Tech Hits the Great Wall
China's tiny online ad market has the Middle Kingdom's woebegone dot-coms struggling to survive
It's hard to imagine, but there's a place hit harder by the tech wreck than Silicon Valley: China. A year ago, erstwhile stars of the Internet were vying for top place in the world's fastest-growing market. Today, with paltry revenues, poor management, and sour investor sentiment, they're competing just to stay afloat. Netease.com tried to find a buyer, but a deal with a Hong Kong cable operator recently collapsed. SINA.com fired its founder and CEO in June and is fighting him for control of its Chinese unit. And Sohu.com lost high-profile investors like Intel after its stock crashed.
Even the wealthier Hong Kong companies are calling it quits: Chinadotcom on July 1 canceled its deal to offer AOL in Hong Kong. Pacific Century CyberWorks, run by billionaire Li Ka-shing's son, Richard, is retreating from its Net strategy and sticking to telecoms. The coming months will be "crucial," says IDC Internet analyst Matthew McGarvey. "It's fish or cut bait."
A big problem is that China's online ad market is tiny -- just $40 million. Only those with deep pockets can wait for it to grow. That gives an edge to Beijing-backed companies such as Legend Holdings, the computer maker that linked with AOL in July. In the end, the only Chinese dot-coms to survive may be those owned by dot-commies.
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By Bruce Einhorn
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