Taking a leaf out of the Ali-play book

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 reports strong quarter

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.

Flavour of the month....free

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.

China makes it harder for publishers

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.

No surprise that they're not opening up. Nor, for that matter that they're trying to plug the loopholes in the regulation of the online side. I'll be digging deeper into that to try to work out what's going on.

You don't need a fancy venue

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.

Conferences on my mind

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:

• Gilmor points to Paolo Valdermarin's post about "pod" conferences. This seems to be an extreme version of the trend which has been evolving in IT events over several years to get ever-more focused; just a small group of attendees with very narrowly-shared interests. It can be great for the attendees. It's very hard for organisers to make money with.
• Then, I notice 852Signal talking about the launch of the BarCamp 'unconference' in Hong Kong. I realise this is not a new concept but the fact that it is evolving strongly in Asia as elsewhere makes it clear that the organisers are onto something.
• Then, I notice that the lively Danwei China media blog is organising a "Plenary Session", "a lively, PowerPoint-free panel discussion" on careers in the media, technology and communications. The point here is presumably that once PowerPoint is introduced, it's hard to have a lively discussion.
• Finally, there's a thoughtful post from Rebecca MacKinnon on the series of Web 2.0 conferences she has been attending in Beijing.

There's lots going on and a lot of experiments. Nobody though, as far as I can see, has really come up with quite the right solution to making these events marketable, truly valuable and profitable for the organisers.

Kenfair explained...sort of

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?

DH Gate puts prices up front

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.

Kenfair suspended again

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.

The right price?

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.