense (Shanghai: 600060), Tencent (HK: 700) In TV Game Platform Tie-Up (Chinese article)
Starwood to Sell NYC’s Baccarat Hotel To Chinese Insurer Sunshine (English article)
Sohu (Nasdaq: SOHU) Reports Q4 And Fiscal Year 2014 Unaudited Results (PRNewswire)
