Qihoo’s new search engine emerged in mid-2012.

Despite every single one of its iOS apps being banned by Apple right now, and a lot of negative media coverage of how its desktop apps threaten user privacy, Chinese web company Qihoo (NYSE:QIHU) has reported some stellar numbers in its Q4 and full-year 2012 financial report. Markets reacted positively to the news from the software maker and fledgling search engine, pushing Qihoo’s stock price up 6.3 percent in Tuesday trading to hit an all-time high of $34.82 per share.

Before looking at the financial side, Qihoo also rolled out some user numbers. The report states that total monthly active users of Qihoo 360′s products and services reached a record 456 million in December 2012, up from 402 million at the end of 2011. As for its web browser – which is an important traffic driver for its relatively new search engine – the company reported that “monthly active users of Qihoo 360′s browsers reached a record 310 million in December 2012,” up from 255 million the year before. Antivirus apps are another strong area for Qihoo, and it saw mobile users of 360 Mobile Safe rocket from just 53 million in 2011 to 207 million at the end of last year.

Qihoo sailed past its revenue guidance with $103 million in revenues in Q4 (up 64 percent from previous year) to reach $329 million for full-year 2012, almost double that of 2011. Out of all that, $46.8 million was net income.

Chairman and CEO Zhou Hongyi hailed an eventful year in which Qihoo burst into the search segment to take on compatriot rival Baidu. President Qi Xiangdong explained their investment focus:

In 2012, we made proactive investments in product and technology development to further our leadership position and expand our footprint, particularly in mobile internet and search technology where we see tremendous opportunity for future expansion.

Aside from Qihoo’s tussle with Apple over its iOS apps ban – which might seriously impede its mobile strategy in 2013 if it remains unresolved – rival search giant Baidu has instigated a lawsuit over Qihoo’s search mechanisms.

See the full Qihoo financials here.

The exact selling price will be revealed at close of trading on March 5th, which is tomorrow. DeNA is currently at 2,596 yen per share at the close of Monday’s trading.

Sony’s announcement today, as caught by TheNextWeb, explains that it “is transforming its business portfolio and reorganizing its assets in an effort to strengthen its corporate structure. This sale is made as a part of that initiative.”

The Sony stake in DeNA, which amounts to 17,722,500 shares and 177,225 voting rights, will be bought by Nomura Securities.

Though $438 million is a useful chunk of cash for the struggling firm – which is now down to sales of under two million of each of its gaming gadgets in Japan – it’s not the biggest pile of money that Sony will be getting soon. That’s because Sony has also sold off one of its Tokyo office buildings for a cool $1.2 billion. Sony outlined a number of such cost-saving measures in its recent financial forecast.

Sony lost $5.7 billion in 2011. In 2012 Q1 it saw a less alarming $312 million evaporate, followed by $198 million vanishing into the ether in 2012 Q2.

DeNA, in contrast, is doing well as one of the world’s top social gaming platforms. It expanded aggressively in 2012 yet still managed $216 million in operating profit in 2012 Q3.

(Source: Sony (PDF))

Alibaba’s Jack Ma (left) and Tencent’s Pony Ma (right) are unlikely new biz partners.

China’s insurance regulator has confirmed approval, say sources, of a major new online insurance joint-venture between two Chinese web giants. As was first proposed last August, the new business sees e-commerce company Alibaba teaming up with social and gaming-oriented Tencent (HKG:0700), who – along with the country’s top insurer, PingAn (HKG:2318) – will soon launch this online-only joint-venture that will be called ZhongAn.

Neither Tencent nor Alibaba have commented on the apparent approval, pending official word from the China Insurance Regulatory Commission (CIRC) itself.

Unlike traditional insurers – like PingAn – the forthcoming ZhongAn company will not open brick-and-mortar stores across China. The new business will reportedly focus on liability and guarantee insurance, such as for homes and possessions. It’s not clear how much of a financial investment this entails.

Alibaba, which runs online malls like Tmall and Taobao, will be the top shareholder in ZhongAn with a 19.9 percent stake. Tencent (makers of QQ and WeChat) and PingAn Insurance will each own five percent. There are also six smaller shareholders, including online travel booking site Ctrip.

E-commerce rivals forced to work together

With China having over 200 million e-commerce shoppers at present, and an anticipated 420 million e-shoppers by 2016, these companies will be hoping that the populace is ready and keen to handle its financial services online as well.

Both Tencent and Alibaba are old hands in the online finance business, as they run major e-payments platforms (Tenpay and Alipay, respectively). Plus, Alibaba has been micro-lending to small businesses on its e-commerce platforms for quite some time. Nonetheless, it’s still a major business move by the two web companies.

Tencent also has its own e-commerce business, making it a rival to Alibaba in several areas. But it’s likely that China’s strictly regulated financial sector necessitated the two rivals working together for this new business.

(Source: GlobalTimes; Image from Techweb.com.cn)

MOL is one of the biggest payment companies in Southeast Asia, with over 680,000 physical and online payment channels, 60 million annual transactions, and yearly revenue over $300 million. Some of MOL’s main payment products include:

1. MOLPoints is an online wallet for purchasing virtual goods, specifically for game credits and online content.
2. MOLPay is an online wallet for purchasing non-virtual goods like products and services from online enterprises.
3. MOLCards is a prepaid card sold at MOL distribution channels. It is used to top up MOLPoints.

MOL also owns Friendster after its acquisition in 2009. I recently met up with MOL founder Ganesh Kumar Bangah as he told the story of MOL’s founding.

Ganesh started work at age 17 in 1997 when he was still an undergraduate. He worked as a promoter in a Johor-based company, Cyberfield. Cyberfield does development, runs cyber cafes, and also produces a cyber cafe management software that it sells to other such cafes. After working there for some time, Ganesh dropped out of university to focus on the company because of the potential he saw. It was a decision that he doesn’t regret but doesn’t encourage either.

In the interview, he quipped cheekily:

I saw an article that the Singapore government wants to turn Singapore into a Silicon Valley. They should encourage students to drop out.

Starting up

During the dot com bubble period in 1999, Ganesh and his two co-founders had the idea of spinning the cybercafe management software off as a separate business entity and offering the software for free to cafes around the world. They approached Tan Sri Vincent, a Malaysian self-made billionaire and founder of the Berjaya Group to pitch this idea, which raised two million ringgit ($640,000). It was a small investment compared to Tan Sri’s other investments, but Ganesh feels this was a blessing in disguise.

At that time, Tan Sri invested 200 million ringgit ($64 million) in 30 other startups. Some of those startups raised ten to fifteen million ringgit. I only raised two million. It was one of the smallest amounts raised. If I had raised ten million, I would have shut down the company in one and a half years. Because I raised two million, I managed to wait it out. When you raise fifteen million, you tend to build your burn rate to one to two million per month. And when you have one to two million ringgit burning every month, you cannot generate revenue after one year, you need to cut the team. When you cut the team, it’s a downward spiral.

With the investment, MOL AccessPortal was launched in February 2000. Within three months of giving the software away for free, it was installed in more than 15,000 cyber cafes across the world.

Solving problems

But MOL had problems monetizing its users as there wasn’t Google AdWords to easily monetize the traffic. As such, Ganesh and team developed their own payment system and turned the wide cyber cafe network into a payment system where people could pay cash at the cyber cafes for online transactions. This master stroke instantly made MOL into a potential giant monetizing machine with a wide distribution channel in Malaysia and across the world.

With the payment channel sorted out, the team faced a chicken-and-egg problem of having few transactions happening. There weren’t many virtual goods to be purchased online back then as there were few merchants online. The team went out to solve this by working with game publishers. In 2002, MOL was the exclusive payment gateway provider with Helbreath, an extremely popular Korean game. The partnership propelled MOL’s reputation, which saw many game publishers using MOLPoints. By December 2003, MOL got listed on the Malaysia Stock Exchange.

Starting the company was the most challenging time because the internet hadn’t picked up yet. So you needed to learn how to wait it out and bootstrap, especially at the beginning. The first three years are the toughest times. After we get traction, it’s just growth. The first day I started collecting game payments, my revenue was like 3,000 ringgit from one game. Today we collect more than a million ringgit a day from online game payment alone. And we work with more than 250 to 300 game publishers all over the world.

From good to great

Many entrepreneurs dream of getting listed but Ganesh had his sights on bigger things. In 2008, he again roped in help from Tan Sri Vincent to de-list and privatize MOL. This was another monumental moment for the company. By now, both of his co-founders had exited, and Ganesh was the sole remaining founder in the company. He went on to expand MOL to India, SIngapore, and Thailand and passed the milestone of $100 million yearly revenue. In 2009, MOL acquired the giant social network Friendster, presenting the world with a rarely-seen phenomenon: a Southeast Asian firm acquiring a giant US internet company.

Despite the success he has achieved so far, Ganesh doesn’t seem to be slowing down. He hinted at several acquisitions in the company road map and market expansion to other countries is part of the plan. At a personal level, Ganesh also does angel investing and mentoring of local entrepreneurs. Certainly more entrepreneurs in Southeast Asia could learn from Ganesh’s example: got funding and being listed don’t have to be the end of the story. Sometimes, it’s just the beginning.

MOL’s ten-year anniversary

Chinese telecoms firm and phone-maker Huawei might’ve had the kind of publicity in 2012 that’s usually only seen in a PR director’s worst nightmares, but that didn’t prevent some solid financial results. Huawei revealed today that the past year saw rising revenues (up eight percent to US$35.14 billion) culminating in a net profit of $2.46 billion, a rise of 33 percent from the previous year. Interestingly, 66 percent of Huawei’s overall revenue came from outside China.

The nadir of Huawei’s year came in October when a US congressional hearing cleared the company’s telecoms equipment of being able to spy on all users on its networks, but still judged there to be a security risk. Huawei denied the allegations and insinuations, but is still facing similar government-backed probes in India and the European Union. The company is also accused of being complicit in selling telecommunications interception equipment to Iran that would’ve helped Iranian authorities to spy on its citizens.

Nonetheless, Huawei CFO Cathy Meng says that Huawei expects its overall revenue to grow 10 to 12 percent in 2013. [UPDATE: An interesting little fact, from the WSJ, is that Ms. Meng is the daughter of founder Ren Zhengfei]. As a private company, these figures are guidelines for now, and KPMG audited results for the full year will be revealed in April. It seems to be part of a PR strategy of Huawei being more transparent to try shake off its shady reputation.

In addition, it was revealed today that the company “has cumulatively invested 120 billion RMB [$19.15 billion] in R&D over the past 10 years, including a 29.9 billion RMB [$4.77 billion] investment in 2012.”

Huawei is made up of three main divisions: network, enterprise, and consumer. The latter department makes its smartphones, which Canalys says are now outselling Apple’s iPhones within China. Its newest model is the ginormous Ascend Mate, which is designed to compete with Samsung’s popular Galaxy Note range. Huawei’s phone business brought in $7.72 billion of its total figure for the past year, and is said to be “continuing to grow in developed markets including Europe and Japan.”

Of the two-thirds of Huawei’s total revenues coming from overseas, most of it came from Europe, the Middle East and Africa, which is the company’s biggest single area for sales (77.4 billion RMB), just ahead of China (73.6 billion). The Americas made up a much smaller chunk, bringing in 31.8 billion, which is just over $5 billion.

What do startups in Vietnam need or lack? I asked this recently to a bunch of friends on the way back from new annual conference for the technology community. They immediately replied: Focus! Technical Skills! Exposure! Creativity! Courage! The event underlined something rather poignant in technology events in Hanoi and Saigon. There’s a disconnect. High-level speakers flew in from around the world to talk about what’s next in technology, but how relevant are 3D gesture interfaces to a country that is still dominated by feature phones?

One of my venture capitalist friends summed it up well: “From heaven to hell”, he said. “Speakers at all the local events in technology talk about things that are rarely ever relevant to actual problems in Vietnamese startups. It’s like angels talking to devils.” But what are the problems? Essentially, the question really is, how can the Vietnamese tech community, centered in Hanoi and Ho Chi Minh city, achieve a Silicon Valley-like cohesion that produces great individuals, companies, and products that significantly impact domestic and worldwide markets?

Over the last three months, I’ve uncovered five main areas of improvement commonly cited by local CEOs and executives in the tech industry: community building, handling of ideas, execution, technical skills, and business savvy. Let’s delve into the mechanics of each.

1. Community building

In 2009, community was something rather hard to find here. Facebook was still well under three million users (but now it’s the largest social network in Vietnam, with over eight million users) and events for tech enthusiasts were hard to come by or low in attendance. Barcamp Saigon was the biggest event on the map with a few hundred attendees. Homegrown web companies like VNG, VC Corp, and others were still on the rise. Online, there was no place to meet other like-minded folks except in fragmented forums across the web. That’s where Launch came in.

Launch, branded as the “Vietnam Internet Startup Community”, only had a few hundred members by the end of 2009. For Trung Huynh, one of the early co-founders of Launch, he felt that communication was vital.

People didn’t know each other, they didn’t know who was doing what, they didn’t have access to Silicon Valley wisdom about starting up, they barely had access to the latest trends in tech. So we first started Launch by translating content from leaders in the the tech scene like Paul Graham, and monthly events with successful Vietnamese CEO’s.

After six months of this, the community started to self-sustain. Launch members organized their own events and brought their own topics to the Facebook group. Today, there are 5,631 members and it’s the number one place to go for techies to go to talk about hot tech topics in Vietnam.

Today, more Facebook groups are popping up in more niche web-oriented areas: technical, founders, startup news, and so on. And yet, the community problem persists somehow. That’s because Launch only solved the logistical problem. The other side of communication is an attitude towards ideas.

2. How new ideas are handled

Like much of East Asia, Vietnamese kids are raised in a Confucian household. That means veering from the status quo is frowned upon and adhering to a hierarchy is the default. Also, being a developing country and burgeoning tech community, that means the environment is both very competitive and young. The status quo makes people cautious about new ideas, and competition makes people feel protective about their creations. This is reflected in the market.

When a startup goes to a big business to pitch, let’s say, from a B2B e-commerce service, companies are skeptical. B2B startups will often think here: “Why should our company take a chance on your no-name company that has not proven itself in the market?” The risk is high. Is it any wonder that there are so many consumer-oriented e-commerce and social media clones in the market? These are considered safer bets, consumers are more ready to take a chance than businesses. The risk is low.

This has bred, as Nguyen Tuan Son of Kleii puts it, two types of thoughts that entrepreneuers have:

• That idea is too big, I can’t do it. Or someone else will do it.
• I’ll just follow other people’s ideas.

Protecting ideas, on the other hand, actually bleeds into another much ignored area: execution.

3. Protecting new ideas vs executing new ideas

In a developing Asian economy like Vietnam, people copy ideas. Therefore, there is a fear of being copied, and it’s warranted. We’ve seen it in neighboring China. Every new market among tech startups in Vietnam is crowded: e-commerce, chat apps, social media, daily deals. The problem is that this has reduced emphasis on other more important factors to success and put more emphasis on ideas and protecting those ideas. What’s missing is an emphasis on execution, team building, and relationships.

Startups don’t realize that ideas are not what make a startup successful – a good execution of those ideas is. As Nhan Tri Vu of JoomlArt told me recently, companies believe too strongly in their ideas to their own detriment. They don’t know how to read their own data and the market, and instead play deconstructive ego games.

Viet Hung of KMS extols the benefits of team-building over ideas:

One one side, the business landscape needs to support the development of software, but also leadership and communication is still weak. Entrepreneurs and technology people don’t realize the importance of building a great team. If you are a great leader, you can get other people to join you, but if you are a weak team, why would talented people join you?

4. Technical Skills

But are there enough talented people in Vietnam’s technical landscape? Vietnam churns out over 150,000 graduates per year in information technology, but many managing directors and CEOs complain that it is hard to hire and maintain good talent. This is especially true for projects that require advanced technical solutions like OCR, augmented reality, and newer programming languages like Python.

The conference I mentioned at the start is BTIC. At this year’s event, Le Hong Minh of VNG, one of Vietnam’s top tech companies, cited three criticisms of Vietnamese tech talent from a Japanese company they worked with:

• They’re not hungry enough
• They’re don’t eat their own dog food
• They’re not fast enough.

On top of these three issues, it’s also hard to find technical people who willingly go out and experiment with new languages and create their own projects without supervision.

A common criticism that I have also encountered in interviews is that there is a lack of product managers and system architects. When building new products, teams don’t have a power user that is extremely knowledgable about the details of a product and can lead a vision of a product. They also don’t have people that can build highly sophisticated pieces of software that can handle a large amount of data and computations.

This has been a struggle for foreign companies and outsourcing companies who need to complete more sophisticated software projects for international companies. It also ripples into startups. If there aren’t experienced product managers and system architects around, how can entrepreneurs dream about high-tech solutions?

5. Business Savvy: Going to Market

Lastly, and maybe most importantly on this list is business.

Some technical teams don’t realize how much they need a business person, and others are struggling to find a capable one. The problem is that teams are not looking at problems. Nguyen Van Loc at Ao Thun advises:

Businesses make money by serving society. Our biggest problem is to define what our society really needs.

Chris Zobrist at The Start Network echoes the same:

Most of them get stuck in the very early phase of a new venture due to a lack of focus on what customers need and solving a real customer problem.

Is the market ready for such thinking? Viet Hung of KMS warns that the Vietnamese software market is precarious. If I sell software to a consumer, but he can get that same software on the street for free on a DVD, where’s the money? If I can’t get any money from this, how can I fund talented engineers? If I can’t fund talented engineers, how can I produce a great product? It’s better to go global instead.

The Way Forward

To top it all off, software policy may be becoming more restrictive in 2013. In EuroCham Vietnam’s recent recommendations (PDF link) to Vietnamese policy makers, they’ve warned that the new restrictive and bureaucratic regulations on software development will stunt a lot of needed growth that would address many of the above issues.

All of this looks pretty stark, right? Well, let’s leave it at that for now, I’ll address the strengths of Vietnam’s tech scene in a later article.

(Thanks to the quoted interviewees, as well as other CEOs and directors who agreed to talk but preferred to remain anonymous)

The amount of chatter around “mobile strategy” is giving me a piercing headache that I can not shake. The only remedy is to write. So here I go.

Are you ready for this screen? (Image: Thomas Hawk on Flickr)

Mobile is not a strategy. It’s simply another screen on which your business must function. Is there a titanic shift from time spent on the PC to mobile screen? Yes. Are there business models well suited to mobility? Yes. Is developing for the mobile screen a fundamentally critical channel for any business that wants a future? Yes.

Are you a mobile company? I hope your answer is no. Just because you have led with mobile you can’t stop there. If you want to build a formidable business for the long term then you need a ubiquity strategy, not a mobile strategy. What happens when Apple TV starts competing with your iPad app in the living room? What happens when Google Glasses become common place on the street? What happens when the automobile dashboard becomes truly connected? Do you then need a “TV strategy”, a “glasses strategy” or an “automobile strategy”?

Sounds stupid right? What you need is ubiquity. You need to seamlessly be everywhere your customers are. I of course may be wrong (I usually am) but I believe the future is in responsive web design, HTML5, the open web, and seeing the world through your customers’ eyes, whatever screen those eyes may be looking at.

Believe me, the future is much bigger than your mobile app. If you are not thinking ahead, you will lose. Is mobile a good starting point? Of course it is. Mobile distribution has tremendous advantages such as cost, speed to market and distribution. But please don’t fall into the trap of talking about your “mobile strategy”. Strategy by definition is about the future of your business. Instead think of mobile as just another screen on which you engage your customers. Your strategy deserves to be bigger than a 4-inch screen.

A Lephone-made device. Will one soon be a vehicle for Aliyun OS?

China’s Alibaba, the nation’s biggest e-commerce business, might have suffered the indignity and hassle of having its flagship phone launch scuppered by Google in September of last year, but its smartphone OS is not dead.

Rumors circulating on Chinese-language tech blogs today suggest that Alibaba’s Aliyun OS will appear on a new flagship handset soon, possibly before Chinese New Year at the start of February. The new phone is thought to be produced by Shenzhen-based manufacturer Lephone (or maybe its English moniker is Blephone) [1]. That’s not exactly a great brand that’s going to inspire consumers, but there are few options for Aliyun OS now that Google has effectively prohibited its Android partners (in the Open Handset Alliance) from working with Alibaba on new phones.

The anticipated new Aliyun phone will hit all three of China’s carriers, and pack a Qualcomm Snapdragon MSM8625 1.2GHz chip under a 4.5-inch screen. It might cost as little as 700 RMB (US$112). Alibaba has not yet confirmed any of this.

But we do know that the e-commerce giant has resolved to push forward its own smartphone platform, and shortly after the Google slamdown the Chinese company opted to spin of its Aliyun mobile OS division and give it $200 million worth of investment.

Aliyun had no new flagship hardware in 2012 after Google persuaded Acer not to launch the Acer CloudMobile A800 in conjunction with Alibaba. But that was only after we’d posted our hands-on with the phone, which eventually never launched with Aliyun on it. The primary options for Alibaba are to either acquire a phone-maker, or pursue partnerships with smaller (and unknown and unloved) Chinese handset-makers.

[Source: 36Kr - article in Chinese]

Jack Ma - Chairman and CEO, Alibaba Group

China’s e-commerce behemoth, Alibaba Group, is playing its cards close to its chest in terms of a potential IPO. But rumors today suggest that Alibaba – which runs market-leading online malls such as Tmall, Taobao, and Alibaba.com – has actually pencilled in mid-2013 for beginning its IPO roadshow, with a public listing coming by the end of 2013 or in early 2014.

QQ Tech and a number of other Chinese tech and finance blogs claim that the rumor stems from within Alibaba, and that it’s a sign that the vast company is a lot more focused on raising funds than it likes to appear.

Alibaba runs the country’s top B2C e-commerce, B2B, C2C, and daily deals sites, making it like some huge combination of Amazon, eBay, and Groupon, and more. It even has its own mobile OS platform, Aliyun, which was under attack from Google a few months ago.

What’s the firm worth when it lists? Its recent buyback of a 20 percent stake from Yahoo (NASDAQ:YHOO) and the subsequent financing revealed Alibaba Group as a whole to be worth $40 billion, making it bigger than China’s top search engine, Baidu. Forbes’ Eric Jackson reckons that Alibaba’s dominance and growth could be enough to make it worth over $150 billion by 2016.

Alibaba’s two largest consumer-oriented online malls, Taobao and Tmall, recently hit RMB 1 trillion (US$159.5 billion) in sales for the whole of 2012 up to the end of November.

[Source: QQ Tech - article in Chinese]

Loc, Founder of Aothun, with his 250cc BMW motorcycle

During my recent trip to Ho Chi Minh city, I met Loc, the founder of Aothun, a T-shirt design and printing startup which is now four years old. I visited his new factory(picture below) and startup incubator at the eastern end of the city, where he told me about his entrepreneurial journey and his vision for incubating a thousand fashion and design startups in the next two years.

Loc started his company immediately after his studies in 2009 when he was 24 years old. There wasn’t much investment capital in the Vietnamese market at the time and that made it even tougher to raise money for a non-scalable T-shirt design and printing company. He and his co-founder each borrowed US$7,500 from friends and parents as starting capital.

Inking a bad deal

Initially, business was brisk as there aren’t many T-shirt printing companies in Ho Chi Minh, and there was strong demand for custom-designed shirts. Seeing healthy profit and high demand in their services, they invested most of their capital into a printing machine to cope with the demand. The investment nearly proved to be a fatal decision for the startup company as the print quality from its new machines was really bad – and it seriously affected sales. Customers rejected orders and cash-flow dried up. At the end of the first year, they struggled with payroll for their 10 staff, as well as payment to suppliers. They were in debt.

This was Loc’s lowest point in his entrepreneurship life. Sales were bad, and his co-founder left. He owed his friends and family money, and no one offered help. He was alone. Times were very tough for Loc, and he remembers crying silently into his pillow almost every night. Only passion and his determination to prove himself kept him going.

Knowing that there was still strong local demand, he pushed on with his venture. At end of the second month, one of his best friends joined the ailing business. That friend contributed $2,500 and worked full time alongside Loc to rebuild and refine the business. At the end of second year, they regained all their lost customers and built up a profitable and stable company. Things were looking rosy.

Printing money

In the third year, Aothun attracted an investor who knew this T-shirt business well. This investor brought in new funding and expertise, taking the company to a level higher. Instead of printing T-shirts manually one at a time, they now had a $50,000 machine that could do high-quality printing at the rate of 700 pieces per hour. And in addition to importing T-shirts from suppliers, the company now imported yarn as raw materials and manufactured its own shirts. This gave the company far greater control.

Aothun is now the biggest T-shirt making and printing company in Vietnam. It owns two factories and has a sales office in central Ho Chi Minh. And with the manufacturing and printing process established, Loc now aims to help fellow Vietnamese entrepreneurs start out.

Despite Vietnam being the top ten garment exporter in the world, there’s just over 20 locally branded t-shirts. I hope to improve this statistic by reducing the barrier of entry to this industry and inspire more local designers and fashion entrepreneurs to start up apparel brands of their own.

He is offering his manufacturing and T-shirt printing production line to designers and fashion entrepreneurs to use at low cost. In the factory itself, Loc even has a 100-desk office to incubate entrepreneurs who wish to work and live in the factories for free. For poor, struggling entrepreneurs, he’s receptive to offering allowances and even free meals. Here’s the email to contact them.

These initiatives will certainly help many aspiring entrepreneurs in Vietnam, and kudos to Loc and Aothun for being a good inspiration, giving back to the community. We need more people like this in Asia.

Zipping through the busy streets in Ho Chi Minh on Loc’s motorcycle.

Aothun’s new factory. The blue machine at the front is capable of producing an output of 700 high quality 3D print per hour.

Aothun’s sales office in central of Ho Chi Minh city.

Ending an eight-month drought of Chinese IPOs, the gaming community YY (NASDAQ:YY) is about to hit the tickers at the start of trading in New York. YY’s CEO, ‘David’ Li Xueling, will have the honor of ringing the opening bell shortly, at 9:15am ET. After stating that it hoped to float between US$10.50 and $12.50 per share, YY has just announced that it’ll debut at the lower figure, thereby raising $81.9 million on its offering of 7.8 million ADS.

As we outlined earlier this month, YY touts that it’s a fast-growing web company with expanding gaming and social services. As well as its gaming platform and Duowan community, its YY Music service looks promising, and the YY Chat service claims 400 million registered users. SeekingAlpha earlier today put all the key stats into these useful two tables:

YY is only China’s second full US IPO of the year, coming a long while after flash sales site VIPShop (NYSE:VIPS) went public back in March. After initially struggling, VIPShop is now well up on its debut price. But not everyone is smelling roses with VIPShop’s progress. China-based analyst Bill Bishop gave this warning on his Sinocism blog that he says also applies to YY’s IPO:

VIPShop only got IPO done because two of its VCs bought $20m in IPO. YY’s F-1 says existing investors may buy up to $30m of IPO. Retail investors insane to buy into these IPOs.

China’s top search engine, Baidu (NASDAQ:BIDU), has raised $1.5 billion in its first-ever bonds issue. The dollar bonds are aimed at overseas investors, and will help the Chinese company acquire US currency for global acquisitions. Baidu hasn’t revealed any potential targets, but we’ve already seen the search engine giant make very careful moves into Thailand and Vietnam to take on Google.

Earlier this month, Baidu spokesperson Kaiser Kuo told the WSJ:

We want to grow our war chest for all sorts of operational purposes, including overseas [merger and acquisitions].

[UPDATED: Here's a quote directly from Baidu's afore-mentioned communications director]:

We’re pretty happy about how well the notes offer and how well it’s been received.

Besides the obvious advantage of being able to raise US dollars inexpensively at this time to retire some of our existing debt, our bond offer is really about having a ready war chest that gives us flexibility for a range of future strategic uses. That certainly could include [mergers and acquisitions] M&A. While we have no specific M&A deals pending at present, Baidu always wants to be ready to make prudent investments and acquisitions when good opportunities present themselves. Note that acquisitions of some Chinese companies would also require US dollars, so it can’t be assumed that proceeds from our raise that may be earmarked for M&A are necessarily for cross-border transactions.

In the announcement this morning, Baidu explains the notes offering (which will be listed in Singapore) in a bit more detail:

The public offering consists of US$750,000,000 of 2.250 percent notes due 2017 and US$750,000,000 of 3.500 percent notes due 2022. […] The Company expects to receive net proceeds from the offering of approximately US$1,491.6 million, after deducting underwriting discounts and commissions and estimated net offering expenses. The Company intends to use a portion of the net proceeds from the offering to retire certain existing debt and the remainder for general corporate purposes.

Baidu currently has 72.97 percent of the Chinese search engine market (in terms of page-views), but stronger local rivals such as Qihoo and Sogou, have been eating into its piece of the pie.

In a letter to employees last month, Baidu CEO and founder Robin Li urged the company as a whole to be more aggressively innovative and disruptive, and this major bonds issue – which gives Baidu a fistful of dollars – will help with that a great deal.

[UPDATE 1: This was all confirmed by the company later in the day. The story's text has been amended to reflect this just in the first and final paragraphs].

Earlier this year we suggested that 360Buy, China’s second-largest B2C e-commerce site, was focusing on a major new funding round rather than prepping a US IPO. And that is now a reality today with earlier rumors on ChinaByte being confirmed by the company that it has secured series D funding worth $400 million.

The huge fourth round of funding for 360Buy is led by Ontario Teachers’ Retirement Fund (OTPP), with participation from the Tiger Fund. As large as the investment amount is, it effectively values 360Buy at $7.25 billion, which is a lot less than the $10 billion or more that the e-tailer was pegged at after its $500 million injection from DST in April of last year. Indeed, means 360Buy’s valuation has been slashed by a quarter. [UPDATE 2: A DST spokesperson has reached out to clarify that, at the point of DST's investment in 360Buy in June 2011, "360Buy was valued at $6 billion" - and not $10 billion, a figure which was bandied about last year. So the suggestion here (though DST cannot confirm the size of its stake) is that 360Buy's valuation has actually grown].

Ontario Teachers’ Retirement Fund is Canada’s third-largest retirement fund. Bloomberg reported last week that the OTPP is planning to open a Hong Kong office in 2013 as a part of its strategy to diversify the group’s investments.

This summer I asked what on earth 360Buy is truly worth, amidst wildly fluctuating numbers of its eventual evaluation when it finally lists publicly. Some in the e-commerce industry in China reckon that 360Buy should not be evaulated on the same price-to-sales ratio as Amazon, since 360Buy is in a much less stable a position compared to Amazon in the US and many other markets. To cut a long story short, some industry experts reckon that a valuation of $5 to $6 billion is closer to the mark.

360Buy confirmed the news later on Tuesday after many initial reports about the new funding round being secured. CEO and founder Liu Qiangdong has been unusually quiet on social media in the past month and hasn’t commented personally on this.

[Source: ChinaByte - article in Chinese]

Chinese gaming community portal YY has really got its IPO roadshow rolling, and has filed new documents at the US SEC. The filings reveal that YY – which soon hopes to be hitting the tickers as NASDAQ:YY – is aiming to raise between $81.9 million and $97.5 million with its public listing.

YY’s detailed form F-1 amendment (see it here) outlines its plans to offer 7.8 million American Depositary Shares (ADS) and that the company anticipates “that the initial public offering price will be between $10.50 and $12.50 per ADS.” The lead underwriters are Morgan Stanley, Deutsche Bank, and Citigroup.

Now touting the English tagline, “We engage people,” the IPO prospectus outlines the 400 million registered users of its gaming-oriented YY chat client, as well as newer social services such as YY Music. It emphasizes: “We primarily generate revenues from paying users of online web games, YY Music, and membership.” That largely means virtual items; and so it’s not too reliant on advertising for income, except on its Duowan.com portal and forums. It states: “We currently do not allow advertising on YY.com and Mobile YY, and have minimal advertising on YY Client [app].”

As for Duowan, the prospectus points out that the site is China’s second-largest games website, in data from iResearch, “with a market share of 15.7 percent” in terms of monthly unique visitors up to this August.

Surprisingly, the ‘our challenges’ section of the filing doesn’t mention the state of preparedness for mobile, which seems to be an area where YY and Duowan are a bit weaker. Piracy is mentioned, and indeed Duowan is a huge copyright concern as it’s still home to lots of user-uploaded pirated smartphone apps, such as this ripped-off copy of Plants vs Zombies.

The timing of the IPO is a little odd, as China braces for the once-in-a-decade leadership transition that begins in earnest today with the opening of the 18th Congress. That’ll begin a country-wide change of personnel across many departments, and that might bring changes to laws relating to Chinese companies with overseas ownership. Also, with a frosty reception for Chinese tech stocks this year, only one company – flash sales site VIPShop – has made the US IPO leap all year.

Be more wolf-like. That’s one of the rallying cries of Robin Li, CEO and founder of China’s top search engine, Baidu (NASDAQ:BIDU), in an internal email to all employees that was sent out today. The morale-boosting email was leaked out to Techweb, giving an interesting glimpse into one of China’s top web companies at a time when it’s facing new competition in its core business.

In the email, which was headlined “Change Starts With You and Me,” Robin Li (pictured right) calls on Baidu employees to think like wolves, to increase investment in innovation, and new businesses, and to be “willing to disrupt ourselves.” Outlining the dangers of stagnation faced by any large company, Robin suggests that his employees “must suffer” or else a level of comfort and achievement actually “becomes a disadvantage” – and then, he warns, they all risk becoming “dinosaurs.”

Innovation, innovation, innovation – and efficiency

There are several mentions of innovation in the letter, with Baidu’s CEO even suggesting that innovating should be a higher priority than net profit. To back that up, he says there’ll be more investment in some of its recent products, such as its desktop and mobile web browsers, so as to “guide users towards search” and thereby grow market share.

The ‘courage wolf’ meme was almost made for Robin Li’s email!

It’s clearly a call to arms in the face of competition from Qihoo’s new search engine, which has analysts worried and has caused a serious drop in Baidu shares since the new rival came online in mid-August this year. Baidu’s stock has since dropped from a summer peak of $133.98 per share to the current $106 – its second-lowest ebb of the year. In terms of search engine market share, Baidu is currently at 72.97 percent of search page-views, while Qihoo has blasted into second-place with 9.64 percent.

One of the subheaders in his lengthy email is “Reduce management layers and improve efficiency.” In this section, Mr. Li calls for “downsizing to improve efficiency” by “reducing the number of simple management” and “junior staff” and focusing more on senior engineers and others who are actively coding and creating products. Despite this suggestion of job cuts, no further details are given in Robin’s email to staffers. At the end of 2011, Baidu had just over 16,000 employees.

“Baidu’s second take-off”

Robin’s missive also outlines a few other details, such as fewer meetings and stricter action towards deadlines.

Baidu’s CEO concludes his email by calling for staffers to work towards “Baidu’s second take-off.”

In a recent speech at Stanford University, Robin Li outlined that mobile is an area where Baidu needs to grow, and the company is expecting three-times more revenue from mobile products this year.

[Source: Techweb - article in Chinese; Images: Luxuo, Knowyourmeme.com]

Apple’s new store in Shenzhen, set to open November 3rd. (Image: CiPhone,fr)

Apple (NASDAQ:AAPL) has set an official opening date for its seventh store in mainland China – and its first in the south of the country. The new Shenzhen Apple Store will open its doors on Saturday, November 3rd at 9am.

Shenzhen Apple Store notice: click to enlarge.

The new shop is at the high-end Holiday Plaza in Shenzhen (pictured above, courtesy of CiPhone.fr), which is home to luxury brand stores such as those from Burberry and Omega.

This year has seen a huge proliferation in Apple Stores in mainland China – and Hong Kong – with two new ones opened in just the past few weeks: one in Hong Kong’s Kowloon district, and another on Beijing’s Wangfujing shopping street.

Shenzhen is on the border with Hong Kong, which already has two stores of its own. And so the Shenzhen Apple Store seems like a calculated attempt to cut the cross-border, sales-tax-dodging grey importers who smuggle in cheaper gadgets from Hong Kong. But it’s also more of a risk, as most Shenzhen citizens can quite easily drop into Hong Kong – which has no sales tax/VAT in stores – for a few hours to make large purchases.

In Apple’s earning calls last week, Tim Cook said that the official iPhone 5 release for China will happen in December. He hopes.

Find the new Shenzhen Apple Store page here.

[Hat-tip to QQ Tech (article in Chinese) for spotting this]

Chinese electronics retailer Gome (HKG:0493) has something of an odd e-commerce strategy, with its online interests represented both by its own Gome.com.cn site and its ownership of the Amazon-esque Coo8.com. Chinese tech blogs have been buzzing recently with rumors of Gome selling off its 80 percent stake in Coo8 – but now Gome’s VP, He Yangqing, has stepped forward to shoot down the rumors, saying that Gome is not selling Coo8 and has not been discussing such a sale.

Gome bought its sizable stage in the Coo8 site back in 2010 – a year before the massive brick-and-mortar retailer launched its own full shopping website. That stake cost just RMB 48 million at the time (US$7.63 million at today’s rates). But Coo8 has been struggling, incurring RMB 194 million ($30.84 million) in losses in 2011. The dual brand strategy might have also hurt Gome’s site, which lost RMB 197 million ($31.32 million) last year.

China’s B2C e-commerce scene is a tough one – especially so in the gadgets and home electronics sector, which is hit by frequent price wars and characterized by brutal amounts of marketing expenditures. Gome and Coo8 are up against China’s biggest online store, Tmall, plus more specialist sites like 360Buy, Dangdang (NYSE:DANG), Amazon China, and Suning. That last one, Suning (SHE:002024), is also a competitor of Gome’s on China’s streets, and it has been enjoying much greater success as it pushes into e-commerce, recently rising up to be China’s fourth biggest e-commerce site. Coo8 is down in eighth spot.

Gome VP He Yangqing went on to say the company has a clear strategy that goes through to 2013. Coo8 is targeting RMB 2 billion ($318 million) in sales in 2012 – three times higher than 2011’s figure.

But Gome seems insistent on its current path – unless the losses become untenable, or perhaps shareholders pressure the board to follow the lead set by Suning as it transitions from the High Street to the web.

[Source: Techweb - article in Chinese]

This is YY's mascot for the Duowan site. (Image: newgame.duowan.com)

The Chinese gaming and downloads portal YY.com has taken its first step towards a US IPO – despite the frosty conditions for Chinese stocks this year. The company has posted a filing at the US SEC with a plan to offer up to $100 million American depositary shares (ADS) that would see it hit the NASDAQ with the “YY” ticker. No specific figure is given for how much it plans to raise.

YY is mainly focused on gaming, and encompasses its YY chat tool for gamers, and its Duowan gaming portal. When we heard the company’s founder and CEO, David Li, talk onstage at TC Disrupt last year, he described the YY service and appeal:

We have a lot of grassroots users. We have a strong gaming base, and the cooperation between gamers, with voice communication is crucial. It all goes together. And we’re the only service doing this for gamers [in China].

The SEC filing points out that the YY chat client has 400 million registered users and recently hit “10.0 million peak concurrent users.” But its gaming potential is where the money will come. The filing states:

For the six months ended June 30, 2012, our total net revenues grew to RMB324.5 million (US$51.1 million), representing a 173.2 percent increase from RMB118.8 million for the six months ended June 30, 2011 […] and in the six months ended June 30, 2012, we had a net income of RMB20.8 million (US$3.3 million).

Yes, there are significant losses each year as well. But the YY filing stresses that it has a highly-engaged user base and that its gaming and chat platforms are easily scalable. The funds raised in the planned IPO will partly go to obtaining “additional servers and bandwidth.”

As for revenue streams, YY and Duowan primarily rake it in from online games and virtual purchases, paid memberships, and the relatively new YY Music. An interesting tid-bit, as spotted by Sinocism’s Bill Bishop, is that local serial entrepreneur Lei Jun owns 23.8 percent of YY before the IPO.

Rumors swirled last October that YY would shoot for a US IPO – but this time the plan is for real. Last year I suggested that investors would be scared off by rampant piracy in the downloads section of Duowan, where pirated games are freely available. All that pirated material is still on the site today (fancy a “free” copy of Plants vs Zombies, anyone?), still threatening to torpedo its IPO plans.

As if all that’s not enough concern for investors, this year there’s also the added worry of markets being quite hostile to Chinese tech stocks. Only one such stock from China has fully listed in the US this year – and that’s the e-commerce site VIPShop (NYSE:VIPS), which is doing well at the moment, riding a couple of dollars above its debut price.

Check out the YY filing here and tell us in the comments if it looks right or risky.

[Source: Marketwatch; via Sinocism]

Along with a small but great team in Beijing, we have been working hard prior to the launch to build and design a site that suits a Chinese audience. But it’s still young, and your feedback is extremely valuable to us. Do visit our Chinese edition at cn.techinasia.com or our pinyin URL yazhoukeji.com and let us know what you think.

Not seeing eye-to-eye: Andrew Left, Zhou Hongyi.

Chinese software maker and search engine Qihoo 360 (NYSE:QIHU) has threatened legal action against the financial blogger Andrew Left, who runs the short sellers Citron Research, for what the company claims are “untruthful statements” that have caused “the commercial reputation of [Qihoo] to be significantly damaged.” This comes in a cease-and-desist legal letter, in both Chinese and English, that was just tweeted out by the Qihoo CEO Zhou Hongyi on his official Weibo page (here).

Qihoo’s letter today says that Citron’s reports have been “untruthful,” adding:

We believe that, regardless of being according to either Chinese laws or US laws, the practice of good faith shall be a basic legal principle, and the commercial reputation of a company should be protected from being damaged by defamation.

It comes nearly a year after Citron’s first post on Qihoo in which Left wrote that, in his analysis, Qihoo’s stock was “overvalued” and that it was a “web 1.0 brand with a web 1.0 business model.” In further posts, the financial blogger and frequent CNBC guest went on to brand Qihoo as a “fraud” and questioned the veracity of its financials – especially with regards advertising and gaming revenue. At that time, Qihoo hadn’t yet moved into the search engine business, which has boosted its stock a great deal in the past couple of months.

But it was only in August of this year that the whole war of words really blew up, when the former head of Google China, Kai-Fu Lee, leapt to the defense of Chinese tech stocks in general, slamming analysts who do ‘short selling’ of stocks for personal profit. Then, a few days after that, Lee and some other tech execs – including Qihoo’s Zhou – set up CitronFraud.com to, they say, tear apart and fact-check short sellers such as Citron. Andrew Left has earlier requested that the execs’ site cease with their own allegedly defamatory attacks on him, but the three-week deadline on that earlier legal letter has since passed by and the CitronFraud site remains up. For his part, the Citron founder insists that he has an excellent record on Chinese stocks, highlighting the mess at Longtop Financial before that company was charged with fraud and subsequently delisted.

Ultimately, it’s unlikely that the trans-Pacific bust-up will come to any legal action – either from Qihoo or Left himself. Even if it comes to court in the US, damages could be settled without any dramatic court time devoted to picking apart the rights-or-wrongs of the claims made. Let the awkward impasse continue.

I wish all tech companies had animals for logos - like Tencent's QQ penguin - as it makes it easier to do silly photoshops like this one.

A Chinese research institute, in cooperation with authorities in Beijing, has compiled a list of China’s top 100 tech and web companies by revenue. Looking only at the top 10, it’s full of familiar names from the world of social media, e-commerce, and gaming.

Before seeing the top 10 list, the institute’s white paper points out this eye-watering figure: China’s hundred hottest tech companies pulled in a total profit of 11.6 billion RMB – that’s US$1.868 billion – in 2011. That’s 26 percent higher than the industry average in the country.

1. Tencent (HKG:0700) makes China’s biggest social network and is also top in social gaming. Plus, it makes WeChat, the world’s biggest messaging app. Oh, and it does e-commerce. And lots more.
2. Netease (NASDAQ:NTES) must’ve had a good year to make it so high up the list – but then this list is about revenues, not a company’s market cap. Netease is primarily a web portal, but it also does online gaming (it runs World of Warcraft in the country), and also the Evernote-esque, Youdao Yunbiji service.
3. Baidu (NASDAQ:BIDU) is the nation’s top search engine by a big margin, and also has a major ad platform and some social services too.
4. Sohu (NASDAQ:SOHU) is another web portal, and is pushing its streaming video site pretty hard these days. It also runs the Sogou search engine which is sneaking up on Google’s market share.
5. Shanda (NASDAQ:SNDA; FRA:RZP) here means Shanda Interactive, which makes the Kindle-like Bambook e-reader, and has lots of web services like an e-bookstore, cloud storage, and more. Its gaming subsidiary is separate.
6. Alibaba is China’s biggest e-commerce company in every sector, running Tmall, Taobao, and Alibaba.com.
7. Perfect World (NASDAQ:PWRD) is China’s fourth-biggest social gaming platform.
8. Giant Interactive (NYSE:GA) is a tad smaller than perfect World in terms of gaming revenue, coming in sixth in that respect in the country. It runs games like Allods Online in the country.
9. Besttone (SHA:600640) is a telecoms firm, and the only one in the top 10 that we’ve never looked at before.
10. Sina (NASDAQ:SINA) is talked about a lot these days – and on this site – as it runs Sina Weibo, China’s hippest Twitter-like service. But Weibo is proving costly to run and hard to monetize – hence having China’s hottest social media site doesn’t equate to stellar revenue.

There are plenty more big names lower down on the list, such as Qihoo 360 (NYSE:QIHU) in eleventh, media outlet People’s Daily Online (SHA:603000) in 24th, and the kids social network Taomee (NYSE:TAOM) in 41st.

Of course, the list is open to debate because revenue is not always the best way to rate a company. Perhaps a more representative list could be formed by calculating every firm’s true valuation. If we did that, then Tencent would still be first, but Alibaba Group would be second as the recent Yahoo share buyback and fundraising effectively valued Alibaba at $40 billion.

[Source: Techweb; via Techinasia Chinese]

Barack Obama & Mitt Romney are among suggested people to follow

Recently LinkedIn (NYSE:LNKD) announced a new feature that allows people to follow influential business and thought leaders of their choosing. These leaders will post articles from time to time, sharing their knowledge and professional insights. You can also comment on the articles, and if you’re lucky, the leaders might even reply back (though we think that is quite unlikely as these people are highly busy with their own daily businesses already).

There are articles on various topics already from the current 150 thought leaders. Among them, Kaifu Lee’s post about the reason American companies fail time and time again when expanding business to China is quite interesting. Startups might also be interested to hear about US-based entrepreneur Andrew Chen’s thoughts on the startup industry. Rakuten’s CEO Hiroshi Mikitani and Freelancer’s CEO Matt Brie are there too [1].

One crazy thought of mine though – will people spam the articles just to have the chance to send a message? For example, maybe Indonesians would send a lot of comments over LinkedIn if US President Barack Obama wrote articles regarding a controversial anti-muslim film. Would they do really do that? I certainly hope not.

LinkedIn is also open to people interested in becoming one of its thought leaders. You can check more information about it here. But who else would you like to see added? We’d love to hear from you about this.

[Source: LinkedIn]

It has been such a rough year for Chinese stocks on overseas markets that yesterday the China Mobile Games and Entertainment Group (CMGE) became only the second company from the country to list in the US this year. Yesterday its NASDAQ:CMGE ticker hit the trading floor where the mobile gaming firm took the unusual path of listing ‘by way of introduction’.

This backdoor listing method means that CMGE has hit the market, but isn’t necessarily going for an IPO of its shares. Yet. It also means there’s no price. But as the China Daily notes, the reception that CMGE got wasn’t all that warm:

The company’s American depositary shares (ADS), each representing 14 Class A ordinary shares, began to trade on the Nasdaq under the ticker symbol CMGE but failed to settle a price on its debut.

As of Tuesday’s close, investors had put in a high bid price of $3.90 per share, not even close to the ask price of 40 dollars.

Click to enlarge

CMGE claims to be China’s biggest mobile gaming developer and publisher, and is a spin-off from VODone, the massive semi-state-owned media company. CMGE’s chariman, Zhang Lijun (pictured center in the image on the right), told state news agency Xinhua yesterday that the firm doesn’t urgently need financing at the moment, and is happy using the listing just to raise its profile at home and overseas. But even without the full IPO, CMGE must now file financial reports to the US SEC.

The company might want to wait for a better economic climate – and warmer attitudes towards Chinese tech stocks, so tarnished by last year’s Longtop financial scandal – before going for the full IPO.

CMGE is NASDAQ’s first Chinese stock this year. The only other US lister from the nation this year was the flash sales site VIPShop (NYSE:VIPS), which is currently slightly up on its $6.50 debut at $6.90 per share.

In a surprise move, Chinese e-commerce behemoth Alibaba is spinning off its Aliyun mobile OS division and giving it $200 million worth of investment. It comes just a week after Aliyun suffered a major setback, hitting the global news when Google slammed it as an incompatible version of Android. Alibaba disagrees with that assessment, but the end result was Google preventing a new flagship Aliyun phone, made by Acer, from launching.

Though it’s not known if the move is related to this setback, it’s a significant development for China’s most ambitious homegrown smartphone platform. In a memo written by Alibaba founder and CEO Jack Ma that leaked out to media, Ma explains fully:

After two years of hard work mixed with trials, we have seen significant progress in the Aliyun OS business. We have built a strong team and also gained recognition from our business partners. To better safeguard the healthy growth of Aliyun OS business and further implement the [Alibaba] Group’s Aliyun wireless strategy, we need to make adjustments 
in terms of talent, organizational structure and the Group’s resource allocation.

The management is making the following decisions:

1. The Aliyun OS business will spin off from Alibaba Cloud Computing [Alicloud/Aliyun] as an independent operation.

2. Jonathan Lu [Lu Zhaoxi] will be appointed chief data officer and president of the Aliyun OS business; Wang Jian will be appointed chairman and chief technology officer of the Aliyun OS business and will continue to serve concurrently as chief technology officer of Alibaba Group.

3. The company will invest US$200 million into the Aliyun OS business, to strengthen its talent base, technology, and infrastructure.

Fellow Aliren [Alibaba employees], the company has a lot to strive for and a long way to go. Thank you to everyone that has made contributions to the development of Aliyun OS. I believe that the Aliyun OS business will be better than ever with all your support.

But with Aliyun’s flagship phone apparently canned due to Acer’s commitments to Google with Android, it remains to be seen how the cloud-oriented, Linux-based OS will fare in terms of sales this year.

(Original photo: news365.com.cn)

The home-improvement chain Home Depot (NYSE:HD) recently admitted defeat on the streets of China, failing to replicate the success of Ikea in the nation, and closed all seven of its remaining big-box stores. But the US retailer has one more plan of attack in China: e-commerce.

A representative of 360Buy, China’s second-largest B2C e-tailer, said yesterday that it has agreed a deal with Home Depot that’ll see 360Buy’s open platform play host to a virtual store for the US firm. Rival online store Tmall was rumored to be in contention, and there’s no reason why a retailer can’t have a presence on both.

360Buy is said to be in the process of adding Home Depot items to its inventory, and they’ll appear on the site in due course.

Home Depot, which has over 2,200 stores in total, is not the only major US chain to flunk its Chinese test. Best Buy (NYSE:BBY) did the same in early 2011 – though it’s seeking a smaller-scale comeback in China, this time focusing on mobiles.

Of course, just because Home Depot is shifting things online, it doesn’t mean things will magically work. Chinese consumers are really not into DIY home improvements for lots of reasons, such as a lack of storage space for tools in apartments, and plenty of manual labor in the country that makes it cheaper to get someone to do stuff for you.

[Source: 21CBH - article in Chinese]

You know how painful it is to make a huge payment that seems to empty your pockets and your bank balance? Perhaps that’s how the folks at Alibaba, China’s biggest e-commerce company, feel today having just paid Yahoo (NASDAQ:YHOO) “approximately US$7.6 billion” to buy back half of Yahoo’s formerly 40 percent stake in the firm. It’s been in the works since May of this year, and today it’s finally all wrapped up.

The announcement explains:

The initial repurchase of shares, which represented one-half of Yahoo’s 40 percent stake in Alibaba Group on a fully diluted basis, was valued at approximately US$7.1 billion. Of this, Yahoo received approximately US$6.3 billion in cash and US$800 million in preference shares in Alibaba Group. Concurrent with the initial repurchase, Alibaba Group paid Yahoo a one-time cash payment of US$550 million in connection with the amendment of their existing technology and intellectual property license agreement. Under the terms of the agreement with Yahoo, Alibaba Group has the right to repurchase one-half of Yahoo’s remaining stake upon a qualifying initial public offering in the future.

So there’s an incentive in there to go for a major Alibaba Group IPO – including all its sites, like China’s huge Taobao and Tmall online stores – which is rumored to actually be in the cards in a few years’ time.

Alibaba’s founder and CEO, Jack Ma, said:

The completion of this transaction begins a new chapter in our relationship with Yahoo. We are grateful for Yahoo’s support of our growth over the past seven years, and we are pleased to be able to deliver meaningful returns to our shareholders including Yahoo!. I look forward to working with Marissa Mayer and her team in our continued partnership.

Indeed, that’s a huge profit for Yahoo (which is now down to a 20 percent stake in Alibaba), which bought its huge slice in the fledgling e-tailer back in August 2005 for a mere $1 billion.

Alibaba “financed the transaction with a mixture of cash on hand, senior debt and the issuance of convertible preference and ordinary shares.” It’s believed that China Investment Corp (CIC) helped out to the tune of $2 billion. The company points out: “The new equity financing was completed at a valuation of approximately US$40 billion.”

Citron's Andrew Left

Just as Citron’s Andrew Left told us he would do last week, he has resorted to legal channels in the bitter dispute between himself and numerous Chinese business CEOs and execs. The financial blogger and short seller has issued a demand for an apology and retraction via his lawyers, citing “libelous” allegations by the collective of tech execs, seemingly led by former Google China head Kai-Fu Lee, who set up CitronFraud.com to shoot down Andrew reports on US-listed Chinese stocks – especially tech stocks.

Filed in the US, where the anti-Citron site is hosted (and because Mr. Lee is actually a US national), the demand for a retraction is an inevitable stand-off in the war of words between Citron Research and its China-based detractors who say that the short seller is making a personal profit from attacking Chinese tech stocks like Qihoo (NYSE:QIHU), or inflating ones he fancies like Sohu (NASDAQ:SOHU). Andrew, for his part, defends his record in spotting dodgy Chinese stock. Of his 20 China-oriented reports, Andrew claims that, “Seven of these companies have been delisted” – and were therefore legitimate targets so as to alert investors to the dangers.

In the legal letter aimed at all 61 co-signees of CitronFraud’s first post, it gives a deadline of three week for the demands, or else “Citron will file suit and will seek to recover general, special and punitive damages.” Andrew makes four demands, including:

The site at the center of this legal tussle.

Immediately issue a retraction of your libelous letter/communication and apologize for having published such false and unfounded statements. Immediately remove the name of the website “citronfraud.com” and cease using the domain “citronfraud.com”. Cease and desist in the future from making other false and misleading statements that Citron has lied to, deceived, or defrauded investors.

Also, in an email sent to interested parties including TiA, the Citron man claims to have been the victim of “massive Distributed Denial of Service Attacks over the last two days” on his Citron Research site. He explains:

While it is not yet possible to prove the source of this effort to block our communications, it appears to Citron that it is more than coincidence that our website, which has operated flawlessly for years, has been obstructed three times in the last two days – specifically at moments following new posts, and/or Tweets by Citron’s editor.

It’s likely that the DDoS mischief is coming from random patriotic hackers (yes, that’s a thing) who have decided to go ‘Anon’ on Citron, as the whole China versus short sellers battle has taken on a them versus us, and nationalistic, tinge.

We’ll have to wait and see how the retraction demand is taken by Kai-Fu Lee and the other co-signees, which includes Qihoo’s CEO Zhou Hongyi. So far today, Lee has not taken to his Weibo account to comment. While it’s conceivable that the repeated “fraud” claims that got personal, and even got included in the URL of the collective’s site, might need to be amended, we hope that short sellers – who often make personal profits from the stocks they bash, unfettered by things like journalistic codes of ethics – will still be monitored and fact-checked.

Prof Zeng Ming, Alibaba’s chief strategy officer

“Our competition with 360Buy is over. […] They’re struggling.” So said Alibaba’s Zeng Ming in a talk with media this morning, dismissing the closest rival to its Tmall site in China’s fierce business-to-consumer (B2C) e-commerce sector.

“I no longer look at 360Buy at all,” added Prof. Zeng Ming, Alibaba’s chief strategy officer, before wondering aloud if 360Buy can even make enough money to survive. China’s B2C sector is worth nearly $100 billion in terms of sales. While Alibaba’s Tmall leads with 41.5 percent market share, 360Buy seems a strong second with 15.5 percent of the pie.

But the slam on 360Buy was aimed more widely – at the whole B2C sector in China. In the talk at Alibaba HQ in Hangzhou, eastern China, this morning, Zeng stressed that Alibaba likes to be a platform, not a buyer of goods – and the same extends to the online shopping site Tmall. While 360Buy acquires all its goods and keeps them in its own warehouses – and is even now moving into delivering them via its own logistics company – Tmall does none of that. If you buy, say, a Nike T-shirt on Tmall, then Nike or its local partner sends that to you. In that respect, Tmall is B2B2C. The implication is that it’s cheaper, more sustainable.

Asked by a Forbes reporter if Alibaba might get into logistics itself, Zeng replied, “Definitely not.” Well, since Tmall doesn’t buy any goods itself, it doesn’t really have anything to deliver.

Zeng emphasized that the platform approach is better for the company – and, he claims, for the e-commerce sector as a whole. The attack on the centralized B2C ethos comes at a time when a few specialist, vertical Chinese sites have gone under, apparently weighed down by the costs involved. In recent months we’ve seen Vcotton hit financial troubles, and the once-promising Yaodian100 vanished off the web in mysterious and worrying circumstances.

Earlier this summer we reported that 360Buy might launch its much-anticipated US IPO – albeit at perhaps half the value of its previous funding round. Failing that, series D investment might be the way to go. The official line from 360Buy’s CEO, Liu Qiangdong, is that he has nothing but money – enough, even, for the controversial recent price war.

It looks like a new China internet war is brewing. And this time the headlines revolve around B2C e-commerce powerhouse, Tmall and 360buy – China’s two biggest online malls. According to Nbdaily, Tmall and 360buy have each asserted pressure on their own brands and suppliers to choose just one platform for the upcoming sales and promotion season.

The situation is not looking good for the small- and medium-sized brands who rely on selling their products on the two huge sites. Some suppliers reflected that they were sort of “caught” in the middle and some of them claimed that they were forced to take part in the price war between the two. A representative from the Chinese jeans brand Jasonwood revealed that their products remained online despite declining to take part in the 360Buy price cut promotion. The rep commented, “Such actions are not acceptable.”

Other brand labels are feeling the pressure as well. Some of them claimed that Tmall enquired if they had taken part in the 360Buy price cut promotion. Most of the labels chose to remain silent regarding this incident, as they wish not to “offend” any of the parties involved. According to Nbdaily, Tmall and 360Buy have both responded to this speculation by insisting that the rumors were not true and that they did not “force” the numerous brands to take part in any of the price-slashing promotions.

The report cites a Tmall Pr manager as saying:

Tmall as an e-commerce platform has always given our clients the freedom to choose how they want to operate their sales.

Personally, if this kind of Tmall and 360Buy battle is indeed going on, I’d say that any intention of a price war should first consider the interests of consumers. By placing such fears and pressure on the brands who are their major suppliers, I don’t see how it is going to benefit and grow the entire e-commerce community.

[Source: Nbdaily via TechSina, Image]

Speaking via Skype, the Citron founder defended his record on China tech stocks, conceded to an error, and suggested he’d be looking into legal action against the likes of Kai-Fu Lee, the former head of Google China, and Zhou Hong-yi, the CEO of Qihoo (NYSE:QIHU), who collectively set up the CitronFraud website which personally branded Andrew a man with “a record of fraud.”

Citron’s Andrew Left

Andrew begins by defending his work on CitronResearch, claiming that “of the 10 Chinese stocks” he has reported on, “Only one is really trading today: Qihoo. Two are way down, the rest are charged with fraud.” An example is his post on Longtop Financial in April of 2011, a month before the Chinese financial software company was charged with fraud and subsequently delisted. Prior to that, Longtop had been sailing along nicely with clean audits from Deloitte “for six consecutive years.” But others he lists are still trading even after sustained attacks by Andrew and some other short sellers, such as Deer Consumer (NASDAQ:DEER) which is currently at an all-time low of $2.26.

He adds:

Why go after the guy with a good record? I have a body of work in China, but… are you kidding me? My record speaks for itself. […] It’s proven that my track record is right. Only Qihoo hasn’t played out.

If Kai-Fu Lee really wants to help, he’ll say: We will not do business with any company misrepresenting to western investors.

But a key part of the attempt at undermining Citron is by pointing out the conflict of interest in short sellers – that they’re profiting from their moves against stocks. Is this true of Andrew in his year-long tirade against Qihoo, and his recent praise of Sohu (NASDAQ:SOHU)? “Of course I invest my own money,” Andrew concedes, but stresses that doesn’t alter the facts he puts forward, or the research that he does.

On Researching

And what of that research into Chinese stocks? Though all US-listed stocks must submit financials in English, most of their services are in Chinese and can be tough to navigate and understand. The Beijing-based analyst Bill Bishop has been keen to learn who helps Andrew with his Chinese homework. Andrew sort of explains:

I get 50 emails a day from Chinese people who want to work for me.

But then Andrew declines to name a particular source, individual, or company that might be working with him. Aside from all that, he says that a lot of this info is in broad daylight. “It’s all in the filings,” he laughs.

On Qihoo

Which brings us in our chat to Qihoo, an undoubtedly controversial web company that started out in anti-virus products and other bits of software, and is now a major AOL-like site with portals, gaming, and a new search engine. It was from Qihoo’s filings that Andrew took issue with its advertising revenues stats – but especially with Qihoo’s claims to have the highest ARPU of any Chinese gaming service. Qihoo’s claimed figure of 400 is five- to ten-times higher than most in the industry – above even the local market leader, Tencent (HKG:0700).

On this call-out, Andrew feels vindicated, despite Qihoo’s stock remaining strong. His public challenge to Kai-Fu Lee to explain Qihoo’s ARPU claim was declined. He says:

Kai-Fu Lee’s 16 million Weibo followers and himself can’t come up with the answer.

Qihoo has changed a lot since Citron first turned on it, so does Andrew think the new search engine launch last month changes Qihoo’s outlook? After all, it’s now China’s second-biggest search engine, even beating out Google in mainland China. He says Qihoo “needs to change its corporate culture” to succeed long-term, something we heard recently from a source who’s an ex-employee who paints a rather Wild West picture of working life at Qihoo. Andrew adds:

How to win in search? A better algorithm – and that’s it. Then Qihoo needs to monetize search in a believable way. Do you know that [China’s top search engine] Baidu spends $250 million on R&D? If you wanna compete, spend on R&D.

On Sogou

Click to enlarge

But on the issue of Sogou, the search engine run by Chinese web portal Sohu, Kai-Fu Lee did have some ripostes and answers. It was Andrew’s post praising Sohu as undervalued that actually triggered the backlash against short sellers – and it seems to have centered on an inaccuracy in Andrew’s summary of what Sogou does. Kai-Fu Lee pounced on it, annotating corrections onto the offending passage (pictured right), prompting the former Google China boss to slam the way Citron and “these short sellers take advantage of the information asymmetry between China and the US.”

On the conflation of Sogou search and the Sogou input method editor app (for writing Chinese), Andrew holds up his hands:

I did combine the two. You can call it an error – an over-simplification for an American audience. But that doesn’t mean the whole story is not valid.

As for his being long on Sohu, Andrew says it’s based on an analysis by JP Morgan; he can’t say for sure if he’ll continue on the theme of Sohu in his next post.

More Attacks, Legal Action, or Peace In Our Time?

Kai-Fu Lee (left) and Zhou Hongyi (right)

Will all this mud-slinging continue? The collective of Chinese business execs has already set up CitronFraud.com and it looks set to pick apart every new report that Andrew puts out there. Heck, I’ve been been doing that occasionally since last November when we felt that the core claims against Qihoo by Citron were not credible – mainly because Qihoo’s “web 1.0 model” (as Andrew called it) could actually work and prove profitable in China where millions of new people come online for the first time each day. And those folks, sort of like your grandmother, need a guide to the net. They might want Qihoo’s web browser forced down their throat, and be led to a page full of dull links. It worked for AOL for long enough. And so I’m still not convinced that Qihoo is on a par with Longtop or the now-delisted China Media Express. Andrew says he hears that: “I deserve to get called out.” But there are, he points out, some limits.

Andrew says he’s “consulting with lawyers about Kai-Fu Lee and Zhou Hongyi” – specifically about the collective’s personal claims against him. He explains:

I’m consulting with lawyers about this whole fiasco – about being accused of fraud. The lawsuit would be filed in the US, and the CitronFraud site is registered in the US. […] If the charade continues – me blogging, him blogging – then I’m through answering in a public forum and I’ll turn to lawyers. I’m not gonna let people spread lies.

But that’s not set in stone. Striking a more conciliatory tone, Andrew says that he and Kai-Fu Lee, now the founder and CEO of startup incubator Innovation Works, do have a bond:

I’m a stock market person – not anti-China, not anti-Qihoo. I want to buy good companies and short bad companies. Also it’s not Andrew versus Kai-Fu Lee. We both want to make money.

The whole complex issue is muddied, he reckons, by Chinese web companies having to take sides and forcing uneasy alliances during this controversy. He expands on that:

I don’t think Kai-Fu Lee did Qihoo a favor – making a controversial company even more so.

It also exposed the awkward fact that Qihoo’s Zhou Hongyi ploughed some money into Lee’s Innovation Works. Andrew calls it a “major” backing, but the actual figure is a reported $3 million out of the fund’s $180 million total, which will be invested in numerous local startups.

Andrew says he feels he still has a place in the China tech scene, exposing potential fraud and dodgy practices, and notes that one of China’s top investors, Neil Shen of Sequoia Capital, is not one of the collective supporting the site that’s policing Andrew’s reports. Of that website, he says:

CitronFraud.com – on what? I’ll be proven right.

Hit the comments with your thoughts on this ongoing battle between short sellers and Chinese tech stocks.

There are thousands of e-commerce sites in the Chinese market, where literally almost anything can be bought online. So which ones have made the biggest impact in China’s online shopping space? We have shortlisted over 20 e-commerce sites below which we think you should look out for. Read on!

C2C

1. Taobao.com

Alibaba-owned Taobao is no stranger to e-commerce industry. The C2C giant sells almost everything, literally, from notebooks to vehicles. Unlike its western counterpart, eBay, Taobao owes its success as the market leader in this industry by notably offering free registration for its users.

B2C

2. Tmall.com

Another Alibaba-owned business, Tmall focuses on B2C services. Its a virtual mall that plays host to many brands’ main online retailing presence, notably companies like Gucci, Calvin Klein, Burberry and many more. Our most recent market share report notes that Tmall is the leader by a wide margin with 41.5 percent of revenue in 2012 Q2.

3. 360buy.com

360buy, the ‘other’ giant in China’s e-commerce industry, covers mainly electronics, home appliances, clothing, and books. The site also has its own online travel service, and a mall for luxury brands at 360Top.com.

4. Suning & Gome

Suning, is an electronics retailer that operates stores across the country. But it is transforming itself into an e-tailer so as to avoid the disastrous fate of the brick-and-mortar industry. It is interesting to see how the company uses its experience in the industry to conquer e-commerce in China. Our recent stats suggests it’s now up to fourth place in the B2C sector. Gome, a close rival of Suning and 360buy, also principally operates retail shops selling electronics and electrical appliances. As the market slowly diversifies into e-commerce, and as more customers turn to online shopping, Gome is also transforming itself into an e-tailer to keep pace with the market.

5. QQ buy

QQ buy, an e-commerce site owned by Tencent, aims to bring competition to the industry that is heavily monopolized by Tmall and 360 buy. QQ buy focuses on brands and labels, and also allow rival, specialist e-commerce sites to open up virtual storefronts on its site.

6. Dangdang

DangDang, the e-tailer specialist that sells almost everything from clothing, shoes, to gadgets, also has an e-reader and e-book service which launched recently in April. Called the Doucan, the Kindle-like e-reader is highly integrated with Dangdang’s own e-book store. Customers are able to purchase e-books from within the Doucan device.

7. Vancl

Vancl is China’s largest clothing e-tailer. It sells its own brand of clothing and makes them affordable for shoppers. It has recently started shifting production overseas in an effort to cut labour rates and beat the country’s rapidly rising production costs. The company also runs the mall-like V+ site which hosts other clothing brands.

8. 51buy & Coo8

51buy is an e-commerce site selling mostly home appliances and gadgets. The site is heavily financed by Tencent, China’s internet giant. Coo8 is a subsidiary of the electronics retailer, Gome. The site mainly sell gadgets and IT-related products as well. It has a very similar product area to 51buy.

9. Yihaodian

YiHaoDian is the country’s largest food and consumables e-commerce retailer. Products range from food to toiletries, and recently it has been diversifying into clothing and electronics. Walmart has a controlling stake in Yihaodian and the partnership became official last week.

Group Buy Sites

10. Meituan & 55tuan

Meituan and 55tuan are long-standing market leaders in the group-buy industry. They offer deals and discounts that are usable in many cities, such as at restaurants, cinemas, traveling agencies, etc. The two sites account for approximately 26 percent of the daily deals market in China according to the most recent data, with a monthly revenue of 200 million RMB.

11. Dianping

Dianping is a group buy site that offers more than just deals and discounts. It is similar to (but actually pre-dates) Yelp in the US, and it started its online journey with reviews and listings. As such, Dianping has been expanding exponentially, with its revenue growing at thirty percent since the start of the year.

12. Taobao Juahuasuan

Juhuasuan is a deals site owned by Alibaba, and located at a subdomain of Taobao, ju.taobao.com. Despite the slump in the group-buy industry, Juhuasuan continues to perform exceedingly well. The site sold 57 percent of all product-based deals, more than all of its rivals combined. It’s the market leader at present, with 21.5 percent market share by revenue.

Vertical Commerce (also B2C)

13. Mbaobao

The ladies will love this one! Mbaobao is a specialist e-commerce site in China that focuses on women’s bags. The e-tailer has received a fourth round of funding and we’ll likely see expansion coming up.

14. Redbaby

Redbaby specializes in baby-products, and was one of the early leaders in the B2C e-commerce industry in the country. As competition steepened, its market share decreased, raising questions about the feasibility of its business model. There were rumors that Gome or Suning, the electronics retailers mentioned above, are interested in acquiring the baby-product retailing site. Nothing has been confirmed yet.

15. Jiuxian

Jiuxian is an e-tailer that specializes in selling wines and spirits. The wine retailer has expanded its storefronts this year, and it has a virtual store on Tmall and Dangdang as well. It wrapped up major series C funding just recently.

16. La Miu

La Miu is a specialized e-commerce site that focuses on selling lingerie. It is not just an e-commerce site, but one that designs and manufactures its own underwear. The founder aims to provide a sort of luxury shopping experience like Victoria’s Secret in US, but yet make it more affordable as well.

Flash/VIP Sales

17. Vipshop

VIPShop focuses on discounts and flash sales. The online retailer partners with over 1,000 brands to bring certain amounts of items at a lower price for consumers. The site mainly covers clothing and electronics. It was one of very few Chinese tech stocks to list in the US this year.

18. FClub

FClub operates on the same model as VIPShop. It got $30 million in funding very recently and might well follow VIPShop along the IPO route. The site was launched in 2009, and it sells mainly mid-range clothing and accessories, as well as some luxury items. The site has partnerships with over 1,500 brands to buy up items and re-sell them to members within a period of five days.

“Referral” Commerce

19. Meilishuo, Mogujie

These are the sites that drive traffic to other sites, mainly to Taobao.com. Mogujie and Meilishuo are more than just Pinterest clones. They are e-commerce referral startups that function as aggregators of different products listed on other e-commerce sites. Online shoppers will select and pick the items they want, perhaps led there by someone sharing an item via social media, and they will be redirected to the product’s original site for payment. According to Mogujie’s own stats in April this year, the site attracts 2.2 million visitors each day who browse 750,000 items on Taobao every day, and end up buying 60,000 of those.

20. eTao

eTao is a prices comparison site owned by Alibaba. The site aims to help consumer compare price and eventually bring them to the cheapest e-commerce site to make the final purchase.

So that’s it folks, if you have any other sites to recommend, kindly add them in comments below.

Yaodian100's frontpage, before it vanished offline.

At the end of last month we reported on how one long-standing Chinese e-commerce site, Yaodian100, had vanished off the face of the earth. And now comes the sad and messy aftermath as suppliers find themselves unable to recover millions of RMB in unpaid orders for the B2C e-tailer.

Yaodian100 still hasn’t filed for bankruptcy; its Shanghai offices are locked but not yet fully cleared out; but the site is now totally offline, and its official Weibo account is untouched since July 17th. The Beijing Business Today paper estimates that there are just over 50 suppliers of the B2C e-commerce site who are owed money, with the amount totaling over RMB 10 million ($1.58 million).

Digging deeper, the paper found warning signs way before the Yaodian100 site put up a mis-leading notice on its site at the end of July saying it was suspending orders for a few days as the company “relocated” its offices. It turns out that senior staff had gone unpaid for three months prior to that, with the rest of the staff unpaid for two months, causing widespread internal worry and disarray. There had been rumors as early as March of this year that the site was in trouble and angling for an acquisition.

One company in Zhejiang province, south of Shanghai, says that it sold RMB 40,000 to 50,000 worth of items via the clothing retailer, but now it is left owed RMB 20,000 ($3,160) by the AWOL Yaodian100 execs.

Aside from the issue of debt collection – and where’s the CEO in all this? – it also raises the broader question of how a young but fairly established site got into so much trouble, apparently bereft of cash for months before its ignominious collapse. Is the B2C online model of retailing broken, involving far too great an amount of overheads – warehouses and inventories; marketing; some rivals are even preparing to do their own express deliveries – to be sustainable on such slim profit margins. Just last week, the specialist e-tailer VCotton suspended operations amidst news that local authorities had seized its warehouse over unpaid debts. It’s going to make some suppliers wary of working with some smaller B2C sites, especially ones which pay as late as 60 days after sales are made.

Who else might stumble and fall so spectacularly?

[Source: Beijing Business Today; via QQ Tech - article in Chinese]

Jack Ma plays to the crowd at an Alibaba event

If China’s Alibaba Group IPOs, as many analysts think it will, in a few years’ time, it’ll be the world’s biggest ever tech IPO. But not too much is known about the e-commerce giant – which runs the country’s top online malls, Taobao and Tmall – outside of China. So a former employee of the company, Porter Erisman, decided to make a film about the rise of the company as it was powered by its founder, Jack Ma.

The result is Crocodile in the Yangtze: A Westerner Inside China’s Alibaba.com, which, Porter tells us, gives a “unique behind-the-scenes look at the eBay-Taobao battle” – the titanic tech tussle in which Jack Ma beat the American competition by better understanding the Chinese market. Taobao went on to become a wildly popular haven for amateur shopkeepers; eBay (NASDAQ:EBAY) became irrelevant except for a few people trying to sell some junk. In the full documentary, of which I’ve seen segments, Porter at one point says in his narration:

To eBay’s western managers, Taobao probably seemed too cute and flashy, but Taobao appealed to a new generation in China, that used the internet with a certain innocence and optimism that eBay failed to appreciate.

And so Mr. Ma’s entreprenurial story (he’s a former English teacher) is one which mirrors the emergence of China as a business superpower. Check out the short trailer below. Crocodile in the Yangtze has not yet been released, but Peter says he’s about to begin a festival tour that will take in the likes of the Palm Beach International Film Festival.

Porter stresses that “the film was 100 percent self-financed with my own savings” and that Alibaba “didn’t help fund it.” He adds:

Before leaving Alibaba I told Jack Ma that I wanted to write an independent memoir (in book form) of my experience at the company, in my own words, warts and all. He let me know that he wouldn’t have any objections. So in my last week at the company I gathered about 100 hours of video archives from the company that I intended to use as a reference for my book’s accuracy.

When I looked at the amount of footage available, I told Jack that I may consider making a film rather than a book and I was fortunate that he gave no objections and the company let me take the footage with no preconditions. Other than that, I had no additional access to Jack Ma or the company because I wanted to preserve the film’s independence.

The film ended up “drawing on 200 hours of footage filmed by more than 30 sources.” While it doesn’t show some of Alibaba’s more recent challenges – because the film was already in the can – such as the protests against new rules for Tmall vendors, the documentary is a sort of China biz 101 for those fascinated with China’s tech scene. And seeing Jack Ma rise from a trapdoor dressed in a manga-punk outfit while thousands of supporters cheer sure does make a Steve Jobs keynote look more like a Catholic Sunday mass.

Here’s the Crocodile in the Yangtze trailer:

Last year we described VODone (HKG:0082) as the biggest tech company you’ve never heard of. But it’ll soon be getting more global exposure as the mobile gaming subsidiary of VODone, the online media company that is a semi-state owned enterprise (SSOE), will IPO on NASDAQ next month.

This will see the gaming part of the company, China Mobile Games and Entertainment Group Limited (CMGE), spun-off and then publicly listed. The move is confirmed by a week-old document on the CMGE site which says that a filing will have been made with the SEC by August 20th – but we cannot find such a form at present. Nonetheless, the parent company expects CMGE Group to hit the NASDAQ tickers on September 25th (Tuesday).

Forbes recently listed CMGE as one of the top 30 mobile businesses in China, with revenue in 2011 of $31 million. One major investor is the Taiwanese chipmaker MediaTek (TPE:2454). CMGE describes itself as “the leading mobile game company in China” in terms of its distribution and publishing of mobile gaming titles in the country. Among its developer partners are Rovio (makers of Angry Birds), Disney, and Tencent QQ, as well as phone-makers who have agreements to pre-install some CMGE games on their shipped phones.

[Sources: CMGE; via Techweb (article in Chinese)]

While businesses and brands are making significant investments in China, many are cutting corners on their websites – which isn’t the smartest move. For the technical, marketing, and sales departments of a company, the web should be a key pillar for your operations in China, in terms of selling products, spreading the word, and tuning in to social media. Here are a few points that will help convince even the non-techies why this is crucial:

1. Chinese love to buy things online

There are 50,000 purchases every minute on Taobao, China’s eBay-Amazon-combo. They’re being bought by the 193 million Chinese now shopping online, making it the fourth most popular pastime on the Internet in China, and the fastest growing. By 2015 it’s forecast to be 350 million, 50 percent of China’s projected online population, and more than the US, Japan, India, Russia and Indonesia combined.

The take-away: Make sure you’re on the established Taobao (for C2C), or – more apt for brands and larger companies – TMall (B2C) online malls at the very least. Rival platform QQ Buy will soon open up to brands as well. If you’re selling independently from your site, accept payments the way Chinese want to pay, such as Alipay or UnionPay – Chinese don’t use credit cards as much as western consumers.

2. Chinese are online a lot

The new urban Chinese are commuting longer and spending more nights at home than their equivalents in the west; and many of them use that time to go online. The average connected Chinese person spends 2.7 hours a day online, more than anywhere except Japan. Mobiles have recently become the most popular way to go online, and tablet usage is soaring; dominated by iPads with 72.6 percent of the market.

The take-away: Ensure your site is optimized for mobiles and iPads. For iPhones, [focus on sharp graphics for the iPhone 4S, as local middle-class consumers tend to prefer the very newest gadgets; and on Android, be aware of which smartphones Chinese people are using most this year. That applies to which mobile web browsers they use too. And then create entertaining content that helps Chinese visitors pass the time and keeps them coming back. Branded smartphone apps are becoming an increasingly popular way to draw Chinese visitors.

3. Chinese express themselves more online

Chinese are some of the loudest and most engaged of all when online. A 2011 Forrester Research survey of 330,000 social media users discovered that 76 percent of Chinese ‘create’ content online, many of them through blogging on services like Sina Weibo, China’s Twitter-Facebook hybrid. Just 24 percent of Amercians create such stuff, and 23 percent of Europeans. Social media has finally given Joe-public [Ed: you mean Zhou-public ] in China a voice and he’s taking full advantage of it.

The take-away: Getting an official company Weibo account – a brand page, not a personal one – is a great idea to connect with Chinese consumers and build a community. Weibo has a suite of APIs in English that you can integrate into your site.

4. Websites raise awareness and woo Chinese consumers

How do Chinese find out about brands? The web. A recent survey by Ipsos China revealed that 37.6 percent of Chinese consumers regularly increase their brand awareness through websites. That’s more than any other channel. And when they come to shopping, 47.5 percent of consumers stated that websites increased their purchase intent; 50 percent more than ads in the newspaper, TV, radio, those ubiquitous LED screens, and every other channel. Ensure your SEO works very well on Baidu, rather than Google.

The take-away: Make sure you have a beautiful UI that has been tested by Chinese people. Ensure that any promotions or information on where to buy is simple and easy to find, again tested on a Chinese audience. Take care with your Chinese-language SEO.

5. Chinese trust what they read online

With a widespread lack of trust in state-controlled TV, newspapers, and radio, Chinese are more likely to believe things they read on social media such as Sina Weibo. Since launching three years ago, Weibo now has over 325 million registered users, many of whom aren’t shy to share their thoughts. The transparent nature of Weibo means 95 percent of Chinese trust a brand more if they’ve seen it on Weibo, communicating with them very directly. 55 percent have contributed to a conversation about a foreign brand.

The take-away: Ensure that someone in your business is keeping up with what Chinese consumers are saying about your brand and products online. Use your social media accounts and websites to deal with any feedback or complaints in an honest and transparent way, before it gets out of control.

Hopefully all that will help your business justify bucket-loads of extra funding for your website and online resources – and ensure Chinese visitors come back. Good luck!

Tudou’s Gary Wang (left) and Youku’s Victor Koo, pictured today after shareholders of both companies approved the proposed merger.

China’s biggest-ever tech deal was revealed back in March of this year when Youku (NYSE:YOKU) and Tudou (NASDAQ:TUDO) shocked the nation’s netizens, proposing that the two largest video-streaming sites should merge. And now that’s closer than ever to being finalized after shareholders of both Youku and Tudou have agreed to the terms of the deal.

It’s a major step forward, but there’s still some way to go yet. So long as regulators don’t intervene, the careful legal process will stretch on for the rest of the year.

Aside from the new photo of Tudou’s Gary Wang (left) and Youku’s Victor Koo, nothing much changes immediately in the ongoing merger, which will ultimately form a new company called Youku Tudou Inc. Unless they think of a better name. The two brands and sites, Youku.com and Tudou.com, will go on largely unchanged even after the merger is complete. We believe that a thorough legal laundry list is the next thing to plough through, then Tudou will be very close to being de-listed from NASDAQ and merged into the $YOKU ticker.

The makers of the popular UC Browser, Beijing-based UCWeb, is looking towards an IPO – probably in the US – in 2013. UCWeb CFO Roy Rong told Bloomberg in an interview that:

We’re thinking this year may not be a good time. We’re looking at 2013 right now.

The public offering would also be a way to accelerate UCWeb’s global expansion, pushing its Opera-like web browser worldwide. Back in April of this year, UC Browser rolled out as an international version for Android (pictured right), and UCWeb said at that time that the browser had 40 million overseas users.

In May, we sat down with UCWeb CEO Yu Yongfu who explained that his company sets up an R&D office in any new country it wants to expand to in order to begin developing the localized version of the product. The firm, started in 2004, now has an office in India, and plans to open a US office later this year.

Talking to Bloomberg today, Mr. Yu explained:

It would be better for us, branding-wise, to be listed in the US. It would expand our brand name and make us better known.

In a recent report from Chinese web giant Baidu [1], UC Browser was the most-used browser for mobile visits to the search engine’s services, with a pretty dominant 30.3 percent:

From October 2011 to the end of June 2012, Lashou has lost 55 percent of its market share by revenue. Briefly China’s number one daily deals site at the end of the third quarter of last year, it has now sunk to sixth place in the country according to our favorite source of local deals analytics, Dataotuan. We know the IPO is off, but how about funding? It’ll be difficult to persuade investors with that kind of track record over the past year. Being China’s sixth-largest daily deals site is a bit like being an aging hooker – everyone knows you’ve been through a lot, and many will wonder if you’ve got the brains to get your life back on track.

Here’s the grim Lashou landscape [1] over the past year, contrasted with the current market leader, Meituan:

Of course, some are having it worse in China’s rough and very fragmented group buy/deals market. Nearly 3,000 daily deals sites have shutdown in the past nine months. And other former luminaries have crashed much harder. Look at poor 24Quan. It has gone from a peak of 8 percent share in October 2011 to – brace yourselves – 0.6 percent in the most recent 2012 Q2 stats. You can practically imagine the company face-planting. Yes, the figures in this sector can be volatile, fluctuating wildly; but that is catastrophic. It wasn’t too much of a surprise, though, as the 24Quan CEO spoke to us at the end of last year about its “restructuring” – giving us a sense of unease that the whole venture was in trouble.

As for Lashou, how long can that go? Where’s the diversification, the pivot? Or the fightback. Right now, Lashou is clearly on the decline, and its market share is back almost exactly where it was last June.

China’s biggest tech company in terms of revenue, Tencent (HKG:0700), has just revealed its 2012 Q2 and half-year financial results. The stats show the company – which has stakes in gaming, social media, e-commerce, and more – growing yet further. Revenue for the quarter stood at 10.53 billion RMB (US$1.66 billion), up 56.2 percent on the same time last year. Operating profits for the same period were 3.94 billion RMB ($622.8 million).

In terms of 2012 H1 figures, that’s 20.18 billion RMB ($3.19 billion) in revenues, with 7.63 billion ($1.21 billion) in operating profits.

Tencent, in its announcement this afternoon, described its online advertising business as having achieved “a significant year-on-year growth rate, due to new platform contributions and market share gains in key advertiser categories.” Ad revenues grew to $224.5 million in the first half of 2012, up 79 percent year-on-year.

Its online services, including social gaming revenues, were also lauded for their growth, climbing 42.6 percent from 2011 H2 to now hit $2.4 billion. Earlier this week we reported that Tencent’s QQ platform for IM and gaming has 30 million paying users, and their cash is evident in that impressive number. Tencent pointed out that “QQ membership subscriptions revenue also contributed to the increase.” Regular readers will know that Tencent is the market leader in both casual and MMO games in China, with a 33.7 percent slice of this juicy pie.

It wasn’t all good news, as Tencent described its growth in mobile services as “modest.”

As for e-commerce, there was no comparative figure to go by as Tencent’s e-tailing efforts have changed a lot in the past year with its launch of QQ Buy. We recently looked at how it has already become China’s third-largest B2C e-commerce site. Its revenues for 2012 H1 were $254.6 million.

In an interview with Paidcontent, Tencent’s GM Sophia Ong revealed that out of Tencent’s 752 million QQ active users, over 30 million are paid members. And on average, each user pays about 10 RMB per month. That adds up to about 300 million RMB (US$47.16 Million) a month, or more than $470 million a year. That’s really a bucket load of money for Tencent (HKG:0700) coming just from its QQ instant messaging service.

So what can paid users buy? Users usually buy credits (“Q bi”) to pay for Tencent-related stuff, like game credits and VIP memberships. VIP membership allows fast track QQ rank promotions and extra discounts the next time you buy credits. Different payment modes and lengths (monthly/yearly) will entitle users to different discounts. It’s all kinda confusing but it seems to work well for users in China.

Tencent, it seems, has set its eye outside of China. It has operations in most big countries in Southeast Asia including Vietnam, Thailand, and Indonesia, and it is pushing hard on WeChat in India too. Another eye is set on U.S./Western markets where its main focus is on gaming, it seems. Tencent has so far acquired/invested in in two gaming companies — Riot Games and Epic Games. There are rumors that Tencent might just buy Blizzard which our own Charlie Custer thinks is not very likely.

If you have five minutes to spare, we urge you to head over to PaidContent to read the interview about Tencent in full.

Yaodian100's frontpage, before it vanished offline.

That was quite a vanishing act. The Chinese e-commerce site Yaodian100 – which has, over the years, received over $50 million in funding – has gone offline, leaving users and even industry insiders wondering what’s going on. The Yaodian100.com site now redirects to its official Sina Weibo account (see it here) – but that hasn’t been updated since July 17th.

Before going offline on July 28th, Yaodian100 posted a short notice saying that it would be down for an unspecified duration due to its “relocation.” After three whole days, concerns are growing that the rumors earlier this year that the company was near the point of bankruptcy were actually true. QQ Tech and several other Chinese tech blogs have tried to contact several senior executives at the company, but with no luck so far.

Shanghai-based Yaodian100 was started up in 2009, and was one of the earliest specialist B2C e-commerce sites in China, selling mostly cheap clothing. It wrapped up a major first-round of funding of $40 million in August 2009, led by Qiming Venture Partners. That was followed by a round in May 2010 that was worth 60 million RMB ($9.5 million at today’s rates), courtesy of Chinese search engine Baidu (NASDAQ:BIDU) and local shoe brand Daphne. Intel Capital later led a smaller series C investment.

Yaodian100 was taking 30,000 orders per day back in late 2010, it had boasted at the time, with monthly sales worth 30 million RMB ($4.75 million). But things got quieter thereafter, and rumors of massive layoffs, and even possible bankruptcy, were all that was being said of the website by the start of 2012. When we looked at the most recent market share stats for the B2C e-commerce scene in China just last week, we noted that the top five sites had consolidated their lead upfront, and now accounted for about two-thirds of the entire nation’s e-tailing business.

We’ll update if the site reappears; or if we can officially add it to the deadpool.

[Source: QQ Tech - article in Chinese]

Chinese video-streaming site Tudou (NASDAQ:TUDO) has just revealed the next steps in its proposed merger with larger rival Youku (NYSE:YOKU). That merger plan, first made public in March of this year, will require being voted upon by Tudou shareholders, and then if approved will eventually see Tudou delisted from NASDAQ and fully merged into Youku Tudou Inc. – presumably under the $YOKU ticker that the larger company already has.

That Tudou vote will take place at its 2012 annual general meeting of shareholders in Hong Kong on August 20th. The announcement from Tudou today, shortly after American markets opened for Wednesday trading, points out:

[Tudou’s] board of directors has unanimously approved the Merger Agreement and recommends that holders of its ordinary shares and ADSs vote “FOR” the resolution.

In tandem with all this, Youku has filed a “preliminary joint proxy statement” with the US SEC (see it here), that outlines the details. Amongst a barrage of whats and ifs, the prospectus points out that Youku shareholders will need to vote on this issue at some point, as well as on the legal name change to Youku Tudou Inc. Youku’s AGM date has not yet been set.

Jumping to page 62 of the mammoth SEC filing, we see a list of “risk factors” involved in the merger, such as prohibitive “transaction and integration costs.” This being China, there’s always a fear of government clampdowns and other new regulations, which the Youku prospectus does allude to with reference to SARFT, China’s media regulator:

Tudou may be unable to renew its SARFT license in 2014 and may be unable to conduct its business if its SARFT license is revoked or not renewed. […] If the PRC government determines that the contractual arrangements that establish the structure for operating Tudou’s businesses do not comply with applicable PRC laws and regulations or if Tudou is found to be in violation of any existing or future PRC laws or regulations, Tudou could be subject to severe penalties and may be forced to discontinue all or a portion of its business.

Indeed, we know that SARFT will soon move to regulate – and probably outlaw certain elements of – online video content, which will pose a big risk to all of China’s numerous video-streaming sites which have previously enjoyed relative freedom in their screening of entertainment shows and movies.

There are rumors in the tech industry in China that Microsoft-owned Skype and its China partner, TOM (HKG:2383), have already effectively ended their relationship after not renewing their partnership. Marbridge Daily has a good account of the rumors that it sourced from local news portal Tencent Tech, saying that the working agreement ended last year and that TOM is now running its TOM-Skype service out-of-contract and on a skeleton staff after reportedly firing a great number of staffers thought to be involved in the joint-venture.

We’ve reached out to Microsoft China, and will update if we find someone who can comment.

[UPDATE five hours after publishing: Peter Schloss, former CFO and CLO at TOM Online, informs me via Twitter that: "The TOM-Skype partnership has no specific term length. I'd question the accuracy of these reports"].

Marbridge writes:

When Tencent Tech called Wang Zhiyong, Tom Online’s employee in charge of Skype operations, Wang said he was away on business, adding that as Microsoft keeps a tight rein on discussions, he was unable to comment. Li Xiuli, Tom Online’s marketing director for online value-added services, said she had not been informed about the matter. […]

When speaking to several former Tom employees who recently left the company, Tencent Tech was told that the company has begun “transformative” layoffs of employees working on Skype, gaming, and the original online literature site Huangjian Shumeng, among other services. Layoffs have affected more than 100 people so far, with Skype employees accounting for such a large proportion of laid-off individuals that technical staff are reportedly almost all gone.

Word is that TOM Group execs are not seeing eye-to-eye with Skype over the China business, with Tom CEO Yang Guomeng thought to be in favor of dispensing with Skype altogether.

In addition to its Skype partnership, TOM Group runs news portals, online videos, and e-commerce sites, among other things. Its TOM-Skype partnership made worldwide headlines in 2008 when it was exposed how TOM was using keyword surveillance to censor some political or frowned-upon words, such as any references to Tibet during the racially-motivated unrest and violence in the region that was going on at that time.

[Source: Marbridge Daily]

Steven wrote yesterday that Asia has more than 1 billion internet users. That’s huge and that’s largely thanks to China. China has more than 500,000,000 (that’s 500 million) internet users. That’s more than the total U.S population, is so big that it is hard to avoid China nowadays. So many companies have headed into China. Some raise strategic funds in hopes of getting more connections in the country. Even the web is seeing more and more content in Chinese.

(More: China has no innovation? Look closer)

That’s just scratching the surface though. Moving five years ahead, things will be vastly different, I believe. I don’t have a magic crystal ball but I think the signs of this trend are quite compelling. I’m lucky to be able to understand both English and Chinese which helps greatly in my quest to understand the Chinese market. Other folks who are less fortunate struggle as they find it hard to understand the language, let alone the market and culture. Many didn’t want to move in even though they know that the Chinese market is oozing with potential. It is sometimes fascinating to see people putting their guard up when talking about China.

But can a company with international ambition avoid China? I don’t think so. At least not for long. It seems to me that having a slice of the Chinese market (even if it’s tiny) is becoming a must for all big and small companies. It’s a proof to your investors or shareholders that you’re making some real progress in Asia. Yup, if you don’t have China, you don’t have really Asia. Again, the numbers talk — China with its 500 million internet users. Big companies like Facebook, LinkedIn, and Google are exceptions of course. But how many of us can reach to that level?

(More: Copying, Executing, Building)

Many folks find China a mysterious country. In some ways it is, like many Asian countries. But as an entrepreneur, there’s really little to fear. More than 99 percent of startups fail. So having China as part of the plan will increase your failure rate by maybe 0.1 percent? There’s no math in this, but my point is that running your own business is already a huge risk. So getting into China shouldn’t be feared, it should be embraced. We may or may not succeed. But c’mon — I think China is certainly worth a shot. Do it now or it will be too late when the market is flooded with your competitor products. It seems like we don’t really have much of a choice, do we?

(More: The Rise of Social Media in China, With All-New User Numbers)

[Image credit: Chinatown.com.au]

New statistics for China’s group buy market show dramatic drops in monthly transaction volume and value. The latter plummeted 23 percent from the May figure to hit 2.08 billion RMB (US$329.4 million) in deals sales in June. As for the transaction volume, that sunk to a year-long low of 38.38 million orders in June, which was down 26 percent from May.

Although the monthly drops could be seasonal – with folks perhaps moving away from daily deals as the school summer vacation kicks in in mid-June – it is very significant that the sales volume reached a year-long low, dropping below the 40 million mark for the first time in 12 months.

Consumers in Shanghai caused the biggest localized fall in deals in the whole country, as group buy transactions in the city halved from 140 million RMB in May to just 72.85 million RMB ($11.54 million) in June. That was the first time in 12 months that the figure had dropped below 100 million RMB.

The statistics come from Letyo.com, a local deals aggregator. It also noted a substantial fall in deals sold in the capital, Beijing, where transaction value fell 35 percent in June from the previous month.

As for the key players, Letyo noted that two of China’s biggest web portals maintained their lead in daily deals. Alibaba’s Taobao Juhuasuan (pictured above) remains a giant deals aggregator and the industry’s most-used service with a monthly transaction value of 970 million RMB in June. Yes, that’s effectively 46.6 percent of all sales in the whole sector in China. Tencent’s (HKG:0700) QQTuan was a strong yet distant second with 160 million RMB in sales. The independent deals sites are led by Meituan.

If last winter was thought to be harsh for group buy sites, then this year’s coldest season could well be even rougher. With insane numbers of small sites still fighting over the scraps, we’ll likely see even more close down this year than last – when over 2,000 deals sites shutdown.

[Source: Donews - article in Chinese]

[UPDATE on June 27th, three hours after publishing: The original version of this article identified a different company with the name General Mobile, which was inaccurate. Our apologies. The article has been changed significantly to reflect this].

SingTel Innov8 is in action again, this time ploughing its venture capital into – along with Japan’s Mitsui & Co. (TYO:8031) – General Mobile (G-Mobi), which makes mobile platforms and runs mobile services aimed at developing nations. The funding amounts to US$5million, which G-Mobi plans to use for future growth.

The financing clearly represents an investment in mobile tech in developing nations as a whole, since Innov8’s parent company, SingTel (ASX:SGT) has hundreds of millions of customers around the world not just in Singapore but also in nations like Bangladesh, Pakistan, and across Africa. Plus, another of General Mobile’s investors is Taiwan-based MediaTek (TPE:2454) which makes processors that are commonly used in some budget smartphones.

In addition to its mobile apps and services – which include making JAVA MRE versions of apps like Facebook and Yahoo Messenger – G-Mobi generates revenue from partnerships with mobile telcos in developing nations, as well as from its app store.

G-Mobi’s CEO, Paul Wu, said of this funding round:

With this round of investment, we have on board world-class strategic partners across all the fields to help accelerate our worldwide service deployment as well as enabling us to provide a more complete set of services and solutions.

The CEO of Innov8, Edgar Hardless, said that the investment recipient “addresses the strong demands for mobile application and services seen by emerging market mobile users.”

Exactly as we’d heard was about to happen in recent rumors, it has just been announced officially that Groupon’s (NASDAQ:GRPN) joint-venture in China with Tencent, called Gaopeng, will merge with its larger daily deals rival FTuan.

The whole deal was overseen by China’s web giant, Tencent (HKG:0700), which not only owns half of Gaopeng but also has an undisclosed stake in FTuan. The financial deals of the merger have not been revealed. Groupon will be a minority shareholder in the new company, as it was in Gaopeng – but we’re not sure how “minor” it now becomes.

The merger will create a new company that’ll be headed by FTuan’s CEO, Lin Ning, but means that the two Gaopeng and FTuan brands and websites will continue as they are.

In this evening’s announcement, the new entity’s CEO, Mr. Lin, said:

China’s daily deals market is moving from investment-driven to operation-focused, and I believe the merger will position us well to further scale our operations and deliver innovative products to our customers. The multi-brand strategy after the merger will enable the new company to serve the segment needs of merchants and consumers in lifestyle e-commerce and mobile internet.

It is indeed the first major deal we’ve seen in China’s fragmented and costly daily deals market, where the current market leader is the startup Meituan. FTuan was in fourth eighth place last time we looked, while Gaopeng was still losing market share way out of the top ten.

Tencent’s new CEO of its recently spun-off e-commerce division said:

The new joint entity will combine the strengths of FTuan and Gaopeng to better serve consumers in the daily deals market in China. We believe group-buying is a natural leverage off our large user base.

Meanwhile, Groupon’s Jason Harinstein, commented:

For Groupon, this transaction is the next logical step in our strategy to strengthen our investment in China. Tencent has been a great partner, and we are excited to continue our partnership with them. We are also looking forward to working with the FTuan team to provide Chinese consumers and merchants with more compelling offerings.

GREE in action at a gaming conference.

GREE (TYO:3632) announced today that it has purchased shares in GeePlus, a company that plans and develops social games in Japan. This major investment will see GREE having 49.2 percent voting rights at the newly-formed GeePlus.

GeePlus has 140 engineers and staff who were transferred from Polygon Magic, the parent company of GeePlus. We reached out to a rep from GREE who told us that GeePlus is actually just a one-month old company. It’s a spinoff from Polygon Magic and will only focus on planning, development and operation of social games. Polygon Magic is in the offline gaming business – namely, pachinko – as well.

You can’t really find much information on the internet if you search for it. A quick Google search on GeePlus didn’t give me much more than an electromechanical solutions company.

360Buy, China’s second-biggest B2C e-commerce site, is said to be preparing for its American IPO right now, with a view to listing in September. The business news website ChinaVenture recently reported rumors of 360Buy executives holding a lengthy meeting with analysts, and that a resultant SEC filing could be coming this month.

But, after a year of turmoil for Chinese tech stocks, and right after the controversially over-inflated Facebook (NASDAQ:FB) listing, the highly contentious issue of of what 360Buy is worth will come to the fore. If we think back to March of last year when Russian investment group DST committed hundreds of millions of dollars to the Chinese online shopping website, that effectively valued 360Buy – or Jingdong Mall, to translate its Chinese name – at US$10 billion.

That huge figure syncs up nicely with a calculation of 360Buy’s worth according to Amazon’s price-to-sales ratio of 1.18 based on 360Buy’s sales estimate of $11 billion for 2013. Trouble is, Amazon – which 360Buy resembled strongly in its initial stages – is a much more mature company in a more stable (and, I’d dare to say, less fiercely competitive) American market. Plus, Amazon is pulling in profits, while 360Buy is still bleeding 5 percent operating losses.

So, tweaking that ratio to a more reasonable 0.5 would value 360Buy at $6 to $7 billion. Some would say that’s still too high. The last time the rumor mill whirred into life for 360Buy, it was being valued at way over $10 billion, with talk of raising as much as $5 billion. Surely the recent blunders and mis-steps among Chinese tech IPOs – and with Greece and Spain staring into the kind of financial abyss that could drag down global markets – will curtail such excess this time round.

Timing remains crucial. In the past, 360Buy’s founder and CEO, Liu Qiang-dong, has talked publicly of 2013 as making sense for a public offering for his company. Throughout 2012, it looks to be busy hiring 25,00 new staffers; by 2016, he wants the e-commerce site to have usurped Alibaba’s Tmall as the market leader. Somewhere in the middle, the time has to be right. Making this happen in September – rather than waiting for 2013 – might come down to a bunch of odd factors. These include avoiding the market upheaval during an American election period (November this year), getting in before a hyped re-appearance of a Game of Thrones-esque “winter” of investment freezes, a fast-changing e-commerce landscape in China, and pre-empting a downturn if the Chinese economy really does hit the kind of “hard landing” that some economists are predicting.

Until 360Buy’s IPO roadshow creaks into life, estimations of its valuation will vary wildly, which in itself speaks a lot about economic conditions.

[Sources: iResearch, ChinaVenture (article in Chinese)]

Reports are emerging that Baidu (NASDAQ:BIDU), China’s most-used search engine, tried – but failed – to acquire its smaller rival, Sogou, earlier this year. The opportunity is said to have come and gone, and would’ve marked an all too rare acquisition in the country’s fierce but fragmented web scene. Contacted this afternoon by TiA, a Baidu representative could not be drawn to comment.

Though Sogou’s search engine – a subsidiary of web portal Sohu (NASDAQ:SOHU) – is a fairly minor player in China, it has been growing rapidly, and by some metrics it was seen to surpass Google late last year to become local netizen’s second-favourite search tool. Its financials are strong too, with the search engine and affiliated Sogou products bringing in US$23 million in 2012 Q1. Sogou was spun-off from Sohu nearly two years ago, and has seen constant growth in its earnings thereafter.

Baidu snapping up Sogou would’ve made sense in other respects as well: Sohu’s search product is perhaps more of a threat to Baidu’s market share than Google is in China; Sogou and Baidu have lots of overlapping and directly competing services and apps, such as online maps and Chinese-language input method editor (IME) apps; and, as a corollary of that last point, such an acquisition would have brought in a lot of relevant talent that could quickly make the leap to Baidu’s products. Furthermore, Sogou has been pretty innovative, and is currently working on what’s thought to be a voice search system quite similar to Apple’s Siri.

But Baidu seems to have nailed voice search all by itself, as it showed last week with the launch of its budget smartphone with Changhong. In many other ways, it’s also way ahead of it’s smaller rival in making the critical leap to mobile.

So, unless Baidu is sitting on a piece of news, the report suggests that the moment has passed, and no consolidation in the search sector is about to happen. Business as usual, then.

[Source: Time Weekly; via Donews - article in Chinese]

At an event this afternoon in Singapore, Yahoo (NASDAQ:YHOO) has rolled out a whole bunch of advertising platform products for the first time in Southeast Asia. The mobile-oriented ads are, says Yahoo, multimedia, interactive and well-targeted. They launch immediately in Singapore, and will come to Malaysia, the Philippines, Indonesia, and Vietnam “in the coming months.”

Yahoo reaches over 200 million folks across Asia as a huge publisher of content, and it’s that kind of captive audience that it’s offering up to brands today. And so, for the first time in the region, the somewhat beleaguered U.S. web company is making available three of its key ad products:

1. Clickable mobile video ads – These tap-to-video ads can take over an entire screen or expand to certain sizes, working within phones and tablets. Yahoo claims they they “encourage consumers to interact” and “outperform traditional video ads by 3:1.”

2. Smart ads – These can be optimized for each user, and could include something like hyper-targeted local offers. These initially launched way back in 2007.

3. Targeting ads – Lastly, Yahoo’s targeted ads can reach select groups or demographics “based on interest and content consumed within Yahoo.”

The focus on mobile by Yahoo is understandable since home internet penetration across Asia as a whole stands at a fairly low 24 percent, compared to mobile penetration of 74 percent – with many of those phones being used online.

Yahoo (NASDAQ:YHOO), which currently owns 41.7 percent of Chinese e-commerce giant Alibaba Group, has come to a formal agreement with Alibaba to allow it to buy back 20 percent of that stake. With Alibaba worth just over US$35 billion, the repurchase will see Yahoo net approximately $7.1 billion.

Ross Levinsohn, the interim CEO of Yahoo, said in a joint press release that, “Today’s agreement provides clarity for our shareholders on a substantial component of Yahoo’s value and reaffirms the significance of our relationship with Alibaba.” It’s not clear how long this deal has been in the works, or how much it might’ve been delayed by the troubled search engine being on its third CEO so far this year. Levinsohn also thanked Alibaba CEO and founder Jack Ma and the other key players in “this successful outcome.”

The deal also outlines how Yahoo can monetize its ongoing stake in Alibaba – which runs online shopping sites such as Taobao and Tmall – in the future. It includes a framework for the event of Alibaba Group opting to IPO, in which case “Alibaba will be required either to repurchase one-quarter of Yahoo’s current stake at the IPO price or allow Yahoo to sell those shares in the IPO.” But a listing isn’t an apparent plan for the group. Indeed, its sole listed entity, the business-to-business trading site Alibaba.com, is hoping to delist from the Hong Kong Stock Exchange this summer in a privatization move.

[UPDATE: A shareholder vote later in the week decided, with a 95 percent approval rate, that the privatization will go ahead in mid-June].

How will Alibaba raise all that cash? The joint statement notes: “Alibaba intends to finance the repurchase through a combination of its own cash resources, debt, equity and equity-linked financing. The transaction is expected to close within approximately six months.”

[UPDATE: A couple of days later we heard that sovereign wealth fund CIC might be wanting to plough in $2 billion in such "equity-linked financing."]

Also today, Alibaba’s contract to run Yahoo China has been extended for another four years. The Chinese version of the web portal and search engine is not popular in the country, its online search market share never even troubling the statisticians in a market dominated by Baidu, Google, and Sogou.

In Bandung, Indonesia I recently had a few opportunities to share my journey as an entrepreneur. Now note that I’m far from the term “successful.” But I believe I do know a thing or two about starting and leading a company.

From young crowds of student-entrepreneurs, one of the most commonly asked questions is interestingly about leadership and management. Or specifically – “How can a young entrepreneur actually lead a team?” More often than not, the folks who you work with are older than the founders. And you know, in Asia, age matters and people see that as a mark of experience.

I led a team of 30 staff at my previous startup. And while the company grew quickly, people didn’t really like me. I was kind of a dick, pushing people hard to hit target numbers. But we all have bad runs and I learned from that experience. So I moved on to found this very blog that you’re reading now. I’m not from the any school of journalism nor I have previous professional writing experience.

So we needed to hire. And folks who write well are generally smart and come with strong journalistic experience. Interestingly, the first three team members who we recruited were folks who are not just brilliant but are also older and way more experienced than myself. I have a lot to prove as a leader. I’m not the best writer among this team, nor am I the smartest or most experienced. But one thing I believe I did right was to really work my arse off to lead my guys by example.

There are many ways to communicate a message. You could write a corporate memo, talk to a staffer on a one-to-one basis or simply tell them off. But what I find most effective is to communicate by actions. Be ruthless to yourself first, work and run with your team so they will, in return, run the team with you. If you expect your team to work 90 percent harder, as a founder, you probably will have to work 120 percent harder. It’s just the way it is. But that shouldn’t be too tough if you’re really passionate in what you’re doing anyway. That said, if the founder is lazy, the rest of the team is likely to follow suit. That’s leading by example for you. Have fun, but do take care of the team’s well-being too.

[Image: catnkitten.com]

That makes sense, as Tianji has been enjoying accelerating growth, picking up new members at a rate of 500,000 per month and now clocking in at over ten million total users. That may not sound like much compared to Renren or Sina Weibo, but Tianji is actually the largest professional social network in China. Tianji reps told me that the investment would be used to bolster the service’s technology and UI, increase marketing, and improve sales performance.

It’s good to see that Viadeo is placing such importance on its China expansion (we happen to think China is pretty important too). We’ll have to see whether these big buckets of cash — I assume the investment will be conveyed to Tianji in buckets — will have an impact on the service’s growth over the coming year.

The online learning platform ChinaCast (NASDAQ:CAST) has had its NASDAQ stocks suspended after failing to file its Form 10K for 2011 on time. It has until April 10th, one week from now, to get its paperwork in order – or become yet another tarnished Chinese tech stock to be implicated in accounting irregularities and face being de-listed. Its shares are now halted at $4.24.

But ChinaCast, which listed way back in 2004, looks unlikely to come back from the brink. Paul Gillis on the China Accounting Blog reports that the firm’s former Chairman and CEO, Ron Chan, has gone off with the crucial accounting records, official seals, and local business licenses after being ousted in January. ChinaCast fired Chan after alleged financial irregularities and a failure to cooperate. A recent open letter [1] by the company to its shareholders says that “blatant disregard of [new board] directives by Ron Chan and certain other managers at the Shanghai location has the potential to put our great Company in unnecessary crisis.” It adds:

Ron Chan and his accomplices have refused to provide the necessary financial information so as to allow the Company’s auditors (Deloitte) access to the Shanghai offices in order to complete their field work and enable the Company to issue its 2011 audited financial statements within the time periods required by the SEC. Additionally, this group of uncooperative managers has improperly declined to pay outstanding invoices for the services of Deloitte and various other outside advisors and service providers.

This could prove to be yet another embarrassing failure for Deloitte in China, after being a dupe in the 2011 Longtop scandal and China Media Express mess that so scarred all Chinese stocks for the rest of the year, making it tough for any local companies to list overseas. Now this year’s audit season could could bring a new Deloitte China disgrace.

ChinacCast could avoid de-listing next week if it submits to NASDAQ a viable plan to get back into SEC compliance.

Ron Chan’s actions on holding company property are being branded as “theft” by the company, but it’s not clear if Shanghai police have become involved in this dispute. Mr Chan’s own resignation letter [2] says that he has “serious disagreements […] with the group of directors” put on the board in a recent reshuffle. He then accuses most of the newly-appointed directors of acting “to promote their own interests at the expense of the Company and its other shareholders” and of ignoring him and other executives in key decisions.

Another contentious issue complicating this matter even further is that ChinaCast uses the Chinese VIE structure to allow overseas investors to collect revenue from its local operations. But that’s a legal grey area in the country, and could be one powerful tool for Ron Chan – or any other feuding board member – if they were to seize control of it.

[Source: China Accounting Blog]

1. Ren Zhengfei (Huawei)
2. Liu Chuanzhi (Lenovo)
3. Zhang Ruimin (Haier)
4. Yu Liang (Vanke, real estate)
5. Pony Ma (Tencent)
6. Zhang Jindong (Suning)
7. Fu Chengyu (Sinopec, oil)
8. Jack Ma (Alibaba)
9. Feng Guojing (Hong Kong Fengli, exports)
10. Liu Deshu (Sinochem, energy/agriculture/chemical/finance etc.)

Further down, the list continues to be filled with tech companies. Sina’s Charles Chao is number 15, Baidu’s Robin Li was ranked 18th, and 360Buy’s Liu Qiangdong was 21st. Plenty of other tech companies also made the list, and several appeared more than once. All in all, it was a strong showing for tech companies, if you believe in this sort of seemingly-arbitrary list.

Perhaps tangentially, it was also a strong showing for old men, with just a few women making the list and pretty much everyone listed being old. At 37, 360Buy’s Liu Qiangdong is actually the youngest person on the list. Perhaps the real reason Mark Zuckerberg is in China is to inspire China’s young people to get out there and start influencing things so that they don’t miss next year’s list.

[Fortune Chinese via Sina Tech]

Markets in the US reacted positively to the Youku Tudou merger as shares in both firms sky-rocketed. Tudou (NASDAQ:TUDO), the smaller of the two Chinese video-sharing sites which is effectively being swallowed up by Youku, has just closed at an historic high of $39.48, nearly tripling its pre-announcement levels. Youku (NYSE:YOKU), meanwhile, has just ended the day at $31.85.

According to The Street and other sources, the merger is worth $1.1 billion. Investors seemed optimistic that the combination of China’s two social video sites would be a strong force, and that the deal might eventually help cut massive bandwidth and content costs. But the merger is mostly taking place at boardroom level – the two respective sites will continue as normal, and for some time will still have competing and overlapping interests, especially in terms of licensed TV and movie content that the two sites have already purchased.

When the move is complete – as we reported yesterday – the new company’s two sites will have the dominant market share among Chinese video-streaming services. Yesterday we used iResearch stats to speculate that the company would effectively dominate 49 percent of the sector. But it should be noted (and thanks to Will Moss for pointing this out) that Analysis International has different figures which suggest that Youku Tudou Inc (to be NYSE:YOKU) will dominate only 35.5 percent of the market.

Piper Jaffray analyst Gene Munster said, in a note to clients:

Overall, we view the Youku/Tudou acquisition as a net positive for the company as we believe it eliminates a significant competitor in content acquisition and will make Youku far and away the largest online video company in China.

The deal dictates that Tudou shareholders will swap their shares for those of Youku at a value of roughly $39.88. Youku and Tudou shareholders will own 71.5 percent and 28.5 percent of the combined entity, respectively.

In a special Monday conference call timed for US investors, Youku’s Victor Khoo said the deal would benefit the whole online video sector in China. And one Tudou executive said that it would result in $60 million in cost savings for the merged company.

Elsewhere on the Chinese web, netizens on Weibo reacted with some bemusement to the country’s largest ever web deal, jokingly asking which two behemoths might be next to hook up. “McDonalds merging with KFC!” quipped one; “How about Cola and Pepsi?” joked another.

This will not be the new Youku Tudou Inc logo - just our little joke.

Stop the presses! It has been announced moments ago that China’s two largest video-streaming sites, Youku (NYSE:YOKU) and Tudou (NASDAQ:TUDO), have signed a deal to merge. Or, rather, Youku will swallow up Tudou in its entirety.

It will involve a 100 percent stock-for-stock transaction between Youku and Tudou that will end up with “Youku and Tudou shareholders and ADS holders owning approximately 71.5 percent and 28.5 percent of the combined entity, respectively.”

The resultant merged company will be called Youku Tudou Inc., and will retain the $YOKU stock ticker. It looks like both the respective sites, Youku.com and Tudou.com, will go on as they are under their separate brands and URLs.

We believe the agreement between Tudou and Youku is already signed and on the books, but because they’re both publicly listed companies, the US SEC will need to approve the deal; and until that happens, we’re not likely to hear much more out of either company. We have reached out to both Youku and Tudou and will update if they’re able to say anything on the record – at the moment, they cannot speak publicly about this.

But, in the official announcement, Victor Koo, founder, and CEO of Youku, said:

We intend to lead the next phase of online video development in China. Youku Tudou Inc. will represent a differentiated leader in the online video market in China with the largest user base, most comprehensive content library, most advanced bandwidth infrastructure and strongest monetization capability within the sector. Youku Tudou Inc. will have the reach and scale to bring our users high quality content at high speeds. The combined company will have the two leading online video brands in China: Youku and Tudou.

Tudou’s Gary Wang added:

Youku and Tudou share a vision for the future of online video in China and how to deliver the best user experience possible. This transaction further strengthens our market position as Tudou brings its valuable brand, library of professional licensed content, user generated content platform, extensive user base, broad range of partnerships and expertise in mobile video.

The new company will have, far and away, a huge market share in the online video sector, representing quite a threat to the likes of Ku6 and Baidu’s iQiyi. According to figures from last year, the two companies account for about half of the entire video market themselves, with Youku at about 30 percent and Tudou at about 19 percent (see chart below)

Update: Big thanks to Will Moss for pointing out that iResearch’s Q2 figures vary greatly with Analysis’s Q4 numbers that put Youku+Tudou at 35.5 percent, as cited in The Wall Street Journal. We’ll keep the chart intact below, but do note that it’s for Q2. (RM)

There was speculation last spring that Youku would acquire Tudou. And while that didn’t materialize in 2011, these two leading online video providers in China would go on to have a colored relationship over the next year. We saw the two in a legal tiff regarding TV show content rights, and eventually we even saw Tudou block Youku’s Soku video search from indexing its content.

CyberAgent’s Net Impact Jakarta conference yesterday had a fun mixture of Japanese, Vietnam, and Chinese Internet companies. Among them was Tencent, whereby Sean Zhang, director of Tencent’s Mobile Global division, shared some background information about Tencent and also briefly spoke on the company’s plans to engage the Indonesian market.

Yes, you read that right. Tencent (HKG:0700) has set its eyes on Indonesia. In fact, Zhang shared on stage that Tencent already has a team of ten in Indonesia and is looking to hire more as it expands its operations.

Smartly, Tencent noted that Indonesia is very much a mobile centric nation. The Chinese internet giant is thus planning to introduce the QQ browser (we reviewed the mac version here) and also a Whatsapp-like mobile app, Qute, to the Indonesia market.

I was actually puzzled why Tencent chose to bring in Qute rather than Weixin, a popular group messaging app in China, owned by Tencent. I threw that question during Q&A and got an interesting answer.

Zhang explained that Weixin is mainly used by high-end smartphone users who are on Android or iPhones. While Qute can be used for feature phone users, which constitutes a large group of people in Indonesia, where they can enjoy group messaging services even without data plans. That group messaging app resembles Pinch, a solution developed by Affle.

It is a pity that we couldn’t find more time with Zhang to learn more details on Tencent’s plan in Indonesia. But both of us agreed to meet again soon. Coincidentally (or unfortunately for him), we are staying in the same apartment complex in Jakarta which makes meeting up way easier! Stay tuned!

From IFC's 'Ease of Doing Business' survey

Founded in the 14th century as Sinhapura, by King Parameswara and turned into a major trading center, in the 1800’s by Sir Raffles – Singapore has been at the crossroads of global commerce and culture for centuries. My earliest memories of the city are from the late 1980s. The nation was in its baby boomer days, young citizens were moving into HBDs high-rise towers, gleaming new infrastructure in places like Sentosa was being built, and there was a general sense of optimism in Singapore’s young population about what their country could become.

Almost a quarter of a century later, I am happy to see that Singapore has been one of the developmental success stories of our region. Singaporeans have shown the world what a small multi-ethnic island without any natural resources or military prowess can achieve through just human endeavor and visionary leadership.

I believe that the country now stands at an important juncture in its story. It could, like parts of the west, walk into the sunset with its aging population, or it could leverage the physical, social and economic infrastructure it has built, and become a symbol of economic hope for a new, confident and resurgent Asia.

The convergence of opportunities

The Economist recently wrote about how our world is increasingly divided into three socio- cultural spheres of influence [1], the Anglosphere, the Indosphere and the Sinosphere. The article quotes a study by Pankaj Ghemawat, ‘Why the world isn’t flat,’ [2] that two countries which share a common language trade 42 percent more with each other than two otherwise identical countries that lack that bond and countries with former imperial ties trade an astounding 188 percent more often. The article ends with a reminder on the enduring ties of tribes and how this will continue to shape the cultural and economic future of our globalized world in this new ‘Asian century.’

Along with its administrative advantages, Singapore’s unique cultural, linguistic and historic linkage to all three of these spheres is creating a situation where the country now offers some of the same ingredients that made cities like London, New York, Bombay and Shanghai great economic centers in the past.

I believe that the current environment in Singapore makes it inevitable that more than a few great global businesses will emerge from here in the coming years. Whether “natives” or immigrants start all of these is a moot point.

On a recent visit, I had the opportunity to attend Startup Asia, a regional summit for startups in Singapore and the ASEAN region. The international nature of the entrepreneurial ecosystem was evident from the various companies I came across, with Indian, Malay, Japanese, Indonesian, American etc entrepreneurs or key team members.

Based on the 25+ companies I met while in Singapore, the strong Web 2.0 bias of purely Singaporean teams seemed evident. On the other hand, more international teams seemed to have a greater depth of focus on addressing regional and global consumer opportunities within healthcare, security, education and environmental technology. This is hardly surprising. In a country with the cleanest air in Asia, negligibly low crime rates and radio taxis that arrive within minutes, there don’t seem to be many visible problems to solve. When there is a cross-pollination of ideas from around the region, a more robust and interesting business focus seems to emerge within the company.

In addition to government investment programs like SPRING Seeds, IDA’s Infocomm fund and numerous incubators, there seems to be an active Angel, VC and PE investor ecosystem in the country. These investors are increasingly investing in local start-ups to target regional and international markets. LPs seem to be supporting this trend eyeing cleaner corporate governance and greater exit potential of portfolio companies based out of Singapore.

On the talent front, competitive salaries ensure that graduates from respected local institutes like SMU, NUS, NTU are joined by top graduates from India and Australia. The protracted slow-down in western markets, Chinese political challenges and Indian uncertainty also seems to be accelerating the brain-gain [3] into Singapore. On this one trip alone, I met at least four seasoned entrepreneurs who were relocating into Singapore from the west to take advantage of the Asian markets.

A few hurdles to overcome

As is usually the case, all this has come at some cost. From an increasing disparity among its ethnicities, an often over-bearing government and recent distaste for skilled immigration, the city-state has some tough issues to address. Add to this its aging population and rising regional competition from cities like Shanghai and Dubai, success is not as imminent as it once seemed.

The recent push back on immigration and PR approvals [4] for qualified foreign nationals from certain countries has created uncertainty and risks upsetting the momentum that has been built up over the last decade. The last thing Singapore needs at this point is to catch the west’s economic malaise by restricting investors and entrepreneurs who want to build global businesses in the country.

Singapore’s tryst with destiny

As greater affluence and economic integration makes political divisions less relevant, Singapore has the opportunity to become a major center of entrepreneurial activity in Asia. Its efficient administration, cutting-edge infrastructure and access to international multi-lingual talent make it a safe-haven for entrepreneurs, from which to build regional and global businesses.

The IFC’s annual ‘Ease of doing business survey’ consistently ranks Singapore at the top [5]. According to Singapore’s Deputy Prime Minister Mr. Teo Chee Hean, 5000+ new tech enterprises have been registered in Singapore every year since 2006 [6]. He also shared that 61 percent of all enterprises survive for more than three years. These are impressive credentials!

It is often said that chaos breeds creativity. Asia as a whole should be a hotbed of creativity – and it is. However, a factor that is often ignored is that unsupported creativity often leads to failure. Creativity needs nurturing and support to turn it into something tangible.

At the confluence of three powerful socio-economic spheres, Singapore seems to offer the perfect environment for great ideas to convert into great businesses. It remains to be seen if this small island will seize a historic opportunity and position itself as a crucible of great ideas and businesses.

At an Alibaba Group board meeting which has just finished, the e-commerce giant proposed an offer to delist its B2B site Alibaba.com (HKG:1688) from the Hong Kong Stock Exchange after a massive stock buy-back. The proposal is that the company will pay HK$13.50 in cash per share, which is a premium of 60.4 percent over its last 60-day trading average closing prices.

Alibaba.com, which is a platform for Chinese suppliers to sell to local and global businesses, is 73 percent-owned by Alibaba Group. Alibaba.com shareholders will soon receive a paper containing all the details and be invited to vote on the offer.

Why delist at this time? In an announcement issued shortly after the meeting ended, the group’s founder and CEO, Jack Ma, explained:

Taking Alibaba.com private will allow our company to make long-term decisions that are in the best interest of our customers and that are also free from the pressures that come from having a publicly-listed company. With this offer, we provide our shareholders a chance to realize their investment now at an attractive cash premium rather than waiting indefinitely during this period of transition.

The “transition” mentioned there ostensibly refers to the major changes on the B2B e-commerce site, such as a greater international push and onsite visits and checks on its Chinese suppliers.

Just last week, shareholders of Shanda (NASDAQ:SNDA; FRA:RZP) voted overwhelmingly in favour of a very similar proposal which will soon see Shanda Interactive delist from NASDAQ and go private.

Yahoo (NASDAQ:YHOO) owns 40 percent of Alibaba Group. In a separate turn of events, it’s believed that Jack Ma and his execs are trying to buy back that share from the US search engine.

Sing it with me: Ah, ah, ah, ahh, stayin' alive, stayin' alive...

The Chinese social network Kaixin has announced its 2011 results – and despite a rough year that saw folks move towards using Weibo rather than its Facebook-like site, it was mostly good news. Guo Wei, the company’s VP, told the media that Kaixin saw its revenue rise 41 percent last year, rising to 380 million yuan (US$60.3 million).

The site, also known as Kaixin001, puts great emphasis on social gaming, and hosts – as well as produces – a number of popular casual gaming titles. Mr. Guo revealed that the site will continue to roll out new games in 2012, as well as focus more on mobile in general, and social e-commerce in particular.

Perhaps more pertinently, Kaixin also revealed its user stats: 130 million registered users and 60 million monthly active users. That contrasts with the 250 million registered on Sina Weibo, or the 300 million signed-up to Tencent’s own microblogging service. Renren.com (NYSE:RENN) remains China’s most popular broad social network.

[UPDATE Feb 17th - After reaching out to Kaixin, we're told by the company that the '60 million' figure was "in reference to a 2011 ballpark revenue figure" that is the "top-line unaudited" (in USD) number being bandied about internally, and was not meant to be applied to user numbers. It was, we're told, used mistakenly by Mr. Guo. We're also informed that Price Waterhouse will do a routine audit of the company soon. We'll update in a new post if we get some official stat for active users].

China’s social media behemoth, Tencent (HKG:0700), actually owns a significant but non-controlling stake in Kaixin, which happened last November.

[Source: TechWeb - article in Chinese]

Henry Hua, founder and CEO of IDFsoft, a startup company focusing on mobile gaming and gamification, took to the stage at the National University of Singapore (NUS) School of Computing (SoC) last Friday and shared with us certain insights as to how foreign entrepreneurs should go about entering the Chinese market.

As most of us are well aware, many foreign Internet giants tend to lose their foothold in the Chinese Internet industry. That is the sad reality, but why is it happening and why are the subsequent players not learning from the previous failures?

One famous example he cited was Google China, which ultimately came down to – quite apart from the hacking controversy that so soured relations between it and authorities – a very different view of how to let people access the web. Unfortunately, this has resulted in Google losing its market share in China and it is currently struggling to fight for its online mapping license in the country.

Similar cases do happen to other Internet giants such as eBay, Amazon, Yahoo, MySpace, and Groupon. So what are the various factors that contribute to all their failures? Mr. Hua, in his talk, identified these seven areas:

Government and Policies Makes Foreign Entry Impossible

Henry shared that especially for the Internet industry, almost no sole foreign investor – without a joint-venture (JV) partner; more on that later – is able to obtain the mandatory Internet Content Provider (ICP) license. These tend to be restricted so as to prevent Chinese citizens viewing some ‘sensitive’ material from foreign websites.

Hence, one of the most common approaches done by most foreign entrants is partnerships, such as Groupon did with Tencent.

On top of which, one would need many business licenses in order to operate in China. Additional business licenses are very high barriers themselves because one would need to understand which license is required for which side of the business operations. In Henry’s opinion, the reason why such licenses are being set up is (partly) to raise the barriers to entry for foreigners.

Protection for Innovation and Intellectual Property is Weak

In China, there is hardly any protection for innovation and intellectual property (IP). In fact, you would find that there is no protection for business models and user interfaces in the Internet businesses. We’ve seen a couple of cloning examples and undoubtedly the Internet has better facilitated the cloning process, where source codes could be easily ripped and copied from pages and apps.

So-called ‘copy-to-China’ is still the main business model of the China Internet market. If there is a successful site or service in the West, it would be replicated, built, and localized in China. With such a well-oiled process in place, it makes it pointless for foreign companies to enter when their business models could be easily replicated in China.

Some say the JV between Groupon and Tencent - called Gaopeng - is an example of a poor partnership: Tencent has its own rival daily deals site, and little reason to want Groupon's effort to succeed.

Poor Partnerships

In most cases when a foreign company approaches a local company to set up a joint-venture, they approach with different agendas in mind. For the foreign companies, their main aim is to obtain the license and learn how to run a business in China. On the other hand, the local partners would want to obtain the transferable skills and learn the technology from their foreign partners.

However, once they achieve their goal, they want each other out of the JV. The relationship and trust between the two partners weakens and breaks. So that is why some businesspeople say the JV is the kid that brings bad luck to the ‘marriage.’

Problems with being a Global Organisation

Often in big organisations, decision making tends to be very slow. They have to go through levels and levels of red tape before making a decision, which slows down the entire implementation process. This makes them less agile than most startups.

That aside, foreign Internet giants are always aiming to keep to global standards but fail to recognise that the China market itself is very different and fragmented. One cannot plainly copy the common practices that they use in big mature markets and implement them in the Chinese market.

Inability to Attract Top Chinese Talents

Instead of companies choosing their employees, now the choice is given to top talents. In recent years, working in the government sector was the favored choice for many top talents within China. Why so? It gave them power and status being in government and state-owned companies. [And very long lunch breaks. -Ed].

Also, Henry states that it is a common misconception that labour in China is cheap. This is not true, especially for highly sought-after skills. These days, top talents are paid according to international standards and receive global salaries.

How to Build Success in China?

Henry advises that in order to build a successful company in China, you have to first build strong government relationships which will help pave the way for the subsequent operations.

Apart from building strong relationships, you need to play by China’s market rules. If your website mainly thrives on user-generated content, put in a dedicated team to regulate the content being placed on your site. Remove any inappropriate content to prevent your site getting blocked. That’s the oft-misunderstood process of self-censorship that goes on on the Chinese web – it’s the web firms themselves that do most of the policing.

Of course, where is your sincerity when you claim that you want to build a product for the Chinese market and you do not even have offices and staff placed in China? Make a long-term commitment: build a local team, understand the various cultures in numerous cities in order to successfully localize your product. Develop trust between foreign and local employees, because locals know how to better localize your product that you do.

Advice For Foreign Entrepreneurs

Henry advises that if one is sincere about doing and starting a business in China, be based in China. If possible, work in a startup to understand the culture before starting your own business.

For aspiring entrepreneurs who are still students, he advises that one should start his or her career in a China startup, though he does not recommend studying in China. Yes, undoubtedly it allows you to understand the culture and language, but one will never learn how to overcome the struggles startups will face throughout their entire startup journey.

Starting a business in China is never easy, but it is important to learn from why foreign companies fail and avoid their missteps, so the route to building a successful startup in China will be much easier.

Image: playupl.com

From time to time people would say that here in Singapore or Southeast Asia we needed a big money exit – you know, like X acquires Y for $100 million. That would inspire folks to step out and build businesses, because let’s face it, who wouldn’t want to get out with bags of money.

But the idea of building a business to sell kind of sucks [1]. While there’s nothing wrong selling a business, the mentality of starting a business and gearing it up to get acquired one day isn’t quite right. There’s no way to guess who your acquirers might be and there’s no tried and true way to ensure you’ll get acquired. You can’t force your potential acquirers to sign any cheque. Instead, your time should really be spent thinking about building a solid product that serves a real need, and at the same time able to pay your bills.

Entrepreneurs in the tech circle can probably pick up one good lesson from the traditional brick-and-mortar businesses. Entrepreneurs who are running cafes, eateries, or milkshake stalls are very focused on making their milkshake taste right and very focused on breaking even as soon as possible. There isn’t any hint of thought that one day their businesses would get acquired. I had a rough ride building a educational center for five years so I understand what it is like to run a traditional business. The fixed costs are unbearable, especially for businesses which are constrained by space. Just the rental fee alone would probably dominate up to 40 percent of your total cost. So everyday our team was trying our best to make full use of the rental space to drive revenue, and at the same time provide great value to the customers.

On the other hand, entrepreneurs building digital products often don’t incur such lofty fixed costs. It is also relatively easier to receive investment which allows entrepreneurs more time to get their product right and spend less time wondering how to make money. We all read the headlines that say this startup gets acquired or that gets acquired which make young entrepreneurs millionaires in a matter of years or sometimes even months.

Such external influence might have led some people to have a sort of misguided motivation to build a business. Perhaps we all can pick up a lesson or two from entrepreneurs who run traditional business. They may not be cool in your eyes but their focus on getting the product right and the urgency of reaching their break-even point as soon as possible is admirable. At the end of the day, revenue and profit is the common standard people use to judge your business. And to generate profits, entrepreneurs have to build something that people want to use and are willing to pay for. Your customers pay your bills, not your potential acquirers (I mean they could but what are the chances?). So the mindset should be to solve a problem with your product, serve your customers well, and build a sustainable business. Only then will your company have value and you can be in a more comfortable position to decide whether to continue building your empire or cash in and move on to your next venture.

In a sign of growing hostility amongst video-streaming services in China, three such sites have reportedly blocked access to a video search engine owned by the market leader, Youku (NYSE:YOKU). Its Soku.com search feature indexes and lists videos from across the Chinese web, including those of its rivals. But Tudou (NASDAQ:TUDO), LeTV, and Sohu’s (NASDAQ:SOHU) video portal have all teamed up to tackle Youku over what they claim to be unfair search results on Soku.

And so the Tudou, LeTV, and Sohu TV sites have blocked Soku from indexing its content, perhaps hoping users will just come direct to their own sites to search for their licensed TV shows and movies. Or use Baidu.com (NASDAQ:BIDU) instead. The sites seem to be risking losing traffic from Soku, but then hope to gain the advantage of weakening the market leader’s product. In response to this, a Youku representative told the Chinese media that this “closed door” method made no sense. The rep added:

Tudou is, in the 21st century, taking an 18th century style approach with its isolationism, which abandons the user’s needs.

A search today for a very popular Taiwanese show – the one at the centre of a still unresolved copyright spat between Tudou and Youku – shows no results for Tudou, which also has rights to the series, and so its blocking of Soku seems to be working. It’s not clear how it’s being implemented, as the tudou.com/robots.txt file does not show it to be disallowing any third-party ‘web spiders’ to crawl the internet and index content.

Do you have a search warrant?

Soku launched last May and was designed by Youku to be an impartial video search engine with an open API and social sharing features.

The whole situation is similar to the e-commerce search controversy last year which saw Alibaba’s etao.com product search engine being blocked by initially just 360buy, and later by a few other rivals too. In both cases, smaller sites are rebelling against being indexed by the market leader in each sector, feeling that it might be a better strategy to battle the giant rather than dance to its tune.

We’ve contacted both Youku and Tudou to comment on the situation, and will update the post if we hear back.

[Source of quotes: QQ Tech (article in Chinese)]

A new Chinese name for Tmall.com - and now it's accepting ideas from the public for a new logo and mascot.

Alibaba’s B2C e-commerce site, Tmall.com, which stands for Taobao Mall, is changing its Chinese name in a bid to give itself more distinctive branding. Starting next month, it’ll be called ‘Tian Mao’ in Chinese, which roughly means Sky Cat, and will have a new logo and mascot to match. But the URL – and its English moniker – will remain the same.

Tmall was launched on its own domain in November 2010, and last summer was spun off as a separate company. It grew from the wildly popular Taobao C2C shopping platform, and its original name came from there as well. But now it seems that Alibaba feels there’s not a clear enough distinction between the two, hence the need for a fresh name. In the fast-growing B2C sector, Tmall is the market leader but facing growing pressure from 360Buy and other specialist online malls.

An Alibaba spokeswoman told PO:

We believe the name 天猫 portrays the platform’s characteristics and what the brand represents: trendy, high-quality and fashion-forward.

Last September, the site opened its platform to rival sites, and it also hosts numerous branded stores.

In a notice on the site, in both English and Chinese, it says the company is now letting anyone “pitch for the new branding system.” It explains:

All kinds of organizations and individuals are welcomed to participate – design firms, individual designers, students from art schools and other amateurs all can submit your works and take part.

It runs from today until February 14th.

Hopefully there will be prizes given, because Tmall today announced that it’s rolling in cash, having hit 100 billion RMB (US$15.84 billion) in sold items on the site in 2011 – a figure 3.5 times greater than it achieved in 2010.

360Buy.com, China’s second-largest B2C e-commerce site, has acquired Minitiao.com, a specialist online mall for imported Japanese products. It gives 360Buy – also known as Jingdong Mall – a whole new range of supply channels from Japan for items such as clothing and cutesy toys.

The acquisition of the small Chinese company reportedly took place earlier this month but is only now being made public. The financial details have not been revealed, or whether the site will continue at its own domain or be absorbed into the 360Buy domain.

Minitiao gives 360Buy a boutique-like range of stylish inventory to add to its arsenal of product categories in its ongoing battle against B2C market leader, Alibaba’s TMall.

It also points to 360Buy having a more global outlook for its sourced products, with rumors that the company – which might go for a US IPO later this year – is aiming to have Korean and Japanese collections for various product categories – especially clothing, shoes, and home decorations.

360Buy looks to be continuing its aggressive growth strategy into 2012 having confirmed that it’ll hire 25,000 new staffers during the course of this year.

[Source: DoNews - article in Chinese]

Chinaccelerator's funky offices in Dalian, Liaoning province - far from the usual startup hubs in pricey, overcrowded Beijing or Shanghai.

We’ve seen recently that Beijing, Shanghai, and Guangdong are the three main hubs for startups in China. But due to the rising costs of labour and office space, smaller cities – known as second-tier ones – are increasingly attractive to young tech companies. And so 2012 could see a trend in which startups scatter across China to places where rent, wages, and living costs are substantially lower – and yet which still offer plenty of talent to hire and relatively quick broadband speeds.

The Chinese site Techweb illustrates this today by highlighting the likes of Pan Shi-jian, who is based in Changsha, in central China’s Hunan province. Not normally an area associated with tech or startups, he has nonetheless set up a regional real-estate portal – at loupan.com – and now encourages other entrepreneurs to establish web companies in their own provinces, believing that they collectively have more potential than the likes of Beijing, Shanghai, and Shenzhen. Other second-tier cities which look destined for startup booms include Hangzhou, Nanjing, Chengdu, Chongqing, Dalian, Tianjin, and Yinchuan.

The report also points out that a startup’s costs will have increased by about five percent in 2011 compared to the previous year.

So what can second-tier cities quantifiably offer? Primarily, office rents or purchase prices will be about half of those in China’s top-most few cities, bringing down overheads considerably. Labour costs will be slightly lower, though certainly not by half. That creates a more attractive situation for startup entrepreneurs and employees to have a better quality of living in cheaper cities where they’ll be better able to afford to buy an apartment or run a car. And if the move involves departing Beijing, you’ll also get air that’s a lot more breathable.

The folks at Chinaccelerator seem to appreciate all this, and they do their startup accelerating from the coastal city of Dalian in north-eastern China. Here’s a slideshow of its office space – all that room would cost an insane fortune in Shanghai.

There’s publicly available government data, Techweb says, that about half of all employees in tech companies in Wuxi – a second tier city just outside of Shanghai – have had working experience in a first tier city, so people seem keen to move to wherever they get a better life deal. But note that that relates to all tech-oriented companies, not just startups.

Currently, by looking at the database of Chinese startups on 17startup.com, we see that only 15.7 percent are based outside of Beijing, Shanghai, and Guangdong provinces yet inside the mainland. But that figure could well rise by the end of 2012.

[Source: Techweb - article in Chinese]

Nokia China employees going back to work this week, after a short break for the new year, will find they have a new chief executive in the form of Gustavo Eichelmann (pictured right). Based in Beijing, he will have the formidable task of turning round Nokia’s (HEL:NOK1V; NYSE:NOK) sinking business in China, where tens of millions of Android devices and iPhones are now dominating smartphone usage.

Eichelmann has had plenty of time to prepare for the role, having been officially appointed months ago. It came after the shocking departure of Liang Yumei, the senior VP for China, Korea, and Japan, earlier this summer. In the interim, Colin Giles, Nokia’s global head of sales, had been keeping the seat warm.

Although Nokia is still fighting hard for the massive market for smartphones and cheaper ‘feature phones’ in China – such as working with local startups on cool promos – the Finnish company had an awful 2011 in China, with declining local sales reaching the point that some distributors were refusing to take on new inventory.

For Eichelmann, there are both new challenges and new opportunities in 2012. Firstly, Nokia has totally revamped its lower-end feature phones – such as the new Asha series – to bring some smartphone-like features and aesthetics onto devices costing just US$84 to $164. (A strategy aimed at India, Indonesia, and other developing regions too). Secondly, there are signs that Microsoft’s (NASDAQ:MSFT) Windows Phone 7 platform will launch in China in this new year, giving Nokia a more serious challenger to popular iPhone and Android devices than it can muster with its aged Symbian mobile OS. To that end, there are rumors that Microsoft is prepping some retail channels for WP7 distribution, and that Nokia is adapting the WP7-powered Lumia 800 for sale in China later this year.

We’re not sure how much Eichelmann is getting paid in this new job, but the Nokia man sure has one of the toughest jobs in tech in the region.

[Source: Techweb - article in Chinese]

It has never been a smooth ride for Ku6.com (NASDAQ:KUTV), which is currently China’s fifth-largest video-streaming and sharing site. And now, as its stock sinks to below US$1 per share, some staff are facing job losses, which are being portrayed in some sections of the Chinese media as “violent cuts” to its staff and operations.

Ku6 – which was acquired by Shanda Interactive (NASDAQ:SNDA) in 2009, but has proven problematic and unprofitable for Shanda – insists it’s just restructuring. The company says that its games and music video channels, which were based in Shanghai, will be moved to Beijing HQ along with staff who wish to relocate. The Shanghai office will close. Some staff are, however, being let go – with Ku6 stating that they’re voluntary redundancies – but no figures have been given. Ku6’s investor relations website says that it has 610 employees in total.

Despite being one of China’s first video sites at the turn of the last decade, Ku6 was soon superseded by Youku (NYSE:YOKU), Tudou (NASDAQ:TUDO), and Baidu’s (NASDAQ:BIDU) Qiyi.com, in terms of market share in this sector.

As a result, it has also struggled to keep pace with the maturing video market in China in which Chinese consumers have been demanding increasingly costly licensed TV shows – the rights to which can now cost as much as US$100,000 per episode.

Ku6 listed on NASDAQ in 2005. Its net loss in Q3 2011 was $13 million, about on a level with its losses at the same period in 2010. Its stock is currently at its lowest ebb, closing before the weekend at 98 cents per share.

[Source: DoNews - article in Chinese]