Challenging opportunities in China

I had a really interesting start to my day today, participating in a panel discussion hosted by the revitalised Society of Publishers in Asia (which, by the way, we just joined). I was lucky enough to be on the stage as the junior partner of Tom Gorman (pictured), the publisher of Fortune China and guru of China publishing with 35 years under his belt.

The discussion, ably moderated by the Wall Street Journal's Geoff Fowler, focused on challenges and opportunities for publishers in China. A few key take-aways:

• Expect to work within the current regulatory environment for a while (and try to work out how to make money as things are);
• There are plenty of opportunities in China. They're just not always easy to grasp and the market is now very competitive: Tom commented that, when his magazine launched a decade ago, he was third in the market. There are now 100 competing titles.
  
• Print publishers are being somewhat shielded from the harsh realities of digital convergence by continued strong advertising growth. Unlike their counterparts in N. America and Europe, they are not being forced into taking some of the tough decisions. But, that doesn't mean that the trend is not happening in China.
• Mobile may be the truly big publishing opportunity in China. Regular readers of this blog will not need any tips on who might have said that! I noted that I'm far from alone in watching this trend and that IDG, so often a leader in the business/specialist media category, is focusing on the "third screen".
  

E-commerce JVs abound

Somewhat hidden amid the excitement surrounding Alibaba's Q1 results was an announcement that the company has agreed with Softbank (a major shareholder since the early days) to establish a joint venture in Japan. Details are a bit scarce at this stage, but the reports suggest that ownership will be split 65:35 in Softbank's favour while another piece says that the venture will target Japanese SMEs. It seems this was all rumoured back in November.

Meanwhile, we picked up in Seeking Alpha's weekly tech summary a note about a collaboration between U.S.-based CyberSource Corporation (NASDAQ: CYBS) and China-based PayEase Technology Ltd. The press release is here and CyberSource says "technical and logistical issues pose significant challenges for merchants wanting to enter the China eCommerce market. CyberSource Corporation and PayEase Technology Ltd. are collaborating to remove these barriers and facilitate merchants' entry into the China market".

PayEase CEO Fred Sum (pictured) is quoted as saying "Electronic payment in China is an underserved market with great potential".

FIPP heading to Tokyo for digital pow-wow

The conferences organised by the International Federation of Periodical Publishers, FIPP, that I've attended have been really good. In fact, I've just signed up to attend their biennial B2B meeting which will be in New York in September this year.

They have organised a couple of sessions in Germany on digital media which sounded really interesting, but I hadn't been able to justify the trek to Berlin, more's the pity.

So, I was really pleased to see today that they're organising the First Asia-Pacific Digital Magazine Media Conference in Tokyo in mid-November. I have to be in Istanbul at the time for the annual UFI Congress, but BSG will definitely be heading to Japan for this one.

TechTarget and GMI include Asia in new online IT panels

TechTarget has for quite a while been amongst the most interesting of B2B media companies emerging in the US. Where it leads, others around the world will sooner or later follow. Or so it seems to us.

Thanks to my friends at Outsell for pointing me towards the interesting news that TechTarget has joined forces with Global Market Insite (sic). They will be jointly developing enhanced online IT panels which, they say will "enable market researchers to gain virtually instant insights into the buying trends and decision-making process for purchases [of IT goodes and services] from a wide range of respondents' perspectives".

From the get-go, this is a genuinely global initiative with capabilities in "the USA, the UK, China, Japan, India, France, Germany and more", the companies say.

Many B2B media firms play lip service to value-added service, consultancy and research. It is, in our view, typical of the approach that TechTarget has been taking that they have been able to put some meat on the bones of the idea.

Outsell's take on this: "The time for B2B panels has come of age with new announcements from B2B media companies partnering with online panel management firms. Some of the major online firms including GMI, Toluna and Greenfield Online have all announced partnerships in the B2B space. We expect to see continued activity with B2B media properties partnering with online panel companies to help build very specific B2B online panels in relevant vertical markets".

At BSG, we will watch with great interest to see how this plays out in Asia.

Alibaba's net income doubles

Thanks to my colleague Mark for this quick update. It looks like a very
strong set of numbers from Alibaba:

I have not read the whole thing yet, but net income more than doubled
excluding the one time gain from over-subscriptions of the IPO. That is
quite impressive!

First Quarter 2008 Highlights:

• Total revenue increased to RMB680.1 million, an increase of
  53.2% year-on-year and 7.2% quarter-on-quarter.
• Gross profit was RMB601.2 million, an increase of 55.5%
  year-on-year and 8.6% quarter-on-quarter.
• Operating profit was RMB311.9 million, an increase of 81.0%
  year-on-year and 67.1% quarter-on-quarter.
• Operating profit margin increased to 45.9% from 38.8% in
  the first quarter of 2007 and 29.4% in the fourth quarter of 2007.
• Net income (Profit attributable to equity owners) was
  RMB300.7 million, an increase of 111.7% year-on-year and 162.0%
  quarter-on-quarter, excluding the one-off interest income we received from
  oversubscriptions during our IPO in the fourth quarter of 2007.
• Earnings per share, basic and diluted ("EPS") was 6.47 Hong
  Kong cents, an increase of 118.6% year-on-year and 160.9%
  quarter-on-quarter, excluding the above mentioned one-off interest income in
  the fourth quarter of 2007.

http://www.alibaba.com/aboutalibaba/releases_080506.html

Bloomberg story:

http://www.bloomberg.com/apps/news?pid=newsarchive
<http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aIkd4XnXvYqw>
&sid=aIkd4XnXvYqw

Dominating the verticals

An under-reported - in our opinion - operator in the online China B2B world is that other Hangzhou-based listed company, Netsun. They have always taken a completely different approach to their big brothers down the road at Alibaba and focused on dominating vertical market positions. Their Chemnet is an impressive market leader in the chemicals world.

They have also been building up a position in the textiles and garment industries. So, we note with interest another acquisition they have made of Yeshitech.com for Rmb 18 million. The key assets of this business are Texindex and 51Fashion amongst others. My colleagues tell me that this now gives Netsun 'full house' of the top 5 vertical garment/fashion B2B sites in China. Texindex and 51Fashion were the biggest competitors to Texnet which Netsun already owns. It also acquired efu.com in June last year.

The market quite likes them: market cap for the Shenzhen-listed stock today is Rmb3.38 billion (a VERY lucky number in Cantonese numerology) at the close play today with a p.e. just over 80 (more expensive than Alibaba).

All this is being run through the toocle.com 'front page' which is setting itself up to compete with the top flight of China's B2B players. I think this is a really interesting business (I don't own any shares, so this is an entirely independent comment) and you should watch it.

Back to school in China with Pearson?

This may be marginally off-topic, but the story in today's FT really caught my eye. Education is clearly one of the hot areas for the publishing and information services industry for the foreseeable future. Whether it's a logical step to actually buy the schools you service is another question but one which Pearson, the FT's parent company, appears to be grappling with in China.

The Shanghai Learning Education Center, or LEC, was founded in 2000 and now operates 9 or 10 schools (depending on which bit you read). We'll follow this with interest.

Alibaba exhibits at HKCEC....in Second Life

I probably show my age by considering Second Life as a rather tedious time-waster for sad losers who don't have a first one. As with Facebook, however, I have been keeping half an eye on it in case it has relevance to our world. Of course, this may make me a sad loser in training!

Thanks to Mark for pointing out to me this post on the Ambling in Second Life blog. I went to have a look and was surprised to find myself in the Hong Kong Convention & Exhibition Centre (see first pic). Even more surprised to go upstairs and find the MyAlibaba news studio. I have to say it was deserted and there was nothing going on there.

Softbank, Xiaonei and those social networks

As regular readers will know, I've been tracking the social networking phenomenon (most recently here) and trying to work out what it might mean for the industries we cover.

Some unkind souls have suggested that this is simply a good excuse for me to prowl the seamier nether regions of Facebook during the day. Nothing, of course, could be further from the truth!

General conclusion as of this moment: Facebook remains a time sink, good for tracking the antics of family and friends. No real relevance to B2B media and information. The LinkedIn network is impressive although I'm not quite sure about the crowding of new features onto the home page. Plaxo's Pulse is coming fast up in the outside lane, presumably building on that already very large installed base of users who have been keeping their address books up-to-date with Plaxo (about 8 - 10% of the 2,500 names in my Outlook address book).

MySpace was effectively dead for anything other than music business as soon as the teenagers all abandonned it almost on cue when Murdoch bought it.

This is, of course, the English language stuff. China, as always with the Internet, is marching to the beat of its own drum. We were interested then to see Japan's Softbank making a commitment to increase its stake in Oak Pacific Interactive to 40% by 2011. The price tag that's been put on this according to Bloomberg is ¥40 billion (US$385 million).

Oak Pacific's main asset in this transaction is Xiaonei.com, the Chinese equivalent of Facebook. This deal values Xiaonei at just shy of US$1 billion. The Mobinode blog thinks that Microsoft's investment in Facebook which gave that company a $15 billion valuation should be credited. Perhaps Mr. Son sniffs another IPO in the air and would like to repeat the success of his investment in Alibaba.

Aliren of the world unite

It is May Day, so a focus on the workers seems appropriate.

We know that we have teased our friends from Hangzhou quite consistently about their Ali-everything naming conventions. They should take comfort from the fact that we at BSG are not cruel people (well, most of us anyway) and don't pick on the weak. You have to be strong to earn the honour of being lampooned on this blog.

We couldn't resist picking up on Aliblogger Wendy Wong describing herself as an Aliren (阿里人). That was a new one for us. Those Alibloggers really are very pleased to wear their orange jackets. There's great team spirit there. It seems, to paraphrase the Irish Obama of 40 years ago "Today, in the world of e-commerce, the proudest boast is 'Wo shi Aliren'". I trust that doesn't also translate as "I am a jelly doughnut".