WSJ - News Corp., International Data Group Plan to Merge Chinese Technology Sites
March 19, 2001
Tech Center
News Corp., International Data Group Plan to Merge Chinese Technology Sites
By LESLIE CHANG
Staff Reporter of THE WALL STREET JOURNAL
BEIJING -- News Corp. and International Data Group have agreed to merge their Chinese Web sites, according to people familiar with the plan.
The two companies, among the most aggressive pioneers in China's media industry, have signed an agreement to merge ChinaByte.com, in which News Corp. owns a majority stake, with Yesky.com, whose largest shareholder is Boston-based IDG. Both companies report on China's technology industry; their union is a tacit admission of tough times in online advertising, on which both sites rely for revenue.
"The advertising models weren't working in terms of revenue, so we decided to merge the two sites," says a person familiar with the deal. He said the merger, which won't involve cash payments or share swaps, should be finalized in about a month. News Corp.'s chief representative in China, Laurie Smith, said the two companies have formed a "strategic alliance" but denied news of the merger; IDG executives declined to comment on the agreement.
The deal marks a growing trend of consolidation in China's nascent Internet sector, which has seen dramatic growth over the past two years but more recently a drying up of funds that has killed off many start-ups. With initial public offerings no longer an option for most companies, because of the lack of investor interest in Internet plays, the consolidation wave is expected to continue.
The merger should give both companies broader reach in providing information on the country's technology industry. Yesky.com, which targets the casual computer-user, saw 332,000 unique users during the month of January, according to survey firm Interactive Audience Measurement Asia Ltd. ChinaByte, with 141,000 unique visitors in January, focuses on the corporate market and industry professionals. Together, the two sites will launch a series of e-mail newsletters targeted at niche customers and backed by corporate sponsors, a business model that has proved more effective than banner advertising. The companies expect the joint venture to break even by the fourth quarter of this year, according to a person familiar with the deal.
When News Corp. founded ChinaByte in 1997, in a joint venture with the Communist Party's flagship People's Daily newspaper, there were a few thousand Internet users online in China. Although both ChinaByte and Yesky have become more popular as the number of Web users expanded, the sites rely primarily on online advertising, which is expected to total $80 million in China this year.
IDG will hold the larger stake in the merged company, with Yesky's management team occupying top posts, said the person familiar with the deal, adding that the People's Daily stake in the new venture will be less than 20%.
Both companies have moved quickly into some of the most sensitive businesses in China. IDG launched its first publishing venture here in 1980, with the founding of China Computer World magazine. Its stable of trade and consumer magazines, along with separate divisions for market research and trade shows, brought in $150 million in revenue in China last year, with another $150 million invested in Chinese technology start-ups through IDG's venture-capital arm. News Corp. has been a pioneer among foreign broadcasters, as the first foreign company to gain widespread audiences in China through its Star TV satellite network and a stake in Phoenix Satellite Television Co., both based in Hong Kong.
Write to Leslie Chang at leslie.chang@wsj.com1
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