Chinese like messaging on their cellphones.
Monday April 29, 5:34 am Eastern Time
Reuters Business
ANALYSIS-Mobile downloads hearten loss-making China portals
By Jonah Greenberg
BEIJING, April 29 (Reuters) - China's top Web portals are capitalising on the
country's taste for cellphones, signalling the wireless Internet may hold promise in the
world's biggest mobile market, as on-line advertising growth slows to a halt.
SMS stands for short message service, the format for sending and receiving data such
as ring tones or games, with second-generation mobile phones.
EASILY BILLED
The China portals use a business model similar to Japanese mobile carrier NTT
DoCoMo's (9437.T) i-mode service.
If a customer uses a Sohu download, for example, the charge shows up on the
monthly bill received form their mobile carrier. The phone company keeps between 12
and 15 percent of the revenue, and Sohu gets the rest.
At least one mainland Web firm said early signs of Chinese consumers' willingness to
pay for the services is a pleasant surprise.
"You could say we're all happy and a little bit surprised at how much it's grown and
how fast it's grown," said an executive at one of the portals.
"We're seeing overall there's revenue streams that are appearing in China that aren't
appearing anywhere else in the world," he said.
In their short histories, China's Internet portals, like those elsewhere, have found it
much easier to attract Internet users than to spin revenue from them.
Neither NetEase nor Sina.com (NasdaqNM:SINA - news) has said when it expects to
swing a profit. Stocks in all three, including Sohu, trade under $2 -- fractions of their
$13-20 Nasdaq IPO prices in 2000.
Like U.S. giant Yahoo! Inc (NasdaqNM:YHOO - news), the three major China portals
went scrambling for non-ad revenues last year, when China's online ad market was
worth just US$39 million, according to International Data Corp (IDC).
China's mobile phone market, on the other hand, is massive.
Tom Kirkwood, chief executive officer of Beijing-based venture capital firm mobile
internet asia ltd said he forecasts that wireless data suppliers in China will make about
$1 billion in revenue during the year ending in the first quarter of 2003.
"That's one of the defining factors of the China portal scene is that they have this
market to expand into," said Matt McGarvey, an analyst at IDC in Beijing.
"Not even Yahoo in the United States has been able to replicate this," McGarvey said,
referring to a high proportion of revenues coming from sources other than advertising.
While Yahoo pared its reliance on advertising to 63 percent of revenues in the first
quarter, Sohu boasted an even lower 55 percent in the first quarter.
The mobile content market has not gone unnoticed by others. A handful of firms
offering wireless downloads and games have cropped up, backed by tens of millions
of dollars of venture capital, giving portals reason to fear a new set of competitors.
"You need to do creative business development to stay ahead," said the executive at
one of the three portals, noting that mobile phone use is growing faster than on-line
Web use.
"Can one legal entity maintain its business share moving forward? That's going to be
tough."
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