Global Sources/HC deal hits the headlines

It's been a while since a straight Asian B2B deal has made real headlines. Even last year's Yahoolibaba! deal attracted reporters more because of the B2C and C2C elements of the business.

We note today a Bloomberg piece in the International Herald Tribune. Nothing too new there although the suggestion that Alibaba's market share of domestic B2B in China is 60% while Global Sources has 21% and HC 17% are interesting.

It also includes a slightly dyspeptic quote from Porter Erisman at Alibaba.com: ""When you bring together two second-place finishers, it doesn't create a winner," he is quoted as saying. Surely they haven't been rattled by this deal?

I missed this evening's webcast of the investor phone in with Global Sources' Merle Hinrichs but it is available here for those who are keen to hear it.

Japan

Just returned from 3 days in Japan (thus the slow posting). Attended the annual meeting of JEXA, the Japanese exhibitions industry association. This, like many aspects of business media in Japan, is a field remarkably little known to most international companies. Our research shows that this is the second largest exhibitions market in Asia after China and, by far, the biggest market for business publishing.

I am personally keen to learn more. I wrote a white paper for American Business Media on Japan a couple of years ago and researching it was a real eye-opener. Japan is the biggest economy in Asia by a large margin (still more than twice as big as China). Yet, all the attention is focused on China and India. The Japanese economy was the fastest-growing OECD economy last year. I'll bet there's more to come.

The meeting was held at Makuhari Messe (pictured here from my room at the nearby New Otani Hotel), the major centre located about half way between Tokyo and Narita airport.

IDG venture fund for India

As it cashes in one of its China investments, we see via ContentSutra, quoting the Economic Times, that IDG is proposing a new $150 million venture fund for India. It quotes IDG's Pat McGovern saying: "“We feel there is a tremendous opportunity here due to the inherent entrepreneurial nature of Indians to create global companies”.

Global Sources invests almost $10mn for 10% of HC International

Global Sources took a big step yesterday into the Chinese Mainland with the announcement of the acquisition of 10% of HC International (nee Huicong and formerly SinoBnet) with an option to pick up 35% within 12 months which, by Hong Kong securities regulations, would trigger a general offer. By our calculations (and the figure is not explicit in the various figures revealed in the press release), this investment has cost the company $9.8 million, valuing HC today at a hair under $100 million today. If some undisclosed financial measures are reached, the Global Sources offer will increase in value by 40%.

Global Sources Chairman and CEO Merle A. Hinrichs is quoted as saying, “The partnership between HC International and Global Sources transforms the China B2B landscape and enables the launch of many new online verticals, magazines and trade shows for the fastest growing industries in China, the world’s fastest growing economy. We have found in HC International the perfect partner to complement our current offerings, especially given HC International’s strong vertical search technology. Together, we aim to provide the most comprehensive, professional and successful B2B services in China.”

HC has had a number of suitors in recent years but none has obviously found the right formula to close a deal with founder and CEO Guo Fansheng.

As far as we can recall, this is Global Sources' first acquisition in at least a decade and the first media-related one since they picked up World Executive Digest in the Philippines (now Chief Executive China magazine) many years ago. The 10% will come from one of HC International's main investors, IDG Technology Venture Investment.

HC is listed in Hong Kong while Global Sources is, of course, listed on NASDAQ.

New FT Asia editor

We see that Victor Mallet has been appointed as the new editor of the FT Asia. He is currently chief Asia correspondent for the FT in Asia, based in Hong Kong and replaces John Ridding who, Pearson says, will move to London in June to become Chief Executive of the Financial Times.

The company notes that, under Ridding's leadership, "the FT has secured the highest readership among international titles in Asia with a strong lead among C-suite business executives (PAX Q4, 2005). The most recent ABC figures, for April 2006, show a 16 per cent year on year circulation increase".

Sands to include convention space for 54,000 in Singapore

The Las Vegas Sands group look to be on a winning streak in Asia. Having already kicked off their Macau adventure in great style, we now see that they have won the bidding for the first "Integrated Resort" in Singapore. Much of the media coverage will focus on the casino elements. We are, however, more interested in the business events side and see that they are talking of enough space for 54,000 delegates. There can't be too many events that big but you can be sure that Singapore will be gunning for those that are there.


The design is from US-based architect Moshe Safdie and is said to have been inspired by a deck of cards. We look forward to more details!

Exhibitions CSR in Asia?

I sense the beginning of some limited sense of corporate social responsibility in the exhibitions industry in Asia. I have sat in meetings recently where people have wondered about the wisdom and appropriateness of throwing away acres of once-used carpets after a big event. There is some talk about how we can do better than demolishing elaborate stands and having truck loads of waste shipped to brimming landfills.

Now I see a story on the China CSR site detailing some moves made by Global Sources to recycle to charity some of the left-overs from their giant China Sourcing Fairs in Hong Kong.

The article notes: The Global Sources program collects product samples at the end of each China Sourcing Fair from participating exhibitors and re-distributes them to people in need through the non-profit organization Crossroads International.

Asian B2B and the Long Tail

An interesting column in today's Hong Kong Standard newspaper in which writer Peter Gordon describes the long tail concept to his readers, mentions Chris Anderson's new book and then goes on to say why it is relevant to Asian B2B trading (and, by extension, media products):

Hong Kong companies rarely deal in blockbuster products in the world's main markets (and indeed, such successes that Asian companies have had in such products, Singapore's Creative Technologies being an example, have tended to be short-lived).

Hong Kong companies have specialized in niches: cloisonne table lamps, selling garments to Fiji or car stereos to Cameroon, canine chew toys, etc. The Hong Kong Trade Development Council and other trade catalogs and Web sites have thousands of pages of just these sorts of niche products and services.

ICBC, Alibaba sign new online deal

ICBC, Alibaba sign new online deal: "The Industrial and Commercial Bank of China (ICBC) and Alibaba Group teamed up yesterday to further promote the development of e-commerce and e-banking."

(Via People's Daily Online.)

One of them is wrong

Both published today:

The People's Daily: As a major player on everyone's lips, China, the world's fastest-growing economy, is set to overtake the United States as the biggest economy globally by 2050, according to a PricewaterhouseCoopers report.

The BBC: China is set to become the world's biggest economy by 2026 according to a poll conducted on behalf of the BBC.

So who's it to be; Auntie or Big Brother? You decide.

Mobiles

Hugo Martin posts today on an FT article quoting Google's Eric Schmidt on mobile phones:

Mobile is going to be the next big internet phenomenon. It holds the key to greater access to everyone - with all the benefits that entails [...]

This comes out the same day that I marked for future reference the following in the People's Daily Online:

The number of mobile phone subscribers in China hit a record 416 million at the end of April, the Ministry of Information Industry (MII) said on Sunday.

You don't have to be a genius to see where my thoughts are leading. Interestingly, nobody has yet showed me a compelling B2B application on a mobile. Any suggestions?

VNU stays together - for now

News from various sources over the weekend - including this from Reuters - that the massive private equity bid form the Valco consortium for VNU looks as though it is now going through. So, it looks as though, for the time being at least, the guys building the VNU Exhibitions and publishing businesses in Asia are all still part of the same, happy family. That probably gives them as much as two years to relax and do business before the fun starts all over again.

While we're on the topic of my friends at VNU Exhibitions, this link to pictures (many of them!) from their Millionaire Fair looks like a lot of fun.

Update: Another piece of VNU news landing on my desk today - not sure if it's related. Jimé Essink, the CEO of VNU Exhibitions Asia, will be moving back to the Netherlands to take over as CEO of VNU Exhibitions Europe. The current incumbent, Dick Molmans, is moving on to become CEO of Sanoma Uitgevers , one of the Netherlands' larger consumer media companies. Essink will continue to have overall responsibility for VNU's Asian activities from his Utrecht base.

Brave editors

It's been a while since I posted something picked up from Rebecca MacKinnon's RConversation blog. That's no reflection on its continuing excellence in addressing some of the tricky issues of media, censorship and modern China.

This piece on the New America Media site came to me that way and is a fascinating interview with Hu Shuli, the apparently fearless Editor of China's Caijing magazine.

Highlights:

"If a story's important enough, we'll find a way to talk about it".

"Under Hu's stewardship, Caijing has successfully navigated the space between censorship and complete press freedom in China. The magazine, which has lead the way in the transformation of the media's role in China by challenging the boundaries of business journalism, is considered a must-read for politicians, investors and financial market leaders."

Quite right!

"In a transitional country like China, all business issues are related to political issues, and in the end, every important political and social issue has relevance to business"

"Caijing showed people how far you could push the envelope in terms of permissible reporting by wrapping it in the 'financial reporting' cloak"

And finally:

"A lot of times we don't think what we are doing is risky, but at the same time, some risks are worth taking," Hu says.

Well, hooray for Hu.

People's Daily dating services

OK, my headline isn't accurate, just too tempting. However, we do like this piece in the English People's Daily Online quoting an iResearch report and suggesting that the online dating market in China could be worth up to Rmb653 million (US$81 million) by 2008. We won't quibble with the Rmb3 million although that kind of lack of rounding in forecasts always makes us suspicious of unfiltered Excel extrapolations of existing data.

With the sex imbalance among China's one child families heavily favouring boys for many years, there will clearly be a great business opportunity in finding dates and mates for all those boys.

Mad Jack and Zhaocaijinbao

Two interesting posts today on Alibaba. First, Internetnews.com - which I haven't seen for ages - quotes founder and CEO Jack Ma at the Yahoo! analysts' briefing describing himself, apparently, as "Mad Jack". Never one to bore the journos, Jack and CFO Joe Tsai gave a five point plan for e-commerce success in China:

The first one is e-marketplace, which Alibaba has in the form of its Alibaba portal and its TaoBao auction site.

The second element is the trust record, which is something that Ma noted over 160,000 companies have built up on Alibaba and over 15 million individual users.

Payment is also critical. To that end, Alibaba recently launched AliPay, the PayPal equivalent in China.

Alibaba CFO Joe Tsai considers AliPay a key driver of the company's success and e-commerce in China.

"Our own estimate is that the online payment market in China was worth $700 million last year, and AliPay was really the main driver," Tsai said. "We occupy over 40 percent of that market."

Tsai noted that AliPay is different from other payment systems in the market since AliPay is an escrow-based system.

"What that means is that it addresses the issue of settlement risk," Tsai explained. "Settlement risk is someone pays the cash and the other side has to deliver the goods. How do things cross in the middle and get settled?

"This is a true issue for e-commerce in China and it's a very serious issue, which, in the past, has hindered the growth of e-commerce in China."

AliPay solves the settlement risk issue by escrowing the cash until the goods are delivered.

"Through this payment system, we are actually able to increase the liquidity in the TaoBao marketplace."

Beyond pure-play e-commerce, Yahoo is the key to Ma's plans to dominate search in China.

"Today I don't see a real search engine in China," Ma said, discussing the fourth element. "Baidu is good. Google is good. But we have not started to compete yet. We will start in September."

And the fifth element of e-commerce success in China?

"We're probably going to launch No. 5 in the next two years, but today I'm not supposed to tell you about that," the charismatic Ma said.

Then, over at China 2.0 Web Review, a very interesting piece on how search engine concepts are being used at the C2C and B2C site taobao.com with the Zhaocaijinbao keyword bidding service.

Good year for Cybermedia

India's listed technology media house Cybermedia has just posted strong results for the past year. Net profits are up 40% on revenues up 21% at Rs80.55 crore (US$17.6 million). Online revenues are reported up 42% at Rs5.5 crore (US$1.1 million) while research business grew 47% to Rs12 crore (US$2.6 million).

The company seems to us to continue to step out in front of the pack India in terms of speciality business and technology media.

Another download-free e-reader appears

Maybe I've been asleep, but one week after reporting on Singapore's PRO jewellery magazine using the slick RealRead system, we have stumbled across another quite smooth web-based mag facsimile system. This time, it's a US-based magazine targeting Indian women, Nirvana Woman. OK, I admit the Asian B2B link is a bit tenuous, but I think it's interesting.

The system uses FlipViewer BV. Seems smooth to me although these things seem to be coming increasingly commoditised.

Update: Well, in poking around this site, I discover there is an Asian B2B link: Asia Pacific Food Industry magazine from Eastern Trade Media in Singapore also has a FlipViewer edition.

Pass the parcel at UBM

United Business Media is rationalising its US businesses. According to a report in BtoB Online, the US healthcare business currently under CMP Media will be transferred to CMP Medica - makes sense. CMP Media with become CMP Technology. Makes sense too.

What caught our eye, however, was the statement that the cruise shipping and beauty trade fair and conference businesses in the US will now be managed by CMPi based in London. Only 12 months ago, those businesses were, through accidents of acquisition, part of the CMP Asia portfolio. Must be a bit confusing for the guys trying to run those businesses. Hold tight lads, you'll probably be reporting to Hong Kong again within a year. Such is life in large corporations....they survive and thrive despite themselves.

Alibaba will IPO

As far as we know, this Reuters report is the first time that Jack Ma has actually said "we will be a public company". He does, however, shy away from suggesting any timetable for this, instead highlight what he sees as the company's higher priorities: "We have to fix Yahoo first, be the No. 1 search engine."

Apparently, the company is planning to launch a new Yahoo! China search engine in September in an effort to catch up from its distant 3rd place behind Google China and Baidu.com.

Getting copyright religion

It has been a matter of faith among those watching China business for some time that the only thing which would drive significant changes in the chaotic intellectual property environment was domestic self interest. We were interested, therefore, to see this piece in the People's Daily Online about the success of blogs in China driving a growing interest in copyright protection.

The article suggests:

With a huge influx of participants, China's booming blogs are becoming a highly profitable way of online commerce, raising the issue of blog copyright.


Highly profitable blogs may be a little thin on the ground, but the concept is interesting. The article goes on:

BSPs are looking for business models to profit from the huge blogsphere. Hexun.com has set up an advertising alliance for blogs, promoting their popular blogs to advertisers and drawing them to post ads on the blogs.

More and more business people have become aware that blogs could eventually become a highly profitable way of musing rather than simply a lonely stage for online blathering.

According to a report released by the Internet Society of China, the number of bloggers is expected to hit 60 million by the end of this year. There were an estimated 100 million blogs worldwide and about 16 million in China in 2005.

Some questions elsewhere on the Internet about the projection but a trend worth following for sure.

Who'd have thought...

The always interesting Danwei blog reports that China is not in the top ten list of censored countries. It notes: "The Committee to Protect Journalists (based in New York) has released a list of the ten most censored countries in the world. They are:

1. North Korea

2. Burma

3. Turkmenistan

4. Equatorial Guinea

5. Libya

6. Eritrea

7. Cuba

8. Uzbekistan

9. Syria

10. Belarus

Each country in the top ten is described in three sections: Leader, How Censorship Works, and Lowlights. Reading through the list is a good idea for people writing about and researching censorship issues in China.

The whole article is here.

Paid subs in India

ContentSutra reports on a brave effort by the Business Standard - a newspaper in which the FT has a 13% stake - to start collecting subscriptions for some parts of its website. The Rs100 (around US$2) price is in line with magazine pricing in India but, judging from the comments posted with the article, there are some doubts about whether even this low level will be acceptable in ultra price-sensitive India.

Toto expects to succeed where American B2C models have failed

Plugging the gap between its Taobao C2C offering and the Alibaba.com B2B services, Taobao has announced the launch of B2C services. It says it is already China's largest C2C service and will build on that lead by including products and services provided by major manufacturers and retailers.

Taobao General Manager Toto Sun suggest that "While American B2C models have failed to succeed in China, Taobao's model will make B2C a reality in China. Because we are simply connecting large sellers to consumers, rather than taking possession of the goods and serving as a middleman, we are offering a solution that will benefit both manufacturers and consumers in China.'

The company says it has already signed up Motorola, Nokia, Haier, Aigo, Lining, Adidas, Giordano, and UT Starcom too the service. Presumably, this B2C stream of activity is one of the things tow which Alibaba.com CEO Jack Ma was referring when he spoke a few weeks ago about beginning to focus on ways to monetize Taobao's huge audience. Currently, its C2C services are completely free, a strategy which has forced eBay's China business to drop transaction charges.

87.4% of China's net users searching

iResearch in Shanghai has come up with some interesting data on the number of Internet users in China undertaking search: they say that 87.4%, or 97 million of them were using search in 2005. By 2010, they think this number will have risen to 200 million.

HC International Q1 losses increase

HC International, the Hong Kong-listed parent of B2B mini-conglomerate Huicong (ex SinoBnet), has just reported reduced revenues and significantly increased losses for the first quarter. Revenues fell from Rmb78.9 mn (US$9.8 mn) to Rmb57.5 mn (US$7.1 mn) while losses increased from Rmb-4 million to Rmb-20.3 million.

The company, listed on Hong Kong's second board, GEM, notes that Rmb14.8 in revenues was 'lost' from discontinued operations. TV-related operations were, the company says, hit by the timing of Chinese New Year (although, as this is always a Q1 holiday, it's hard to see why) and even revenues from its flagship online operations fell 6%.

The company reports the following actions in an effort to turn things around:

To further expand the Group’s geographical market share, resources had been allocated by the Group to develop its sales agency network in the PRC during the period under review. Agents were appointed by the Group to promote the sales of its on-line marketplace, “Mai-Mai-Tong – 買賣通”, in cities where the Group does not have any presence. As at 31st March 2006, over 200 agents had been appointed by the Group.

To further enhance the features of “Mai-Mai-Tong – 買賣通”, 3 new versions of the on-line marketplace, namely “Silver Mai-Mai-Tong – 銀牌買賣通”, “Golden Mai-Mai-Tong – 金牌買賣通” and “Platinum Mai-Mai-Tong – 鉑金買賣通”, were launched in March 2006 to cater for different needs of the members of the business-to-business community.

Going forward, the Group will continue to focus on the business-to-business sector, which offers higher growth potential and margins, by devoting more resources to upgrade its technological capability and developing new complimentary on-line products.

Price value of Chinese Internet stocks

An interesting piece here at the China Stock Blog which charts price against book value for Chinese Internet stocks. Global Sources and Sina show up at 4.6 times book value against 21.6 times for Baidu which, as I said the other day, still looks horribly over-valued to me.

Charts: Valuing US-Traded Chinese Internet Companies Based On Book Value & Tangible Book Value: "Price / Book Value ratios of stocks covered in the Chinese Internet sector ranged from 21.6 (BIDU) down to 1.9 (JRJC), with a median value of 5.3.

Price / Tangible Book Value ratios ranged from 22.1 (BIDU) down to 1.9 (JRJC), with a median value of 7.1.

Tangible Book Value differs from Book Value by subtracting out the value of intangible assets from the equation Book Value = Assets - Liablilities. Examples of intangible assets are goodwill, patents, capitalized start-up expenses and deferred financing costs.

* View More China Sector Charts *

Data in table version — click on a ticker for opinion and analysis of the company:

		05/11/06	Book	Price/	Tangible	Price/
Ticker	Company	$Close	Value	BV	BV	BV
BIDU	Baidu.com, Inc.	$81.51	$3.78	21.56	$3.70	22.06
CTRP	Ctrip.com Inter	$49.61	$2.97	16.72	$2.91	17.04
GIGM	GigaMedia Ltd.	$10.37	$2.00	5.19	$1.36	7.60
GSOL	Global Sources	$12.03	$2.59	4.65	$2.59	4.65
JOBS	51job Inc.	$25.35	$3.86	6.57	$3.80	6.66
JRJC	China Finance O	$6.40	$3.33	1.92	$3.33	1.92
LONG	eLong Inc.	$15.40	$5.36	2.87	$5.17	2.98
NCTY	The9 Ltd.	$26.25	$4.82	5.45	$3.19	8.24
NTES	Netease.com Inc	$21.28	$2.27	9.38	$2.27	9.38
SINA	Sina Corp.	$27.57	$6.00	4.59	$4.27	6.46
SNDA	Shanda Interact	$13.45	$2.85	4.72	$2.11	6.39
SOHU	Sohu.com Inc.	$26.79	$3.78	7.09	$2.11	12.67

Data: Capital IQ

Related:

1. Most recent opinion and analysis of China stocks


2. 
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3. 
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Aside: Did you know that Seeking Alpha now publishes a one-page recap of Jim Cramer’s Mad Money stock picks?

"

(Via China Stock Blog.)

Another e-mag in Asia

Most of the announcement e-mails I receive go straight to junk. I'm glad, however, that I looked at the one which pointed me to the e-edition of Singapore's PRO jewellery magazine. Maybe I've been asleep at the wheel, but I don't think I've seen this RealRead system in action before and it is one of the smoother implementations of the page turning mag facsimile approach.

The topic of digital strategies got a lot of airtime at last week's FIPP B2B conference in London and I expect the subject to feature large in publishers' strategies in this part of the world. The regulatory and distribution challenges of traditional publishing make it a real challenge in Asia and, although there are many different takes on the best approach, publishers increasingly seem to be finding a receptive audience for electronic publishing.

Details on Venetian Macau bookings

Following previous, cryptic announcements, the veil is beginning to be lifted on details of the exhibition bookings at the Venetian in Macau which is due to open in October next year. In a May 10 press release, LVS President Bill Weidner speaks of 5 contracts for 13 multi-year events.

These include:

- Asian Automotive Aftermarket Products Expo by William T. Glasgow, Inc.
- CMP Asia Jewelry and Watch Show in January 2008
- Global Gaming Expo Asia by Reed Exhibitions

Global Sources

No surprise that Global Sources has reported a strong first quarter. A transcript of the Earnings Conference Call is posted here at the China Stock Blog.

The company is predicting 33% revenue growth for the first half of the year. This is clear evidence that - finally - they have hit the accelerator pedal after a number of years of flat-ish sales. The new trade show business is the key although even the 'traditional' print and online businesses saw 15% year-on-year growth.

Baidu shows strong growth

It's beginning to look like it might have the makings of a business which will come as a great relief to those who overpaid for its shares. Xinhua reports that Baidu, China's premier search site reported net profits totaling Rmb35.2 million ($4.4 million) in the first quarter, "13 times higher than the same period in 2005". The report goes on to say that the profit was also an increase of 43.5 percent from the previous quarter. Sales were up 18% at Rmb135mn.

It still looks mighty thin to me for a business with a NASDAQ market cap of $2.87 billion.

Seet Out

An e-mail is circulating the exhibitions industry with the news that Steven Seet has left his role as CEO of Singapore Expo. We wait with interest to see where Seet, a veteran of Blenheim and CMP, pops up next.

Euromoney in ABF acquisition

It's always good to be at major events to make sure that you haven't missed important industry news. Last week, in London, at the FIPP B2B conference - a really good event again - I was directed towards the news that Euromoney picked up a 47.5% stake in Asia Business Forum at the end of March.

They paid GBP3 million for this stake with an option to buy another 42.5% in 2007 and the remaining 10% in 2009. The total deal value is capped at GBP17.6 million. That's pretty good going for the Singapore-based ABF. We have been aware of the company for a decade or so. Cast in the mould of the old IIR, it now produces around 150 conferences a year in Singapore, Malaysia and Thailand.

BSG news

News on our corporate blog about a new arrangement between BSG and BPA Worldwide to assist with the development of BPA's events audit business in Asia.