Widely Divergent Competitive Trends Across Chinese Internet Subsectors: An Expert Analyst Discusses the Competitive Landscape in Search, Video and E-Commerce with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - May 14, 2013 - The Wall Street Transcript has just published its Internet Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Increased Mobile Content Traffic - Chinese Online Monetization Trends - Internet Infrastructure and Services Consolidation - Social Networking Economics -

Companies include: Sina Corp. (SINA) and many more.

In the following excerpt from the Internet Services Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Could you describe the competitive landscape for the Chinese Internet sector?

Mr. Hellawell: We are seeing widely divergent competitive trends across various subsectors on the Chinese Internet. In the area of search, for instance, one significant competitor suddenly entered the market in August of last year, and it's still not clear what that new player's ultimate market share is, and what its continued presence might do to the incumbents.

As with any industry that might have verged on monopoly status in the past, and is only now seeing new competition, the incumbent players are having to retrench their business models to defend against market share loss. The main question in search is: When do we settle down to a steady state competitive framework? It's still not clear whether that will take one year or two years or three years.

While we previously referred to video as an area of significant monetization opportunity, the competitive dynamics remain very challenging, and thus profitable models for the players remain elusive despite the revenue growth. Online video is an area in which half the battle is for content. Almost every single platform that has scale in China - large user base, solid balance sheet, etc. - has entered the online video fray, helping to drive up content costs and thus delay industry profitability.

We find e-commerce, on the other hand, a space that after a few years of excessive competition is starting to consolidate, with competitive practices - e.g., free shipping at low thresholds, deep product discounting - easing.

TWST: What is your outlook for M&A within the Chinese Internet sector over the next 18 to 24 months?

Mr. Hellawell: We view M&A as a tool to consolidate presence in two areas, namely mobile Internet and social networking...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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