As final thought for 2007, take a look at these two charts from the World Internet Usage Statistics web site. It's a simple but compelling story:
It has really been the year of Alibaba, so appropriate that we go out on another note about them. There's an interesting snippet on Thomson Financial (reposted here by Forbes) in which Alibaba.com David Wei reportedly tells the FT Deutschland that the company will spend "about" 60% of its US$1.7 billion IPO proceeds on acquisitions.
Wei goes on to say that "we have decided to invest more in Europe", adding "with more than 20 million SMEs, Europe is a very important market for us".
This follows a report we ran in early October about the opening of their Geneva office and VP Kenneth Liu's comment "I see the day coming where a major share of trading in Europe will take place on our website”.
The Christmas holidays have seen me very inactive on this blog but I assume a large number of our readers have also been thinking about things other than work these days. I hope so!
However, catching up on e-mails, I was pointed towards an interesting development over on the Yahoo! homepage where our friends at Alibaba - in which Yahoo! owns a 40% stake - have been able to advertise in some absolutely prime 'real estate' at the top of the "Marketplace" section.
Nice if you can get it!
It hasn't been the easiest year for my friends at the Thailand Convention & Exhibition Bureau. They've had various leadership changes to contend with along with some ongoing political uncertainty in Thailand. It's a testament, then, to their efforts and Thailand's continuing appeal to events organisers that the Bangkok Post has them reporting a 22% increase in MICE arrivals this year.
The new leadership team of Chairman M.R. Disnadda Diskul and President Natwut Amornvivat are reportedly targeting a 19% increase next year to 947,600 arrivals and MICE revenues of Bt65 billion (US$2.1 billion). With elections due this Sunday, they will be hoping for a more 'normal' year next year, allowing them to focus on promoting Thailand's combination of charm and business appeal.
I have to confess that, until two weeks ago, I'd never heard of Network 18 or its previous incarnation, TV18. In a very short period, however, the company has muscled its way into the heart of India's business media scene. Three key deals have been announced:
The Asia Media Journal has been published for several years now by the team at Media Partners Asia, the only other consulting firm in the region of which I'm aware which focuses seriously on the media (happily, in areas largely complementary to those we look at). They've recently taken some of the journal's content online.
I was struck by a report on their own advertising research. MPA's Vivek Couto is quoted saying that "By the end of 2008, Asia will represent more than 20% of global ad spend, fuelled by the expansion of China and India". The report is predicting overall Asian market growth of 6.7% in 2007 and 8.5% in 2008. In India, "having peaked last year, ad spend growth...is expected to come in at just above 20% this year before slowing to 16% in 2008".
There's lots more insight in this article which I recommend you look at.
The UK Press Gazette reports on EMAPs failure to sell its B2B division for GBP1.3 bn. "Why was no one willing to pay EMAP's fair price?" they ask. The article goes on "One anonymous source told The Times that Emap’s asking price was “much higher” than it expected".
EMAP's B2B division, it says, "routinely generates 30 per cent operating margins [and] isn’t a visibly troubled business". The valuation basis? "Emap valued its B2B arm at 11 times its forecast earnings for the year to next March. That’s not so different from the valuations attached by investors to its rivals".
If that's considered high, what then are we to make of a market which currently values Alibaba at 207 times its 2007 forecast earnings? Yes, the China market is growing faster than EMAPs home market and Alibaba is not burdened with the legacy of advertising-dependent magazines. But surely, Global Sources' valuation which today sits at a p.e. of 37.95 (US$1.17bn) reflects that more reasonably?
I'm sure my friends at Alibaba feel that we're being unfair to them. Our posts have focused on this issue for a while. If the market's willing to value their shares at this price, so what? Fair point perhaps. But, unless a vast array of other B2C Internet businesses are injected into the Alibaba listed company or some suprising acquisitions are made elsewhere in the world (they can afford it), it's hard to see anything other than under-performance down the road for those investors who have bet big on the giant of China B2B.
Interesting piece over the WSJ/Hindustan Times MINT site about Alibaba's ambitions for India. Brian Wong is quoted as saying that they currently have 340,000 users in India and expect to double that figure by the end of 2008. However, he told Indian journalists:
Hmm. Sounds a bit tentative doesn't it? He also noted:“Depending on the response, we will decide on the opening of our offices or acquisitions in India. However, we don’t have any immediate plans of the kind,” Wong said.
We wait with bated breath. There ain't the makings of a plan worth US$17 billion (today's market cap) in those quotes.“Around 60% of the overall IPO funds will be used for strategic acquisitions and business development globally, as also for acquisition of technologies,” he said.
I have just arrived in Paris to see that the expected game of musical chairs at Dow Jones in advance of the Murdoch takeover has started with a vengeance. There are strong Asian connections to two of the key players:
If you're running a B2B media company in Asia and your budget's already done and dusted for next year and you were bullish back in September, you may be in for a rocky few months. There are a few signs that things are slowing a bit. I read, then with interest this piece on Amy G's blog "...in the center of Silicon Valley" about two speakers predicting economic "winter" at the 6th China Enterpreneur Summit held in Beijing on December 8 (in Chinese).
Alibaba's Jack Ma: "I want an IPO now to be ready for the winter".
Lenovo's Liu Chuanzhi: "We are not afraid of the coming winter, and we will do what we should do in the winter".
Make of that what you will but don't go out without your vest.
Speaking of Alibaba, we also stumbled across their online magazine or e-zine, Ali Biz. There's a nice picture of our friend Brian Wong on the cover of the 3rd edition. I wonder if it will make it into print? I personally like e-zines but I know lots of people (especially advertisers) don't.
And, finally for this morning, no surprise to see that Global Sources has unloaded its stake in HC International back to IDG's VC funds. They are claiming a $2 million profit on the transaction although the explanation of the calculation on p.2 of the press release requires some mental gymnastics a bit beyond me. The writing was obviously on the wall for this from the moment that they announced they would be going ahead and launching their own Chinese language sourcing sites.
About 5 years ago, I was in India, looking at the IT media market for one of my clients. One of the most interesting discussions I had was with IT Nation, a VC-backed IT media start-up. They've actually branched back into print magazines, but one of the key pieces of thinking then was that an online-led approach would give them access to small metropolitan markets that were uneconomical to serve in print.
I remember this when I read this piece today on contentsutra.com. As you can see from the chart, the share of Internet use of the top 8 cities has shrunk from 77% in 2000 (when there were just 5 mn users in India) to 38% (when there are 46 million). According to this research, the 'tiny' cities with less than 500,000 inhabitants now make up 29% of India's Internet users. There are, as always, some health warnings with these numbers and I don't know how many <500,000 cities there are in India (any volunteers out there with that information?). But, it's pretty clear to me that as a B2B or technology publisher in India, you're not likely to be touching these people with print titles, let alone F2F. Online is the only way.
We've written a few times recently (and here and here) about some of the slightly odd deals going down at Kenfair, including its purchase of a coal mine (Kenfair's owners will, in turn, sell a large chunk of the company to the owner of the coal mine - go figure).
Well, something else is going on this week. There is a basic stock market announcement regarding "Unusual Trading Volume Movements". A glance at this Yahoo! Finance chart (click on it to make it bigger) will show you what they're talking about.
You can see a big volume spike late on Tuesday afternoon and again in the middle of Thursday afternoon. Both look to be purchases of around 17.5 million shares. That's around HK$18.5 million based on this week's average price. As the market cap would have been around HK$370 million at that price, that comes in at 4.9%, a hair below the 5% level at which a buyer has to declare their hand. So, whoever made those two purchases got around 10% of the company. As the price chart shows, the market only noticed this on Friday morning, pushing the share price up 7.5% on the day.
I guess this kind of thing has to be more fun than actually running an exhibition business. Kenfair says it is unconnected to the transactions.
An interesting post today from Eddie Choi on CEO blogging in the B2B world in Asia. He lists a number of blogs generated by the major B2B sites, most of which I wasn't previously aware of. So, thanks for this Eddie:
- Alibaba Business Blog, Jack Ma Blog
- Globalsources Blog
- Tootoo Blog
- Dhgate Blog
- HC360 Blog
- NetSun Businessmen Forum
They're worth a look because each of them has a distinct 'signature' look and feel which makes it absolutely clear where they come from. The Global Sources blog unashamedly promotes Global Sources and not much else. DH Gate's blog tries to tell the story of trading online with China while Tootoo's blog is a bit confusing.
The Netsun Forum has more of the feel of a BBS which, while out of favour in many other places, remains very popular in China.
Deustche Bank may have been one of the sponsors of the Ali-IPO but their initial coverage starting today with a "Sell" recommendation saw an 11.5% fall in the Alibaba share price to HK$32.90. This, on a day that the Hang Seng Index rose 0.75% to get back within a hair of the 30,000 level. DB is projecting a 'fair' value off HK$26.70.
Meanwhile, my colleague Mark points out that the over-quoted so-called 'guru' Jim Rogers, who has for months and months been saying there is NO bubble in China has changed his mind. Today he decided there is after all a bubble in China and Hong Kong. But what is the one stock he thinks is not overvalued? He met Jack Ma and yadda yadda yadda....
The news that eBay is having a second crack at Japan set me thinking. What do the big US Internet brands have to do to be successful in Asia?
I had just got off the phone with a reporter who was asking me what was the significance of the Li Ka Shing/Facebook deal. Speculations is rife in Hong Kong that the real significance of this will be a Facebook link to the Tom Group, giving them a leg-up into China. Murdoch's MySpace is already there along with a raft of local Chinese sites.
I'm not clear how big a deal the social networking phenomenon is yet in China. There seems still to be a strong preference there for more BBS-style communities. I am not, though, really an expert in this field and am very ready to stand corrected if I'm wrong.
Update: BusinessWeek's view on the eBay/Yahoo! Japan deal is an interesting one. They say its "less a comeback than a shrewd move to tap into the Japanese market without having to start from scratch".
Another update: Tangos, as often, has more meat to put on the bones here over on his China Web 2.0 Review blog. There's some interesting stuff here, particularly about Facebook's possible China acquisition strategy and company called Fenbei.com.
All those who thought that Alibaba would trade slowly downwards after the excitement of the IPO are going to have to rethink their positions. Step forward yours truly - do not buy a stock tip from this man!
I see that yesterday it hit an all time high of HK$41.80 before settling down to a close of $38.65. That valued the boys in Hangzhou briefly at a hair over HK$211 billion (US$27 billion). Heck they could buy Facebook, have change to spare to pick up the entire remainder of the Asian B2B media sector and still have enough change for another 7,000 sq. foot penthouse in the most expensive building in Hong Kong.
For years, senior executives at the big business media companies have been eyeing the rich trade fair portfolios of the national trade promotion organisations such as the Hong Kong Trade Development Council and TAITRA in Taiwan. Any discussions about the possible acquisition of these portfolios has been rebuffed with a brusque "not possible".
Well, we gather that the Dept. of Export Promotion in Thailand is in the early stages of reviewing bids for its entire trade fair portfolio. How that plays out will be interesting to see although we would assume that a company with very strong Thai connections will be preferred.
What interests us, though, is how much of a dent this puts in the "not possible" argument from HKTDC and others. Expect to hear a bit more about this in the coming months. In what, in major M&A terms, has to be considered a target-poor environment, these are potentially very rich prizes and could represent the biggest B2B acquisitions ever done in Asia (if you exclude Yahoo!'s $1bn investment in Alibaba 2 years ago). Much as the Executive Directors of the big NTPOs would wish the business media companies would go away, you can be sure that they won't.
Li Ka Shing is: "investing in Facebook". That presumably is his current status if various news feeds are to be believed (see here). Maybe he will get his own page after having invested $60 million.
As some of you know, I've been tracking this all for a while, trying to work out whether there are any implications for B2B media. So far, my one man jury remains firmly on the fence. I'm not sure that this courageous position will be swayed by LKS's punt but the man is rarely wrong. There's money in them thar' pages, you can bank on that.
It's certainly fun, and it's certainly addictive. Check out the picture of our team on the BSG Facebook page. But whether it's relevant to B2B media, I still really can't tell.
In Bangkok for the next couple of days, so posting may be thin until I'm back in HK on Wednesday.
I have been very grown-up this week and manfully resisted the temptation to post on the house that Jack bought.
Instead, we'll speculate that the next B2B IPO, riding on Alibaba's coat tails may well be made-in-china.com.(as opposed to madeinchina.com which is different and run by HC International). Blogger David Lau Wei has written a long post (in Chinese) on the company in which, amongst other things he says:
It's a joy to be back in Beijing where you can cut the air with a knife and post to the blog but not read it. Not to mention traffic being stopped for 20 minutes on the Airport Expressway to allow a departing dignitary a misleading view of Beijing traffic.
Seeking Alpha carries a Chinese Tech Stock Weekly Summary which is always worth a browse. To pieces got clipped into my Google Notebook today and both refer to online payment systems.
Firstly, Paypal in China:
PayPal disclosed that it is cooperating with China International Travel Service [CITS] to offer a new payment service on CITS' web site.
This is an odd story. Alibaba can comment here if they want to on whether or not it's likely. The piece comes through Sinocast and I picked it up on Trading Markets. The basic thrust is:
We've written about Ken Carroll's Chinesepod business before (and here). It's very interesting, well done and, as far as we can see, represents a novel take on technology and language teaching. Thanks to Fons Tuinstra, we see that Ken has started a blog and this post is a blast.
Like most of us, he holds the Economist in high esteem but takes them to task with great gusto over what he sees as a case of very sloppy reporting about Chinese teaching:
...this is probably the worst article I’ve ever read in the Economist. The writer seems to have put this together so quickly and superficially you have to wonder if he did it purely to fill a column space on a bad morning. As I said, I read and love the Economist, but this is appalling. Tell me this was written by an intern with a bad hangover, please!The Economist article addresses what I think is an important topic: the value of the current "fad" (their word) for the teaching and learning of Mandarin/Putonghua. Read Ken's piece to find out what he thinks is the matter with the piece.
When I first travelled to China in 1985, I was given sage advice and a good warning by an American who is still there and running what is now a listed company. Stay for a week she said, and you'll feel prepared to write a book on the place. Stay for a month and you'll be up for an article. Stay a year and you'll be so thoroughly confused that you won't want to write anything.
So, I was intrigued to read this Seeking Alpha post of Barry Diller's plans to conquer China:
Diller commented that he was not especially worried about the complications of running a business China; he plans to spend a couple weeks traveling and meeting successful internet entrepreneurs.That'll do it then; 2 weeks and a handful of bright boys with pony tails. Forget eBay and Yahoo!'s failures and the struggles that Google has had to establish itself in China.
Although there appear to be a number of Chinese media companies listed both in China and outside, a closer examination will generally reveal that what has been listed is not the whole business. The publications themselves and associated editorial operations have typically been excluded. What has been listed is the commercial arm of the business. A typical example of this is SEEC Media in Hong Kong, the ad sales division of the publishers of Caijing magazine. The magazine itself, though, is officially published and produced by a different, Beijing-based company.
That may be about to change. Zero2IPO picks up a China Daily story about the "State-owned Liaoning Publishing and Media Company Limited [which] was approved by the China Securities Regulatory Commission on Tuesday for an A-share initial public offering". This, the article says, will make it "China's first wholly listed publication company, which will include both its editorial and operational business in the listing entity".
We really ought to leave this topic to the real experts on the subject such as Hong Kong University's Rebecca MacKinnon. However, two pieces caught our eye today:
Interesting to note that Global Sources also had a cracking day on NASDAQ yesterday when the market overall wasn't doing anything too exciting (up less then 0.5%). GSOL posted an almost identical gain to Alibaba, up 9.63%.
They did make an announcement yesterday about linking up with Semicon to produce Taiwan's largest IC event. It's hard, though, to imagine that this alone could great US$112 million in increased market value.
Thanks to the South China Morning Post for answering yesterday's question about what spooked the Alibaba share price up almost 10%. No thanks to the Kuoks for keeping it behind the paywall.
It seems that the market got itself all excited over the official launch of the Alimama ad network (we first wrote about that back in August). It is part of Alibaba Group, not the Alibaba.com B2B division which is listed.
That, however, is not stopping the Hong Kong analyst community working itself up into a froth over the possibility that Alibaba might inject Alimama into the listed company, something which spokesman Porter Erisman outright denies. Denials clearly didn't cut any ice with the boys in the finance houses who see their year-end bonuses shriveling with the markets and are keen to pour something inflammable on the dying embers.
Now hear this for silliness: JP Morgan's Dick Wei suggests that "It's possible, especially when Alibaba's share price is weak...". Is WHAT? I hope he's referring to the theoretical possibility that it might be weak in the future. If he thinks its weak now, I simply despair.
Update: Free for all is the Standard's version of this story which explains the 'cute' Babas and Mamas play on words as well as suggesting that investors weren't really aware that this was outside the listed Alibaba.com company.
The Hang Seng index recovered a bit today, up 1.13% at 27,721. Alibaba, however, had a cracking day, up 9.89% at HK$35.55. That added HK$18 billion or US$2.3 billion to its market cap which now stands back up at HK$179 billion (US$22.9 billion). At one point, the price hit HK$38.10, approaching it's all time highs.
What's got the market all excited about them again? I have no idea.
I was reminded of the famous 1993 New Yorker cartoon "On the Internet, nobody knows you're a dog" when I saw Thomas Crampton's post today. There is a dog's behind at the top of his blog page, but that wasn't the reason why. The post is headed "Chinese trust the Internet above all information sources".
Given the issues of authenticity on the Internet, this may be worrying. For those who celebrate the anarchic information flows, it's probably very good news.
Tom's piece is based on a study done by Harris Interactive for Edelman. To my mind, it has very interesting implications for publishers choosing how to enter the market: go with a Chinese partner or, as some have done, come in directly from over-seas and online? For general consumer media, there isn't too much choice. You have to go local. But, for non-controversial B2B and technology publishers, there are options.
I struggled with the jargon for a few minutes (the coffee not yet kicking in I assume). Being a PR amateur, it took me a while to work out the MSM must stand for mainstream media.
Eddie Choi has posted some interesting thoughts over on his Marketing, Technology and Entrepreneurial Experience blog. The post is titled Private Label B2B and he's talking about the opportunities for competing in the B2B area with relatively simple and inexpensive technology tools.
I do like the concept of private label B2B he proposes for companies such as trade fair organisers. I don't agree with everything in the post and you can see comments on it at the bottom of Eddie's post. My concerns are focused on the capacity of technology alone to generate useful new B2B businesses.
I haven't yet come across a B2B business which can convert good technology into a great business without a number of other solid assets in place and without a substantial hands-on face-to-face sales effort. Even the most successful businesses out there are using pretty basic technology and I'm not sure they're any the worse for that. Mind you, some of the databases underpinning the big players are pretty good.
Great databases and strong sales teams. I suspect that's at the heart of good B2B media businesses in Asia just as much as elsewhere.
I like to race sailing boats and one of the key competitive tactics is called 'covering'; you try to keep your most important competitor beneath you and in your shadow so that they can never get better wind than you.
There seems to be a bit of covering going on over at Global Sources. I read this transcript of yesterday's analysts call with some interest. A key point in CEO Merle Hinrich's discussion was the launch of the new China Global Sources service at the end of this month. A few comments caught my eye:
Firstly: "this is a substantial medium terms opportunity for us". For which read, "no immediate comparisons with Alibaba please".
Secondly: "The addressable market in terms of number of suppliers is much larger than our international site, and the Online opportunity will grow significantly over the next few years as more and more of the 30 million or so SME suppliers in China get Internet enabled, and as Broadband penetration increases". For which note: here comes the covering. That's directly out of the Alibaba IPO script; much of that huge valuation has been justified on the basis of battalions of currently unwired SMEs signing up for their web based services. Alibaba has been using a number of over 40 million SMEs.
Thirdly: "As a reminder we will be offering this marketing service free of charge for a period of time, while we build the content and buyer and supplier community and establish leadership traction". For which: please forget previous acid comments about "free is not a business model".
Heh, all's fair in love and war. Why not play them at their own game in China while sticking to the different 80:20/full-service B2B model on the international side (you'll have to read the transcript if you're not clear what I mean about that)?
There are also some interesting comments about the possible impact of a US slowdown on their business. In response to a question from Henry Ai at BNP Paribas, Hinrichs commented:
We have, as of yet, not seen a slow down in the buying. We have a larger; a higher number of attendees, at our trade shows, here in October than we had the previous year. That's number one.And number two, though the U.S. market in particular remains extremely important, there are many other markets that have developed very rapidly, which are of course the Middle East, and Russia's become a very exiting market for a number of suppliers. And certainly Brazil and South America as well.
So, there's an increasing of alternative markets, which are taking up some of that slack. I think it's needless to say that if there was a huge slow down, of course, it would impact the demand and it would impact our suppliers.
If that does happen, I know for a fact, as we've seen this same phenomena in years past, that buyer respond by trying to locate products which more closely favor a community who are looking for products, but at possibly a lower price or maybe in many cases simply a lower value.
So, merchandising does not just simply cease in a poor or a reduced market or slower market, but it does change. So yes, if it got very serious I'm sure that it will have some form of impact, but we haven't seen that yet, Henry.
Hinrichs also quoted a BSG report, for which thanks.
Global Sources has just announced a strong 3rd quarter. Highlights in their press release are as follows (comparisons are with Q3 2006):
• Revenue was $33.8 million, up 15% from $29.3 million.
- Online revenue was $19.7 million, up 18% from $16.7 million.
- Print revenue was $12.6 million, up 6% from $11.9 million.
• Revenue from mainland China was $19.9 million, up 28% from $15.5 million.
• EPS was $0.12 per diluted share, up 20% from $0.10.
• Total deferred income and customer prepayments were $88.1 million as at Sept. 30,
2007, up 28% from $68.7 million as at Sept. 30, 2006.
The 30% growth in mainland income might provide a sensible benchmark for future growth over at Alibaba. By my reckoning, print media in China is growing at about 5 - 10% while exhibitions are likely to be up this year in the region of 25% and online 30%. So, these numbers are absolutely in line with my sense of the market.
This is one of Global Sources' 'quiet' quarters as they don't recognise any major exhibitions income in this period.
I read with some interest yesterday Rex Hammock's post about the Wall Street Journal executive who appears to have contradicted to Dirty Digger's commitment to bring down the subscription walls around the wsj.com site. I trust he has his c.v. well polished.
Well, even before the Murdoch deal is consummated, it seems that a chink in the armour has appeared with the addition of Digg links which allow people to get around the subscriber wall.
Then, this morning I read on contentsutra.com that Business Today, one of the 'big three' business magazines in India has just relaunched its website and removed subscriber barriers. Nikhil Pahwa writes:
The new site incorporates social bookmarking features (del.icio.us, Newsvine, Technorati), RSS feeds, and displays content related to stories. B-T also has an emagazine, though I don’t quite see the point: epapers and emagazines require too many clicks to access content, have too many pages with ads (like magazines).This approach certainly makes sense in India where subscription rates are anyway very low and collection complicated.
There's a good post of the China Law Blog today in which they reveal details of the new Catalog for the Guidance of Foreign Invested Enterprises (Revised 2007) or 外商投资产业指导目录（2007 年修订) from the National Development and Reform Commission in China.
Of particular note to publishers (print and online) is this section:
Continued restriction and prohibition of participation in publishing, media, market research and social research. In recognition of the influence of the Internet as an alternative publishing source, various Internet based businesses have been added to the prohibited category. This denial of access for media and publishing is a hot button for the United States and the Chinese do not seem willing to budge a bit on this.
Fun post here on the 2point6billion.com blog (that's China plus India's population in case you wonder where the number comes from) on the "biggest trade fair of the greater Himalayas". The Lavi Trade Fair has, apparently, been going since the late 17th Century and is living proof that business will be done where there is business to be done whether or not we have the latest, greatest, state-of-the-art facilities.
This is important food for thought who become anxious about the new, bigger, and shinier halls being built down the road. If down the road is not where the business is, then those new, shiny halls won't make a d*****d bit of difference.
As an organiser and consumer of conferences, they are often on my mind. I am aware that there is a degree of dissatisfaction with the "PowerPoint and talking heads" model and that most of the interesting interactions at most events take place outside the conference room itself (by the pool, at coffee breaks, on the bus to the dinner, etc.). This presents organisers with some interesting challenges.
I have been aware of a few interesting threads on this topic in the past week or so. Jupiter Research's Michael Gartenberg posted on "Why Most Conferences Suck", quoting another post from Dave Gilmor on the subject. Gilmor worries that attendees are not really involved enough while Gartenberg suggests that he also has concerns about the value of spending time at trade shows.
Then we get onto the alternatives:
There is a magnificently complicated document on Kenfair's website today. The legal masters of obfuscation have been burning the midnight oil.
Shares are trading again (and are up $0.15 at HK$1.30 as we speak) and a deal has been done which will see the shareholdings substantially restructured. I prepared the mindmap you can see here to try to work out what's going on (click on it to make it big enough to read). Subscribers to our Tracker service get it spelled out for them (hope I'm right!) in this week's newsletter.
Answers on a postcard please: why has Richael Hung's allocation of new shares gone up from 70 million in the announcement of 26th October to 277 million in today's new structure?
I met Celina Chen when she spoke on the same panel as me at ad:tech in Beijing a couple of weeks ago. She is COO of DHGate.com of which, I'm afraid to say, I wasn't previously aware.
This is a catch-up week and I've just looked. It's a very interesting twist on the B2B sourcing model as it focuses very clearly on the small scale transaction. Prices are up front on all pages and the basic product listing leads you straight through payment and shipping options. A couple of sample clicks showed that you can go down to lots as small as 5 electronic picture frames worth $150.
It's clearly shooting at a buyer/seller level much lower than the main target of Global Sources and is much more transaction-oriented than Alibaba. Global Sources has tried to target this segment with its Global Sources Direct service, but that doesn't seem to be a key focus for them.
Global Sources Direct scores 36,105 on Alexa.com's rankings. DHGate is at 6,153. Hmmm. Acquisition target for someone?
P.S. They have a very neat sourcing blog as part of the site on which DHGate executives post.
Our favourite coal mining and trade fairs conglomerate, Kenfair, has just announced that it has suspended its shares again. Having missed the market's 30% rise when they did the same thing in late September, pending acquisition of the coal mine (!), they now seem set to miss the ride back down.
This time they say the suspension is "pending the release of an announcement in relation to placing of new shares which is price-sensitive in nature". You have to wonder whether there is anybody at home running the trade fair business don't you.
Citibank has upped its price target for Global Sources to 40x 2008 projected earnings. That pushes the price target about $10 above its current position to $45.
A similar valuation would imply that, even 9% down as it is today, Alibaba is over-valued by about 3.5 times. And that's based on very optimistic projections for next year. So, look to buy only when the price drops below HK$10 if you think Citibank's advice on GSOL is of any value.
Sent via BlackBerry.
Update: There's a bit more in-depth comment on the Citi report here at Seeking Alpha.They now, of course, have enough money to buy the whole Chinese coal-mining industry (see here if the reference isn't clear to you). So far, however, it seems that our friends at Alibaba are going to stick to their core business and focus on providing B2B media services.
As expected, and frequently denied, the company is already moving into organising events. These may not yet be fully-fledged public trade fairs, but that is surely the logical next step. Thanks to Eddie Choi for pointing me to this link on the Alibaba site regarding a Shenzhen private buyer event for Woolworths next week. It notes "More Big Buyer sourcing events will be announced in the near future".
Mind you, they'll need to get an awful lot of Woolworths buyers into Shenzhen meetings with 220 suppliers to justify a market cap of (as we write) of US$23 billion. Heck, they could probably buy Woolworths, take control of the whole Australian supply chain and still have change to spare.
I just looked. The Ali-money machine just hit $37.85. This is getting quite surreal and long ago parted company with any connection to reality. Fundamentals? Shmundamentals. Mental.
Sent via BlackBerry.
Midday saw Alibaba volume hit 336.88mn shares. That's suggests well over HK$10bn at the $30 - 32 range in which most of the morning's action has been taking place. That's US$1.3bn in old money.
Sent via BlackBerry.
My colleague Mark is keeping us up-to-date by SMS on this topsy-turvy news:
Aibaba at HK$35!! Market Cap US$23 billion
Sent via BlackBerry.
I had completely missed this news but, as it makes a refreshing change to magic carpet puns, I'd like to note it now. We'll update our thoughts on the Ali-IPO later in the day as the trading unfolds.
Warren Buckley has been CEO at Suntec Singapore for the past seven years but will be returning to Canada at the end of the year to resume his previous position as CEO of PavCo (BC Pavilion Corporation), the Crown corporation responsible for the Vancouver Convention & Exhibition Centre (VCEC) and BC Place Stadium. The VCEC is being substantially expanded in advance of the 2010 Winter Olympics and Buckley's marketing nous (Suntec has won several international marketing awards under his leadership) will be welcomed there.
Buckley is quoted as saying: "I've had the chance to travel and work around the world, but there really is no place like home. Vancouver is one of the world's most popular convention and meeting destinations, and the current expansion of the convention centre, which is scheduled to be completed in March, 2009, is certainly capturing the imagination of meeting planners at home and abroad. As a result, this is a great opportunity to come home and help take our local convention and meeting industry to the next level."
As far as I'm aware, there's no official word on Buckley's successor in Singapore. I'm not a gambling man but, if I were, a small flutter on his suave #2, COO Peter Idenburg, probably wouldn't go amiss.
Last week we asked whether the Alibaba IPO could break the Hong Kong $:US$ peg. At the time, we didn't think so and today Bloomberg confirms that the Ali-IPO was not the secret "open sesame" code that speculators have been seeking for so long (and with such spectacularly little success). The piece notes:
Investors needed Hong Kong dollars to order shares in the Chinese Internet company's $1.5 billion IPO, the biggest for an Internet company since Google Inc.'s 2004 offer.And Alibaba was just one of the 33 companies that sought a total sum of HK$69 billion ($8.9 billion) last month from overeager investors. This demand for Hong Kong stock worsened a demand-supply mismatch in the city's currency.
There's a press release over on our Corporate Blog with details of a new report we've just published on Alibaba.com. Having, along with most of the rest of Hong Kong, received a zero allocation, I shall simply be an interested bystander with my fingers in my ears tomorrow morning to prevent hearing loss caused by the loud pop.
Mind you, with the Hang Seng down 4% so far today (-1,244 points to 29,225 at the moment), I wonder how long it will stay up there?
Folio magazine reports that Steven Weitzner is stepping down as CEO of CMP Technology in the USA to take on a new role as head of international M&A and business development. It's clearly a bit of a surprise as no replacement has been announced and the parent company's CEO, David Levin, will be taking on an interim chairman role while the search goes on.
What caught our eye was this paragraph:
In his new role for CMP Technology, Weitzner has a large playing field to work with. "As an organization, UBM's got over a quarter of its business in Asia. We've got substantial and fast-growing businesses in India and China," says Levin. "And in old Europe there are opportunities as well, so Steve has an open field to look at."It's not quite clear how that all fits into the tri-partite CMP family (with CMPi in the UK and CMP Asia based in Hong Kong). We shall watch with interest.
If you thought I was exaggerating when I wrote yesterday about the impact of climate-change protests on business events, take a look at this piece from FIPP, the magazine publishers' association, on initiatives in Brussels to clamp down on car advertising. It notes:
By adopting the advertising and labelling part of this report, the [European] Parliament supports the idea that car ads should devote a fixed amount of space (20 per cent) to public policy messages.It's not hard to see this extending to airline advertising and then to advertising promoting travel to international events. Happily, most of the world does not share Brussels' perverse enthusiasm for regulation and we probably won't be seeing anything like this in Asia for the foreseeable future. But many of the Asia B2B industry's clients are much closer to that unholy alliance of Eurocrats and climate change nutters and may well be affected by it.
This report contains six paragraphs on advertising and labelling requirements for car advertising that would infringe on the freedom of commercial communication, as they suggest how the car industry has to inform the consumer about environmental aspects of the advertised car.
One key take-away from both the UFI and ICCA meetings from which I've just returned: the business events industry (exhibitions, conventions, conferences and other meetings) is only waking up to a huge threat very slowly. Reed Exhibitions' Nick Forster mentioned it at UFI and the Pacific Asia Travel Association's Peter de Jong at ICCA: it's not the threat of terror in the skies, miserable major airports or surly security personnel. It's the growing focus on the environmental lobby on air travel as a significant contributor to global warming.
This issue does not seem to have taken hold of the consciousness of anybody in the industry in Asia in a serious way. They are merrily marketing in the assumption that people will continue to get on 'planes in ever larger numbers and keep the business humming along. In the short term, and particularly for local and regional business in Asia (as budget airlines explode relatively late onto the scene here), this may be true. But longer term, I am concerned that most seriously under-estimate the challenge.
PATA's de Jong noted that the mainstream travel industry is fighting a serious rearguard action against knee-jerk legislation on this issue, especially in Europe. But it seems clear that we can expect higher 'carbon' taxes on air travel and, perhaps, demonstrators outside major events like the ones who camped outside Heathrow this summer.
Be aware and beware. The level of environmental awareness in the meetings and events industry is pretty pitiful. That will have to change.
An announcement has just been made which leaves the world in which I work a much poorer place. My friend and colleague, Briac Le Mouël, from UFI in Paris has died suddenly and unexpectedly.
Briac, just 37, was Operations Director of UFI and closely involved in all aspects of its work. A man with a lively mind and great charm, he had friends around the world who will be mourning his loss this week.
French to the core (and proud of his Breton roots), Briac was an internationalist par excellence with a wondefully broad world view. We shall miss his most Gallic of Gallic shrugs, his wry smile and his sharp wit.
I don't have this blog properly set up for guest bloggers but, I'm going to post this message I received from my colleague Mark Cochrane on that basis. To describe this news as strange would have to be the understatement of the week:
Kenfair started trading again this morning. The share swung wildly from HK$1.96 down to HK$1.52 and is now at HK$1.60 [PW note: it closed the day down $0.16 at $1.49 on a day the Hang Seng Index was up 1,181 points!]. They released an 'odd' 28 page document from which, at first glance at least they seem to be buying a coal mine.
Unrelated, but equally strange, TradeEasy's parent company has purchased a huge strip of land in
You can say that again Mark. Heck, whatever next? They'll be listing a company and valuing it at 5 times the total worth of the market. Oh, yes. That has happened too.
Once the IPO is obviously a cracking success, it seems to be becoming increasingly de rigeur to post clever-clever dumps on Alibaba. However, the China Law Blog is always workth reading and I would commend this post to you titled "I Hate Alibaba (The Website, Not the Company)". The basic theme is thus:
Many would disagree and the real 'secret' value of the company would seem to me to lie in the subscriber base for the Chinese site and not the glorified yellow pages which is the Alibaba.com English site they are writing about here.
But then I think about all the harm Alibaba has caused to so many Western SMEs and I change my mind about calling my broker/brother. Alibaba makes the naive think China sourcing is easy. I realize blaming Alibaba for the mistakes companies make in using its site is really not fair to Alibaba, but at the same time, I do not see much use for the site beyond its serving as a really good directory of potential manufacturers of particular products.
The World Internet Usage Statistics website provides several layers of fascinating dipping. It signaled an update to me today and, sitting in an airport lounge in Munich provides the rare leisure for poking around.
Things that caught my eye include:
...is there a connection? There is if you're me. Despite the best efforts of striking Air France crew to keep me here, I am heading from the UFI Congress in Versailles to the ICCA Congress in Pattaya where I'm speaking on Monday.
ICCA represents an important and quite different slice of the business events pie - Congresses as opposed to exhibitions. There will be more than 800 people at the event in Thailand and a lot to talk about.
I'll try to be more successful on blogging from there than here.
In the meantime, I've followed a couple of posts from Thomas Crampton on internet advertising in China with great interest. The issues of measurement and sales techniques are crucial to understanding how money is being generated in this sector in China and where the cracks in the system lie. I encourage you to read these posts. They're very interesting.
"Probably not" is the answer, but it's remarkable that the question is being asked. The Wall Street Journal is measured in its coverage of how the Hong Kong Monetary Authority just purchased US$100 million to steady pressure on the peg, set at HK$7.80 = US$1 since 1983. The article notes:
The Hong Kong dollar has been bolstered by strong demand for local stocks, including the coming initial public offering from Alibaba.com Corp., which could raise US$1.49 billion in the biggest IPO of a Chinese Internet company.The South China Morning Post noted " Hot demand for
I feel a million miles away from the frantic scramble for Alibaba.com IPO forms having arrived here in France this morning. Striking train drivers meant the 40km on the road from the airport to Versailles to 1 hour and 40 minutes which is a bit pathetic but the day is crisp and clear and the town is delightful.
I'm here for the annual congress of UFI, the global association of the exhibition industry and will try to post a little more on that in the next couple of days as things unfold. The Congress has attracted a record crowd with strong groups from Asia including Korea, Thailand, Singapore and Hong Kong.
Go to the back of the class and face the corner all those of you who turned straight to the back of the Alibaba.com prospectus to find out how much the Directors earned (page I-29 if you haven't looked yet). Surely there's more important information near the front.
My colleague Mark Cochrane is beavering his way through the big orange book and there'll be a BSG report for our Tracker Service subscribers at the beginning of next week. Tough **** blog readers, we're not giving our opinions on this one away for free.
I'm off to Versailles for the UFI Congress. A record crowd is expected and I'll try to blog from there.
Relying as we continue to do on unconfirmed sources, we now learn from Bloomberg thinks Alibaba has raised its price. The report says:
Alibaba.com Corp., will sell shares for HK$12 to HK$13.5 apiece in Hong Kong, said the people, declining to be identified before a public statement. The shares were initially marketed at HK$10 to HK$12.If confirmed, this would raise US$1.5 billion. The report notes "that would value Alibaba at $8.8 billion, or 54 times estimated 2008 profit before stock-based compensation, the people said". And remember, the analysts are talking about 2008 profits of US$160 million - almost equivalent to Global Sources' total revenues.
Today's South China Morning Post reports (behind its irritating firewall, sorry) that the institutional portion of Alibaba's IPO is over-subscribed by 50 times. Surprise, surprise. There's nothing else much new in the story which doesn't repeat the suggestion in the weekend FT that the pricing is "relatively undemanding"....for Martians perhaps.
The SCMP does say that "Alibaba.com says it will use HK$1.57 billion of the offering's proceeds for strategic acquisitions and business development". This, of course, pours fuel on the already raging fire of speculation of who they will buy. The gossip in the exhibitions industry is that Kenfair is considered the most likely candidate despite Alibaba's protestations that it is not interested in running exhibitions. I actually have my doubts and suspect that, if they do any acquisitions, they may surprise us.
Congratulations to Dan Londero who, after 3 years running Reed's China business will be moving to London to head up the International Sales Group. He will take a seat on the RX Board in this role, according to an announcement from Chairman Mike Rusbridge.
When Dan took over in Beijing, the company had a relatively small business and was definitely 'boxing below its weight' in the industry there. He told me the other day that they now have 350 people in China and what is widely regarded as a pretty strong business.
His successor in Beijing will be coming from elsewhere in the region.
There's also change down in Australia too (which Londero ran before moving to Beijing). Reed has announced that Debbie Evans will take over there as CEO in January.
I'm not sure if this will get distributed, so I thought it might be of interest to readers to see the presentation I gave at the ad:tech conference.
I was going to try to blog from the ad:tech conference in Beijing. Running around all day today, I only managed to make it to the session in which I was speaking, so I would direct you to Thomas Crampton who is blogging feverishly and fully on the proceedings here. Great job!
Meanwhile, my friends at VNU Exhibitions Asia have announced the return of Michiel Kruse as Director International Business Development. He was with the company in Shanghai from 2000 - 2005 before branching out to launch his own golf show. CEO David Zhong says "In his new role Kruse will focus on the relations with international customers, partners, agents and media and on further expansion of international activities" and proclaims himself "thrilled" that Kruse has returned.
The Chairman of VNU Exhibitions Asia, Jimé Essink will be heading off to take up the reins at CMP Asia on 1st November.
Thanks, by the way, to the ad:tech organisers. I won an iPod in their lucky draw at the reception this evening. In the words of the late, great Frankie Howard, my flabber has never been so gasted.
Update: B2B panel chairman, Eddie Choi, has also blogged on the conference today. There's even a photo of our session. Thanks guys, you're all making this very easy for me: 3 sentences and a link. That's lazy man's blogging.
And more: Marketing in the age of Multitasking.
Reuters is reporting that the Alibaba.com IPO will be priced in the HK$10 - 12 range and that it will raise US$1.32 billion as a result. So much for my punt last Tuesday that it would be $8.88.
The Reuters piece goes on to note that "the indicative price range represents a price-to-earnings multiple of 40 to 48 times the syndicate earnings forecast for 2008". That means the company would have to make $150 - 160 million in profits next year, almost double what Goldman Sachs is forecasting for it this year.
I trust there are some money printing machines for sale on Alibaba.com. These growth targets look awfully steep for a company earning real money in the real world from real live exporters who are operating on wafer thin margins.
It may be the great bastion of British capitalism and it may be pink, most certainly not red. But, we don't expect the Asia edition of the Financial Times to commit basic gaffes on significant issues such as the structure of the Chinese government. And, they make the mistake twice on the same page.
The "Week Ahead" section on today's back page suggests that Hu Jintao is hosting "the National People's Congress". No he's not boys. The National People's Congress is China's toothless apology for a parliament which passes its laws. What Hu is hosting is the 17th National Congress of the Communist Party of China. The meeting may be just as boring, but, given that the CPC still basically controls all key decisions in China, is actually much more important than the NPC over which Prime Minister Wen Jiabao presides.
Tut, tut, boys. Too much staying up late watching the rugby I fear and not enough time checking your facts.
Actually, it's not that bad, I just couldn't resist the 3rd "m". However, I was interested to see my friend Kenny Coyle popping up as editor of a new magazine, Mix (the "i" is upside down in the logo). It's always a good sign that the economy is heating up when travel-related media start to proliferate.
Mix joins Kenny's former magazine, Haymarket's CEI Asia/Pacific and TTG MICE from my former colleagues down in Singapore. They all focus primarily on the corporate meetings and incentives elements of business events (the "M" and the "I" of the MICE acronym), competing vigourously for hotel advertising.
If you've already clicked on the Mix hyperlink above, you'll see it takes you to Panacea Publishing, the company spun off from Euromoney in 2005 to publish Business Traveller. I met the boss in Singapore in July: Julian Gregory led the MBO and I'm pleased to see this relative newcomer of a company doing well. Its Asia operations are run from Hong Kong by another former colleague of mine, Peggy Teo.
I have worked with people involved in all three of these publications, so wish them all well. However, it's hard for me to believe that this relatively niche market has room for 3 competing magazines in Asia. Who will blink first?
Update: Thanks to Kenny for setting me straight. There are actually 4 magazines in this space in Asia. Reed's TravelWeekly group in Singapore still has its Events magazine which I have to confess I'd forgotten about.
...and quite the day yesterday. Look at the chart showing the take-off of both Global Sources and Ninetowns on NASDAQ yesterday. And remember, the market's been flatt-ish this week. At one point, Ninetowns was up 70% on the week!!
It seems that the smart money (which immediately excludes mine) has finally determined that the Alibaba halo effect is going to focus a lot more attention on these two. I wonder which others might benefit? Suggestions in the comments box please.
