That would certainly seem to be a denial. But interestingly, reporters got a somewhat vaguer text from Sogou CEO Wang Xiaochuan, who told them simply that nothing had yet been finalized. On his microblog account, Wang has denied rumors that he’s slated to join Alibaba. And Sohu CEO Zhang Chaoyang stressed earlier this week that the company has enough cash in the bank that it doesn’t need to put Sogou up for sale.

None of these statements have done much to quash the rumors, however, because it seems no one is willing to come out and directly say: “We’re not selling (or buying) Sogou, period.” Whether or not a deal is ever finalized, the lack of absolute language in all three statements suggests that there is, at the very least, some consideration of an acquisition deal going on behind the scenes. And with Qihoo hoping to pose a more serious threat to Baidu, and Baidu wanting to prevent that, it certainly makes sense that both companies would be looking at Sogou and other minor search players as potential acquisitions to bolster their search offerings.

For now, though, we’ll just have to wait and see. Perhaps someone will outright deny the rumors, or perhaps in a few weeks or months we’ll find out that there was some truth to them when Sogou announces a new investment or merger.

(Tencent Tech via TechWeb)

Sina’s report cites a “knowledgable” source in “investment circles” as saying that Sogou is looking for a buyout, and the three aforementioned internet giants have jumped at the chance. According to the source, Qihoo has offered a $140 million deal that includes cash and stock options, Baidu is offering more in cash (he doesn’t cite a specific sum), and Tencent is mostly in the mix because it wants to be sure Sogou doesn’t go to Qihoo.

Furthermore, the report suggests a difference of opinion high in Sogou’s ranks, with CEO Wang Xiaochuan wanting to take the Qihoo 360 deal while board chair Zhang Chaoyang would prefer to sell to Baidu. But as Zhang has reportedly been taking more personal time of late, Wang has been taking the front seat in the proceedings, and Sina’s source says, “it’s a bit more likely that [Qihoo] 360 will win.”

Of course, this is still just a rumor, even if these kinds of rumors do seem to be coming true a bit lately. We’ve contacted Baidu, Qihoo 360, and Tencent for comment, and will update this story if we hear back, but we don’t expect much as most companies have a general policy of not commenting on rumors. All three of them declined to comment for the Sina Tech story (although apparently none of them denied it outright, which is interesting). Sogou CEO Wang Xiaoquan has called the rumor “unreliable” on his Weibo account.

By some counts, Sogou has the third-largest market share in Chinese search, so acquiring it would be a big boost for Qihoo, which has been struggling to close in on Baidu after its initial grab of more than 10% of the market shortly following its launch. But Sogou’s real value may lie in its widely-used Chinese input method software. The company has already begun to integrate search into its input method in a way that I think is potentially very significant. New applications of that concept could be a nice — and very valuable — bonus that comes along with the boost in market share of buying Sogou.

(via Sina Tech, image deleted)

(Photo: Associated Press)

Shortly after this weekend’s earthquake near the Chinese city of Ya’an in Sichuan province, which has so far claimed nearly 200 lives with many more still missing, a number of leading web companies rushed to help with the disaster response by setting up online ‘people finder’ message boards.

Here are the five main online resources:

Google’s Person Finder

This is a well-known site in such an emergency, with buttons for “I’m looking for someone” and “I have information about someone”. Google’s dedicated Sichuan quake boards currently have 1,100 records, though it’s not clear how many of those are made up of people looking for missing folks, or actual bits of information about a lost/found individual. The Google site is also nice enough to link to several resources from other web companies, such as the ones listed here.

Baidu Zhidao for Ya’an

Baidu’s Wikipedia-esque Zhidao site now has a dedicated messaging board for the quake-hit area. In contrast to Google’s more closed-off (privacy-oriented?) Person Finder, the Baidu boards are open to anyone to read through.

360 Search for Ya’an

Qihoo’s board emphasizes the names of missing folks in very large type, making it easy to browse through.

Sohu Public Service for Ya’an

Major web portal Sohu has a Google Person Finder-like site (pictured above) split into “want to find” and “want to help” buttons. It also features an open board with Pinterest-style notes for each person being sought. So far, over 7,600 ‘missing’ posts have been made, but many could be duplicate names.

Panguso Post-Quake People Finder

State-run search engine Panguso has had the sense to make this site mobile-friendly, as many people will be turning to their smartphones or feature phones and using 2G or 3G in an area where many buildings and internet lines have been destroyed, or where electricity has not yet been restored.

Earlier today we saw smartphone rivals Apple and Samsung both make sizable donations to post-quake relief efforts. Social sites like Sina Weibo and the messaging app WeChat (known as Weixin in China) are also playing a part as people in the affected area use lots of web and mobile resources to communicate or find information.

Follow the updates on the China Daily live blog.

Sohu founder and CEO Charles Zhang is, by the standards of most tech entrepreneurs, doing very well. His startup has long since blossomed into a full-blown tech giant, and success has brought him both prestige and heaps of money. Yet in a recent interview on Yang Lan One-on-One, Zhang told the host that he is actually miserable:

I think there’s something wrong with me. I truly have everything, and yet I am so miserable. Happiness is totally unrelated to how much money you have.

Zhang has reportedly removed himself from the day-to-day operations of the company and has stayed out of the public limelight (for the most part) over the past year. In the Yang Lan interview, he revealed that this was because his anxiety was making it impossible for him to work. He also said that he had found his success was changing him:

Successful people often have this need to do things their own way. [After I became successful] I became more of a perfectionist; I wanted to control the outcome of everything, and even felt that I could live to the age of 150.

More details and quotes from the interview are here for those who can read Chinese, but instead of speculating about Zhang’s mental state, I just want to highlight a couple of the things we can learn from this interview.

Many of us are entrepreneurs searching for that big breakthrough or investors working hard to turn money into more money, and Zhang’s reminder that money cannot buy happiness might be cliche, but it’s important to remember. Of course, that’s not to say that having lots of money isn’t nice (or at least I imagine it’s nice; if anyone wants to send me a huge sum of money I’d be happy to give that lifestyle a try and review it here). But if money is your endgame, it’s possible you’ll end up like Zhang, standing at the top of a pyramid and wondering why bothered to climb it in the first place.

The other thing Zhang’s interview reminds is that success can and does change people. Maybe Zhang’s issues are deeper than that and maybe they aren’t — I’m not qualified to speculate on anyone’s mental state one way or the other. But it’s important to keep an eye on your own psyche as you move through the entrepreneurship process and make sure that you’re OK with any changes that are happening. Becoming more of a perfectionist might be a good thing to some people, but others may want to avoid becoming a domineering control freak (and let’s be honest, there are plenty of startup founders who fit that description even before they’re successful).

We wish Zhang the best, as we do to all entrepreneurs at every stage of the game from bootstrappers to billionaires. At the same time, though, I wish that everyone in the startup scene would spend a little more time thinking about their own definitions of happiness and the effects being an entrepreneur can have on their psyche. We spend so much time talking about what technology is innovative, and yet many of us are chasing the exact same goal: make a globally relevant product and get rich. Perhaps sometimes we should approach our own thinking patterns with the same spirit of disruption and innovation we bring to hackathons and tech conferences.

(image source)

Typing on the keyboard is probably the most fundamental way we interact with any computer, or for that matter almost any digital device. Voice recognition and dictation software might replace it someday, but as any Siri user knows, we’re definitely not there yet. And for Chinese users, input method software is simply a part of the typing process. Because Chinese is written in characters but keyboards tend to use the Latin alphabet, to type anything in Chinese you need software that interprets the phonetic sounds the user types (for example: baidu) into Chinese characters. But of course, many phoentic sounds have multiple possible interpretations, which means that input method software needs to include a graphical user interface (GUI) so that users can choose which baidu they meant (For example, 百度, 拜读, 摆渡, 白都, 败毒 and more would all be typed as baidu).

What that means is that Chinese users are used to clicking things from a GUI as they type. These days, many input methods have incredible predictive text algorithms that make it possible to type long sentences and have the correct characters filled in automatically, but no algorithm is perfect (or knows every proper noun) so some user intervention is always necessary. This is just a part of everyday computing for Chinese users on a more fundamental level than even, say, using a web browser.

How Sogou’s search input method works

So why is Sogou’s implantation of search results into its input method system so significant?

It moves the search war closer to users. Until now, Baidu, Qihoo, and Sogou have been battling for search supremacy mostly within the confines of the web browser. Now, Sogou has brought the war to users’ desktops, their word processors, and even competitors’ websites. If you allow it to, Sogou’s input method search will display the search results you’re looking for even when you’re typing in Baidu.com’s search bar. And since users are already in the habit of interacting with and clicking things in the input method software’s GUI, getting them to click on relevant search results isn’t that much of a stretch. If Sogou’s input method search catches on, Baidu and Qihoo may be forced to produce similar offerings. But neither company has nearly as strong a user base for their input method software as Sogou (in fact, Qihoo doesn’t have any input method product at all). By redefining the battlefield, Sogou has put itself in a strong position — at least, if it gets its users to adopt the new “smart” version of its software.

It feels like a natural extension of language input. When I read about this new feature, I’ll be honest — I was expecting it to be awful. The prospect of having search results pop up as I typed just seemed intrusive and annoying, and if it wasn’t my job, I probably wouldn’t even have bothered to download the software and try it out. But when I did try it, I was very pleasantly surprised. Because it gives you a great deal of leeway in defining where and how the search results pop up, it is simultaneously unobtrusive and convenient, and I could easily see it becoming a regular part of users’ computing experience. After all, why bother booting up a browser when you can just type the search term and see the results you want immediately, no matter what program you’re using?

Search is just the beginning. Sogou’s current implementation of input method search is limited to specific kinds of searches, but it doesn’t have to stay that way. In fact, it doesn’t have to stay search-oriented at all. Imagine simply typing the name of a brand’s product and then purchase that product directly from the desktop in the input method GUI. Or typing the name of a friend from inside any program to bring up a video chat with them, or even share your screen with them. The possibilites are virtually endless, and in moving into input method search, Sogou may have taken us one step closer to a world where users interact much more quickly with the web by not using a browser at all.

Of course, Sogou’s new search input method could just as easily lead to nothing at all. As it’s not a mandatory update to Sogou’s input method software — at least, not yet — many of Sogou’s users may not even know about it, and plenty who do know about it may choose not to download it because it sounds intrusive and pointless. And to be clear, while this product is cool, it isn’t going to change the world by itself. But is it the first step down a new path towards a new way of interacting with the internet? Call me a dreamer, but I think it could be.

China’s Sogou has been a player in the search market here since the early days. At present, it commands around 8 percent of the search market share, which makes it one of China’s top three search engines but still puts it way, way behind the dominant Baidu (which has more than 70 percent of the market). But Sogou does dominate the Chinese input method market, with reportedly more than 100 million users across its mobile and PC input methods.

Yesterday, Sogou announced an update to the “smart” version of its PC input method software that seems to signal the company is placing increased importance on search. Users of the latest version of the smart input method (which you can get here) will find that when they type certain terms, relevant search results pop up directly below the character selection bar. Sogou says this will save users massive amounts of time, as where previously they needed to open a browser and search for certain kinds of content, now they can get direct links from anywhere on their computer by simply by typing their search terms. Here’s how it works:

These results don’t pop up for every word you type, though, it only happens for certain kinds of terms: movie and TV titles, songs, app titles, e-services like banking, public transportation, the weather, etc. So if you have the Sogou smart input method installed, every time you type “weather,” a little window will pop up, showing you the local weather. Every time you type the name of your favorite song, links will pop up that allow you to listen to it directly from the input method without even having to open a browser.

If you think that sounds potentially distracting, you’re right, but luckily Sogou allows you to select what environments these results will pop up in during the installation process, so if you don’t want to see them while you’re working in Microsoft Word (for example), you don’t have to. You can also choose to make the pop-up results optional so that they only show up if you click the little light bulb next to the term you’ve typed. Of course, that adds an extra click to the process, but it makes the whole thing less of a distraction while still keeping it pretty convenient.

It’s certainly a time-saver, and it could funnel a lot of Sogou’s users through Sogou search channels if it’s widely adopted. This could be damaging to Baidu (and to its less-popular search competitor Qihoo) because many of its top searches are for entertainment or other content that might be covered by the Sogou app. But at present, the new smart feature is a voluntary add-on, and it remains to be seen how widely it will be adopted among Sogou’s user base.

I downloaded the new input method to take it for a test drive and was reasonably impressed. Because I had set it to pop up only when I clicked a button, the search results were never intrusive, and sometimes it was a bit faster than searching conventionally would be. With that said, there did seem to be a few bugs in the system. When I typed “weather,” it gave me Beijing’s weather, which isn’t particularly helpful since I am about 7,000 miles away from Beijing.

Sogou takes a second to find results when I type ‘train tickets’ into the Baidu search bar.

Also, because the search is designed to redirect you to Sogou products, sometimes it actually adds a step to the process. When I searched for “Miss Puff” (which is a Youku original TV show) and clicked on the search result for the show, it took me to a Sogou page that required me to click again to be redirected to the Youku page where I could actually watch the show. But when I searched “Miss Puff” on Baidu, there was a direct link to the show’s fourth season on Youku right on the top of the first page. Of course, this issue is likely to apply only to content that Sohu and Sogou don’t own the rights to, so for many searches, using Sogou’s input method search really is faster.

So will searching directly in input-method software catch on? That remains to be seen. Baidu does have its own input method software, so it could easily implement a similar feature set (and I will be surprised if it doesn’t), but Sogou has a bigger user base. Although the smart IME currently only works for Sogou’s PC input method, I wouldn’t be surprised to see a similar mobile product rolled out soon as well. It’s starting to look like this could be as interesting a year for search in China as last year was.

China’s tightened internet controls were passed into law earlier today. As well as requiring broadband and mobile internet providers to have full ‘real name’ details of their customers (which pretty much happens already), the new 12-article law also mandates how all web companies operating in China must control what people post. That effectively legalizes the deletion of posts that contain what authorities deem to be “illegal” content or information.

Again, that’s close to what happens already in practice with the blanket self-censorship and fast-paced moderation that goes on on the Chinese web, as seen very clearly on the Twitter-like Sina Weibo. And so the new law will criminalize companies who do not censor the web with the kind of speed and efficiency that the law now dictates. That has huge implications for social companies like Sina (NASDAQ:SINA), Tencent (HKG:0700), and Renren (NYSE:RENN), and search engines from Baidu (NASDAQ:BIDU), Sohu (NASDAQ:SOHU), and Qihoo (NYSE:QIHU). In fact, it’s an extra strain on the whole internet sector in the country, with possible extra costs involved in the already weighty and arduous practice of removing dissent, as well as other genuinely illegal acts on the web.

It’s surely only a matter of time before one Chinese web company is held criminally responsible for content posted on its service. And what will happen then? A fine? The jailing of the relevant member of staff?

Using Xinhua’s presumably official version of events, the news agency summarizes this aspect of the new law:

Service providers are required to instantly stop the transmission of illegal information once it is spotted and take relevant measures, including removing the information and saving records, before reporting to supervisory authorities, the decision says.

It empowers supervising departments to take technical and other necessary measures to prevent, stop or punish those who infringe on online privacy, requiring relevant service providers to give support during investigations.

There are some positive aspects to all this, as it also puts into law measures that, Xinhua says, “will protect digital information that could be used to determine the identity of a user or that concerns a user’s privacy.”

But as with all new web controls in China, a country where the web is already massively locked down, many will worry that the tightened legal framework will be used to identify people who post online some ‘sensitive’ information, such as – to take a topical example – evidence of corruption among officials.

In practice, a lot of this is happening already, as with recent real name requirements for microblogs like Sina Weibo, or the long-standing need to show ID when buying a mobile SIM. For now, a lot of questions remain unanswered, such as how this affects wifi hotspots, or people who rent homes and whose broadband account will be in the name of the home-owner – and a lot of other issues and unknowns.

Last year it was Chinese search engine Baidu that was removed from the U.S. Trade Representative’s (USTR) report on major piracy offenders, and this year it’s the turn of the e-commerce store Taobao to be scribbled off the naughty list.

The USTR 2012 list of “notorious markets” for piracy and counterfeiting has just come out, and it cites “positive action” by Alibaba-owned Taobao – a huge online marketplace where anyone can be a shopkeeper – “which was included in previous Notorious Markets lists for the widespread availability of counterfeit and pirated goods in its electronic marketplace.” The report goes on to urge Taobao to streamline its takedown procedures so as to stay off future lists as well.

Alibaba’s Group’s VP of international affairs, John Spelich, said this morning:

We would like to thank the USTR for the acknowledgment of our efforts. The IPR issue is a long march in China, this is a milestone and it is only the beginning.

Still plenty of counterfeit goods for sale: A fake LV bag on Taobao today. Click to enlarge.

I’m surprised that fashion counterfeiting was not mentioned more fully in the new report, and it only takes a few seconds of searching on Taobao to see items like this fake Louis Vuitton handbag (here) for a mere 78 RMB (US$12.50).

Perhaps it’s because the Hollywood lobby has a lot more power than the fashion industry, and so pirated DVDs are more of a worry to the USTR (allegedly) than fake handbags. Back in September, Taobao signed an agreement with major US movie studios to remove infringing content being sold by Taobao vendors. [UPDATE one hour later: An Alibaba representative points out that Taobao works closely with the International AntiCounterfeiting Coalition (IACC) which represents a lot of firms, including major fashion brands].

Also removed from this year’s list was Sogou, the search engine run by Sohu (NASDAQ:SOHU), which “made notable efforts to work with rights holders to address the availability of infringing content on its site.”

New Pirates

But the 2012 USTR list saw some newcomers, including Chinese P2P and media-streaming site Xunlei. The report says:

This Chinese-based site facilitates the downloading and distribution of pirated music and movies, not only through deep-linking services, but also by offering cyberlocker facilities and through its own innovative high-speed P2P file sharing system.

On the plus side, Xunlei made something “innovative.”

Back in October of last year, Xunlei cancelled a planned US IPO, which was actually scuppered by a large part of the company being based on piracy. This USTR blacklisting of Xunlei puts the company under even more pressure if it wants to raise funds to pivot into a legitimate video-streaming and media site, which it is trying to do in some areas.

Also on the list is the Xunlei-owned site Gougou, which deep-links to lots of pirated content all across the web. Its Gougou.com site is offline at the moment.

The full USTR 2012 report is here (PDF download).

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]

Chinese web users racked up over 4.1 billion hours of collective streaming of web videos in August, according to a new report from ComScore. That time was spent watching 29.75 billion internet videos in total, seeing a mix of user-generated content, licensed TV serials and movies, and perhaps some pirated stuff thrown in there as well.

The summer’s stickiest video streaming sites in China were:

• 1st: Youku (NYSE:YOKU) used for 698 million hours of web video viewing
• 2nd: Baidu’s (NASDAQ:BIDU) iQiyi for 569 million hours
• 3rd: Tencent’s (HKG:0700) V.QQ.com for 474 million hours
• 4th: Sohu’s (NASDAQ:SOHU) TV.sohu.com for 406 million hours
• 5th: Tudou (NYSE:YOKU after its merger with Youku) for 291 million hours

And then a gaggle of smaller competing sites took up the rest of the viewership, such as Xunlei in 6th and PPLive in 7th.

Compared to the same metrics from ComScore for January 2012, we see the total viewing time for one major sites dropping a lot – yes, you, Tudou. But nearly all the other sites grew their audience time in this period, notably Qiyi, Tencent’s video site, Sohu TV, and Xunlei’s web vid offerings.

This solid amount of online time indicates why brands must effectively target China’s web video sites so as to catch the attention of the nation’s young, upwardly mobile, middle-class consumers; they’re more likely to watch, say, a Korean romantic drama on Youku than spend his/her evening watching rather dull state TV which permits very little overseas or challenging programming. Little wonder that the past year or so has been marked by an explosion in the cost of licensed TV and movie content, seeing the rights to a Chinese serial drama hit almost $100,000 per episode.

Looking at the movie pages for both Youku and Tudou, we can see that there is now no trace of Japan among the listed countries. You can see a screenshot of Youku’s movie page listed below, comparing the country list for today with what was on site before [1]. We’ve reached out to Youku to find out more, and we’ll update if we get any comment.

Baidu-owned Qiyi did the same, as you can see below. The left is the country listing on Qiyi’s movie page today, and the right is a cached copy from before.

As for the other big players in the Chinese online video space, PPS.tv has also removed Japan from its country listing on its movie page, and Xunlei looks like it might have as well, although I can’t obtain a cached copy to check if Japan was previously listed.

Among the major video sites, Sohu appears to be the only one (let me know if I’ve missed any) which still has Japan listed.

Despite the fact that anti-Japanese sentiment has always been strong in China, Japanese video content has always been extremely popular on these online video sites. It’s my guess that none of them wants to remove Japanese content from their sites, and that this category removal has been done to appease national censors.

But does it mean anything?

You can still find Japanese movies on Youku, just not as easily

I realize that removing the ‘Japan’ category from a few video websites isn’t really of any consequence. As far as I can see, there isn’t any mass removal of Japanese content on these video sites (see Youku, for example), it just appears to have been pushed out of view. But if you consider the other reports of Japanese book bans and newspaper seizures (news of the latter coming today as well), it makes you wonder what could come next.

Could we begin to see Japanese web content soon fall victim to China’s Great Firewall? Earlier this summer we saw Japanese ‘co.jp’ domains briefly blocked in China. Was that outage a test of something to come later?

Let’s hope not.

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.

Yes, it’s Zhou Hongyi again. But there isn’t any war of words this time round. Earlier today at the China Internet Conference, the Qihoo (NYSE:QIHU) CEO was talking about the future – and a possible collaboration – of its 360 Search engine. As Sina Tech reported, 360 Search will launch an open platform and they will also pick up Google’s advertising system on its search engine.

Zhou mentioned that 360 Search has plenty to learn from Google, especially in the aspect of advertising on a search engine platform. He also shared that 360 will adopt the categorization of paid and unpaid search results, which is mainly adopted by Google. At the same time, 360 will launch an open platform to allow more quality vertical searches on its search engine.

Zhou commented (translations are mine):

Search engines should be an open platform, where distributions are spread across to many other sites. […] Search engines should not just contain data and fail to put it to better use.

Zhou also reflected that there are plenty of high quality vertical searches out in the market that no one gives a damn about. He is open to the idea of working with smaller web companies, so as to give its users a more professional set of search results. Earlier this week, 360 Search focused on its users’ experience with the launch of the “like Project” allowing social search recommendations – like with Google and G+ – in its own 360 Browser for Windows.

Oh well, it’s tough to exactly figure out what’s on Zhou Hongyi’s mind. We never seem to be able to predict his next move. However, be it a gimmick or a strategy, Zhou is clearly trying to make more friends now rather than creating yet more enemies. The Qihoo CEO also hinted at possible collaborations with Google, Microsoft and local rival Sogou; the plans will be revealed in the near future, he added.

[Source: Sina Tech, 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.

But apparently not everyone at Sohu agrees. Sohu CTO Wang Xiaochuan posted this message on his Sina Weibo account about five hours after Zhang’s post saying Sohu must participate in the search war:

It’s a hoodlum [Qihoo] versus a monopoly [Baidu], so who should we help? Participating in this war is really f*cking stupid.

Yikes. Presumably inadvertently, Wang just called his boss “really f*cking stupid.” That’s gonna make for an awkward staff meeting Monday morning. One has to assume Wang didn’t do this on purpose; he may not have seen Zhang’s weibo post. Zhang isn’t generally known as a vengeful guy, so I suspect Wang won’t be in too much trouble, but this definitely isn’t the kind of press Sohu was probably looking for right now. Luckily for Mr. Wang, this all happened late Friday afternoon, which is where news goes to die.

With the CTO pulling in one direction and the CEO another, it’s hard to say whether Sogou will ultimately jump into the fray or not. Zhang probably isn’t going to appreciate being publicly cussed out by a member of his management team, but Wang does have a pretty good point. Taking steps against either 360 or Baidu would likely gain Sogou some short term press but could push the service further into irrelevance if either Baidu or 360 decided to remove Sogou services from its search results.

[via Sina Tech]

The former Google China boss Kai-Fu Lee made a stand against short sellers Citron Research earlier this week – and now the two parties continue to duke it out via open letters, debating the ethics of Citron’s attacks on US-listed Chinese stocks such as Qihoo (NYSE:QIHU). Citron, despite its claims of wanting to expose wrong-doing, makes no ethical guarantees of not trying to soft-sell or inflate stocks for its own profit.

Mr. Lee’s earlier broadside at Citron was aimed at its many factual errors in a report on another Chinese company, Sohu’s (NASDAQ:SOHU) Sogou search engine, and he wasn’t defending Qihoo as such. Citron, in its initial letter dated August 30th (see below), did not bring up the issue of its numerous inaccuracies in its latest report. Instead, Citron put forward an interesting challenge for Kai-Fu Lee:

We believe it is very risky for investors when they are encouraged to ignore common sense and obvious signs of management misdeeds. We have extended an open invitation for you to debate the topic on CNBC Asia if you ever agree to appear for a live discussion.

For Citron, one of the key “common sense” curveballs is Qihoo’s ad revenue and gaming ARPU claims. Those concerns date back to three earlier attacks by Citron on Qihoo (see: 1, 2, 3).

Here’s the initial letter of reply from Citron’s Andrew Left, followed by a response from Kai-Fu Lee that was posted the same day on his Weibo page:

So Mr. Lee, now the founder and CEO of startup incubator Innovation Works, is not keen to debate the topic, perhaps as it might be misconstrued in the media as defending Qihoo, a controversial local web company which made waves by launching its own search engine last week.

One of China’s top tech luminaries, Kai-Fu Lee, has ripped into the short sellers Citron Research – branding their methodology “despicable” – after Citron released a new report about the Chinese web portal Sohu (NASDAQ:SOHU) and its Sogou search engine. Mr Lee, the former president of Google China and now the CEO of incubator Innovation Works, condemns the repeated short-selling of US-listed China stocks as “already questionable” before then pointing out the many factual errors – the “ignorance and deception;” the “holes and lies” – in the latest Citron post.

Kai-Fu Lee, in his first post on XueQiu, singles out “how these short sellers take advantage of the information asymmetry between China and the US,” making false likenesses and providing other bits of vague information that it can be tough for US investors to research and verify. His post is written in English, not Chinese, and is presumably aimed at such overseas investors.

In the past, Citron has attacked Qihoo (NYSE:QIHU) in particular, saying that the software maker – which launched a search engine recently – is over-valued. But now Citron is doing the opposite, and singing the praises of Sohu in the light of Qihoo’s entry into the search market. In a new report, Citron says that Sohu is “worth more than 50 percent or more” [sic] of its current market value. By Mr. Lee’s implication, Citron is just trying to offload some Sohu stock that it might’ve bought earlier, since such firms have no ethical code about not investing in stocks that they post about.

The most amusing part of Kai-Fu Lee’s post is, I reckon, the graphic below, in which he has corrected six pretty serious errors made in Citron’s new report in the space of just a few paragraphs:

Mr. Lee is entirely correct in his amendments, and we’re also flabbergasted as to how Citron seems to have confused the Sogou IME app (for, in this case, typing Chinese characters by inputting pinyin) with the Sogou.com search engine in describing the latter as “a ‘pinyin’ search engine.” That’s a completely non-sensical phrase. Lee quips: “It’s like saying Google’s search methodology is based on the QWERTY keyboard.”

In the past, I think I’ve reported on every single Citron attack on Qihoo. But I have essentially defended Qihoo from Citron, feeling that the short sellers don’t understand Qihoo and how it can generate revenue from something so old-fashioned as Hao.360.cn, its page full of paid links. Yes, that model failed in the US already, but it can work here in China where millions of new people come online each day. They need an AOL-style portal of links. I don’t use it, and Citron thinks it sucks; but the point is that that doesn’t mean it’s not profitable. And so I applaud a high-level attack like this on Citron and others of its ilk, such as Muddy Waters.

The rest is a comedy of errors by Citron and it’s worth reading the post in full. In a section called “Citron distorts data and compares apples to oranges,” the former Google China head tackles Citron’s attempts to compare Qihoo in an unfavorable light next to Sohu whilst omitting more crucial figures for revenue growth or five-year EPS growth estimates. Lee laments:

But as any investment novice would question: What about revenue growth and earnings growth for current year and next five years? Growth high-tech stock prices are much more driven by these growth numbers than the numbers Citron chose to cite. […] it is clear that Citron picks ‘convenient’ numbers even if they are of minimal value, and that Citron obscures ‘inconvenient’ numbers, even if they are of critical importance.

[Source: XueQiu]

"Oh, you silly cat. That's not how you spell 'cheeseburger'!"

Asia now has more than one billion internet users – or 1.016 billion, to be precise – who amount to 46 percent of the world’s total number of web users. More than half of those are in China. In addition, 623 million access the web via mobile phones. That’s the overview of the Asia-Pacific web scene depicted in a new report by the Asia Digital Marketing Association (ADMA), a non-profit organisation backed by corporate donors such as Google, Microsoft, and CNN.

For that fast-growing regional audience, ADMA cautions brands to think carefully before engaging in social marketing – “Although 60 percent of social networkers say that social networks are a good place to learn about brands, 50 percent also say they don’t want to be bothered by brands” – and to take care to note the “fragmentation of online activities” between different nations. Here are five eye-watering biz and marketing stats from ADMA’s David Ketchum:

• Online advertising spend in Asia-Pacific reached US$24.8 billion in 2011, making the region second only to the US, with $34.5 billion.
• Every marketing dollar spent online returns $1.78, exceeding the returns of all other marketing media including TV, print, out of home and trade (according to Nielsen).
• By 2015, Asia Pacific is expected to account for a third of all global mobile ad spend, reaching $6.92 billion.
• India, China, Australia and Japan are expected to generate $258 billion in commerce sales in 2012 between them, and mobile commerce is on the rise with 34 percent of mobile internet users in China and Korea transacting via handheld devices.
• Mobile app downloads reached five billion in 2011, generating $871 million.

Here are some of the key demographic tables from desktop internet users in Asia as a whole. It focuses on who’s online, Asia’s most trafficked sites (note Chinese web giants Tencent and Baidu), and where folks go for social media, online gaming, and e-commerce:

And here are three of the demographical highlights of mobile web users in Asia in the ADMA report. It’s interesting to note just how much more likely Asian mobile users are to do serious, practical stuff on their smartphones or feature-phones:

If you’re more into the consumer attitudes and marketing aspect of this and want to see ADMA’s report in full, grab it at the source link below.

[Source: ADMA’s Digital Marketing Yearbook report for 2012 (requires sign-in)]

Back in August 2010, China’s Alibaba Group – the web company behind China’s biggest e-commerce sites – invested US$15 million in the search engine Sogou.com, a subsidiary of the web portal Sohu (NASDAQ:SOHU), taking a 10 percent stake in it. But now that looks set to be reversed, as a US SEC filing by Sohu reveals that it has completed a share buy-back.

Alibaba has agreed to the deal, and the new repurchase price is set at $25,800,000. Some of that goes to the investment group Yunfeng Capital, which made the initial injection of funds together with Alibaba.

NASDAQ has just reopened for the week, and is not reacting well to this brand-new filing (see it here). So far, in one hour of Monday morning trading, $SOHU is down about three percent.

Sogou is now China’s second-largest search engine, having surpassed Google late last year, with a reported 7.67 percent market share (that’s using stats from web analytics company CNZZ). It generates advertising revenue for parent company Sohu, which sees 36.6 percent of its total income coming from ads.

Tencent's iconic penguin mascot surfs its way to social gaming success.

A seasonal survey of China’s online gaming market by Analysys International reveals some stellar growth up to the end of 2012 Q1 – and that Tencent (HKG:0700) has extended its lead as the country’s mavens of social gaming. Back in 2011 Q2, the Shenzhen-based web giant dominated with 29.5 percent of market share by revenue, but that’s now up to 33.7 percent.

The whole gaming sector has grown to be worth US$1.78 billion in terms of revenue in China. That’s 9.5 percent growth from the previous quarter.

There was a bit of a shuffle below Tencent, as Netease (NASDAQ:NTES) moved up from third to second spot, now claiming 17.3 percent of domestic online gaming revenue. Shanda Games (NASDAQ:GAME) saw no growth – despite its new World Zero title – and consequently got demoted to third.

Tencent runs China’s biggest social network with its QQ empire of IM, social networks, and social gaming. Earlier this week, we looked at the QQ Games exclusive tie-up with PopCap to launch Plants vs Zombies Great Wall Edition. It also operates some more hardcore MMO titles such as Crossfire. Indeed, social gaming is a large part of the reason behind the company having far-and-away China’s richest web portal.

Here’s the interactive chart for market share by revenue among China’s gaming services (2012 Q1):

(View the pie chart as a static image).

The online gaming market as a whole saw 33 percent year-on-year growth. When we last looked, last summer, it was at 8.7 billion RMB ($1.36 billion at that time), but the new figures show the industry has expanded to the point where it reels in 11.26 billion RMB ($1.78 billion) up to the end of 2012 Q1:

[Sources: Analysys International 1 and 2]

There are lots of ways to look at this data, and it’s no surprise to see Tencent way ahead of the rest of the pack. But the first thing that jumped out to me was the stark difference between what Tencent is making from its social networks and what Sina is making — or more accurately, what it isn’t making — from Weibo. Granted, Tencent versus Sina isn’t an entirely fair comparison when it comes to SNS, since Tencent has QQ, Weixin and Qzone in addition to its weibo service. But it’s certainly clear that Sina is having a very hard time monetizing its popular social network.

(Incidentally, it’s also worth noting Sina doesn’t seem to be making much of anything from its weibo gaming platform either. That’s not a huge surprise, as I’ve reviewed a number of the games and found them to be pretty bad, generally speaking, and way too blatant about begging for money.)

[via TechWeb]

Yesterday during Sohu’s quarterly earnings call, CEO Zhang Chaoyang announced that the company was splitting video sales from the rest of its sales team, turning it into a separate group entirely dedicated to video ad sales. Zhang explained this a response to the unique aspects of selling advertisements for video, which certainly makes some sense. But it’s clear that Sohu is putting more emphasis on its video team, which is interesting especially in light of comments the company’s CFO Yu Chuyuan made about its alliance with Qiyi and Tencent.

Talking about the breakdown of costs between the three companies, Yu said that the costs would be the same, but she added:

However, the three companies will continue to buy additional content independently. It would be impossible for all video content purchases to be made together.

Yu also doesn’t seem to consider the alliance to be a long-term endeavor. In response to a question about how long it would be in effect, she said:

The are no provisions for a time limit on this alliance; we can end it at any time we wish.

Zhang Chaoyang also spoke about Sohu’s prospects for acquisitions in the video market, making it clear this is something the company is very interested in. Since Sohu isn’t likely to be able to buy out Tencent or Baidu-owned Qiyi the company is likely looking elsewhere for potential acquisitions.

Could an acquisition lead to the end of the Sohu-Qiyi-Tencent alliance? Is Sohu really as dismissive as Yu Chuyuan makes it sound? It’s difficult to be sure. While Zhang clearly wants to make an acquisition, analysts have suggested it’s not particularly feasible right now. And Yu’s comments could be foreshadowing, or they could just be candor about the terms of the alliance in general. It certainly sounds like things aren’t quite as tight-knit as we first thought, though.

[Sohu Q1 Earnings Call via Sina Tech Transcript]

China's 'three giants' all together on the same stage. This picture is a metaphor.

Yesterday, we passed along rumblings from the Chinese media that Sohu, Tencent, and Baidu’s Qiyi were planning to band together to purchase expensive video content that could help them better compete with Youku-Tudou. Now that news is official.

An official statement from the companies says they hope the partnership will help reduce the cost of video content, which has skyrocketed in part because of the massive bidding wars that have emerged in China’s fragmented video market. But the partnership isn’t just about buying cheaper TV soaps to stream; apparently, the three will also share their existing content libraries and may collaborate in other ways.

The team-up certainly makes sense, as the Youku-Tudou merger put everyone else in the industry even further behind in terms of market share. In the following chart, I’ve used EnfoDesk data from Q4 2011 (the most recent I could find) to show an approximation of what the market looks like now by combining Youku and Tudou’s market shares.

One thing to note from this chart is that while Sohu and Qiyi are now the number two and number three players in the online video business (I made them the same color so it’s easier to picture what they hold together), Tencent is nowhere to be found because its market share is too small (i.e., below 2.9 percent). So why is Tencent being included in this deal instead of, say, PPTV or Xunlei, which hold much more significant positions in the online video market? Probably because Tencent has such strong holdings outside the world of online video. Or, as Sohu CEO Deng Ye put it:

Sohu, Tencent and Baidu [which owns Qiyi] are all iconic Internet giants in China. We will integrate our capabilities in online video, portals, search engines and social networks to better service online video consumers.

Clearly, these guys are thinking well beyond lowering the prices of short-term content acquisition. And even with its big lead in market share, Youku-Tudou ought to be a little worried. Three giants just decided to quit fighting with each other and make friends, and it’s no secret who they’ll be gunning for now.

[Image source]

Having the rights to stream the most popular shows is hugely important to any streaming video site in China. Unfortunately, getting those rights is expensive, especially if you’re one of the smaller players. And after the Youku-Tudou merger, everyone else is a smaller player. Rumor has it that Sohu, Tencent, and Qiyi (which belongs to Baidu) will be teaming up to buy video rights together.

The three former competitors won’t actually be merging, it seems, just pooling their money to buy video rights so that they can collectively afford to compete with Youkudou Tuodouku Youku Tudou. There’s not much more detail than that, and this story should still be considered a rumor for now, but it likely won’t be for long: according to Sina Tech’s sources, the companies will be holding a press conference to announce this news tomorrow.

And it shouldn’t really come as a surprise to anyone who has been watching the Chinese internet video market. This is sink or swim time for many of the smaller players; it’s to be expected that some of them would rather work with their former competitors and keep competing than die off independently.

In any event, we’ll have more on this news tomorrow, assuming Sina’s sources are correct and it does turn out to be accurate.

[via Sina Tech]

Raw data from online analytics company comScore (NASDAQ:SCOR) shows the Chinese online video-streaming sites growing en masse, racking up a cumulative total of approximately 803 million unique views in the month of January 2012. That figure is up from 688 million uniques in December 2011, representing a growth in viewed videos of 16.7 percent.

The figures [1] show that Youku (NYSE:YOKU) remains the market leader, while Tudou (NASDAQ:TUDO) has strengthened somewhat in its second place.

The top seven sites remained stable from the December to January figures; in descending order, they are: Youku, Tudou, Sohu (NASDAQ:SOHU), Tencent (HKG:0700), Sina (NASDAQ:SINA), PPLive [2], and iQiyi (formerly called Qiyi).

Tudou declared itself pleased with the numbers (pictured below) – but then it was the source of the raw data – pointing out that its stats were up in three key areas, while rivals (Youku being the main one) decreased slightly between those two months. In January 2012, compared to the previous month, Tudou’s monthly uniques were up 6.5 percent; its total number of video views went up by 14.3 percent; and total number of minutes viewed on Tudou went up by 17.8 percent. The data seems to suggest that Tudou is edging closer to Youku in terms of unique video views and market penetration. The company’s chairman and CEO, Gary Wang, lauded the stats, telling us via email that “investments made in our brand, content, and platform” were “reflected by the significant improvements in key operating metrics in January of this year.” Tudou’s recent financials revealed rising revenue still hampered by the ongoing inability to actually crack a profit.

Youku responded to the information by telling us that “our daily unique visitors exceeded 34 million in December 2011 according to iResearch, which was a 43 percent increase over December 2010, and this number was 1.6-times that of our closest competitor.” Although comScore once described Youku as the world’s second-largest video-streaming social site after YouTube, Youku takes issue with the US analytics firm’s methodology, saying that the “sampling needs improvements” to better reflect the web environment in China.

Here are the comScore stats for January 2012, split into a double-decker view so it can fit in the column:

Viewing Time

Aside from the tussling at the top, it’s interesting to see the amount of videos viewed per user, and how long they’re being watched for. Those two metrics look disastrously bad for Funshion, whose videos apparently get watched for only two minutes per user. The best performers here are Baidu’s (NASDAQ:BIDU) iQiyi and LeTV – the latter of which launched a joint-venture with Tudou last October – with over six hours of viewership per user, almost certainly busy viewing licensed TV shows and movies. Youku bests Tudou by quite some margin in this area, as the two sites continue to duke it out over broadcast rights to pricey TV series and films.

So that’s how the Chinese video-streaming industry seems to stand now, aside from the disputed numbers. Let’s hope Tudou and Youku never have corporate basketball teams, or they’ll both try to set their own scores based on their own definition of a basket.

Starting this morning, Baidu (NASDAQ:BIDU) is adding search results from Chinese microblog site Sina Weibo, giving its search engine users quick access to tweets on trending topics.

The very recent tweets will show in a box clearly marked ‘newest weibo results’ on the first page of a Baidu search for any names or phrases that happen to be popular/trending [1] at the time. For example, if I search for ‘Windows 8’ in Chinese, I get three relevant Weibo tweets (as pictured above).

As is inevitable when linking to random microbloggers, the results can be a mixed bag, so only one of the tweets proved useful in my test, taking me to a video news report about the Windows 8 launch. One way for Baidu to improve this is by taking you to the actual tweet page, not the Weibo user’s homepage (as currently occurs). Also, it would be useful to scroll through some more microblog results, as can be done with Google’s collated Twitter search results.

This initiative by Baidu isn’t entirely new, as the search engine giant has already tied up with three other microblog sites in China: Tencent’s (HKG:0700) Weibo, plus the less used Netease (NASDAQ:NTES) and Sohu (NASDAQ:SOHU) Weibo platforms as well. So, today the picture is complete with added support for the Sina (NASDAQ:SINA) service. Even though Tencent’s site has more registered users – a whopping 300 million – today’s addition is important because Sina’s service seems to have the most buzz, more media mentions, and allegedly also has the lion’s share of wealthier urban users.

Announcing the new Sina Weibo searches, Baidu’s executive assistant, Zhang Dong-cheng, said:

We process billions of search queries on a daily basis, and many of those queries are related to the real-time information found on microblog posts. With this deal between Baidu and Sina Weibo, Baidu has completed its integration of high-quality content from China’s four leading microblog platforms.

In the same joint Sina-Baidu press release, Sina’s VP, Peng Shao-bin, said that his company’s Weibo service sees “100 million microblog posts daily” and can thereby provide “quality real-time information.”

Exactly two weeks from today, all microblog sites must start to enforce ‘real name’ tweeting, meaning that any users who have not submitted their names and national ID numbers to the web companies will no longer be able to post. That could cause the number of daily microblog posts to fall off a cliff.

Sogou (which is owned by Sohu) has long been a competitor to Baidu in the search field, but it not attempted to mirror Baidu’s expansion into other areas like mobile internet. Case in point: Baidu has a phone, but Sogou’s only foray into the mobile space is its Chinese input method.

But Sogou CEO Wang Xiaochuan says that’s changing. He spilled the beans at a TechWeb IT conference yesterday, saying that Sogou is working on a new mobile internet product that’s related to speech recognition. Is comparing it to Siri fair? Apparently. Wang himself used a screenshot of Siri at the conference and said the product was “related to Siri, but different.” Whatever that means.

The company has been developing this product using voice data they’ve apparently been getting from the Google Voice implementation they added to their Sogou input method earlier this year. So far they’ve collected more than a thousand hours of voice data and are continuing to collect more.

Sogou’s input method is fairly widely-used, so the company has had success with language-based mobile products. It will be interesting to see how this one goes over, and — more to the point — what the heck it actually is. Wang Xiaochuan isn’t saying, yet.

China’s police are on the back end of a three-month long crackdown on cybercrime, and apparently, they’ve found an awful lot of it. Over the course of the crackdown, police told Xinhua, they cleaned up more than 1.2 million pieces of harmful information, closed over 7,000 illegal websites, and investigated harmful information posted on 1,075 prominent sites.

Among those prominent sites were Tianya, Sohu, and Baidu’s Tieba. The BBS services these companies offer are theoretically self-censored, but the police found that on these and many other sites, illegal information was present. These sites have apparently been given a deadline for cleaning up their acts.

The police were looking for a number of things, but specifically targeted black market sales of things like guns, bombs, stolen bank information, poisons, phone-tapping devices, etc. Criminals can’t exactly list these things on Taobao, so sales are often arranged via BBS forums, which are less easily searchable and simpler to remain anonymous on. At the same time, police were also looking for “illegal harmful information that seriously harms the stability of society” — i.e., politically sensitive information, dissident opinions, news reports about censored topics, etc.

So I guess we can all rest a bit easier knowing the Chinese internet now has fewer bomb salesmen and, uh, people who disagree with the government about stuff. Hooray? Anyway, if you’ve run across some harmful information on your own and are looking to report it, there’s a website for that right here. Happy snitchin’.

[Xinhua via Sina Tech, Image source]

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)]

New data from web analytics company CNZZ suggests that Google (NASQAQ:GOOG) is now in third place in China in terms of search engine traffic – pushed down by the rise of Sohu’s (NASDAQ:SOHU) Sogou.com.

But a note of caution: analytical methods can vary greatly, and CNZZ’s numbers have always been greater for the smaller search engine rivals than the stats from, say, Enfodesk, that we’ve used in the past. Here’s the most recent data for November, in terms of traffic:

Nonetheless, if anyone was going to steal Google’s tenuous second position in China, it was clearly going to be Sohu’s Sogou, which has long been the strongest of the also-rans who are ultimately aiming at taking market share – and ad revenue – from Baidu (NASDAQ:BIDU). It is perhaps helped by its popular web browser, Sogou Browser, which of course defaults to using its own search engine. Indeed, earlier this summer Sohu’s chief executive, Wang Xiaochuan, said in a speech that “Our real aim is to overtake Google in China within a year.” Mission accomplished, if CNZZ’s data can be backed up by some other sources too.

Looking at the data for last month compared with November 2010, we see the same eight competitors in action, with Tencent’s (HKG:0700) Soso search and Netease’s (NASDAQ:NTES) Youdao perennially stuck in fourth and fifth places, respectively:

The only major changes we see are Bing going up to sixth, and Sogou’s step up to second.

Holding On to Revenue

Google declined to comment on the latest stats when contacted by the China Daily. But the American search giant can take solace in still being a strong second in terms of revenue. Analysis International says that Google still brings in 17.2 percent of revenue in this industry in China, largely due to its advertising network. Forbes’ Eric Jackson pointed out last week that Google’s China business still rakes in US$640 million per year. Though in the broader Chinese market, that’s actually in third place behind e-commerce company Alibaba Group.

Sohu’s Sogou, in contrast, takes only a 2.2 percent-sized slice of the ad revenue pie in the search market.

On a final note, the playing field is far from level here, with ongoing Great Firewall interference on all Google’s search sites – not just Google.com.hk, which it runs out of Hong Kong – causing the search homepages to be slow or inaccessible about half the time I try to use them from within mainland China.

[Sources: CNZZ, via China Daily]

(Photo source: People's Daily Online)

Despite fears of a very bad year for Chinese tech stocks after the fraud at Longtop (formerly NASDAQ: LFT), a new list from China Analyst reveals that the majority of the top ten most profitable U.S.-listed Chinese stocks for the last 12 months were tech/web companies.

It’s actually doubly surprising, after an IPO Dashboard study back in October showed that tech IPOs were performing the worst, with an average growth rate of -19.43 percent. Yep, that’s a minus symbol right there. But, from the look of the top ten list, a number of China’s web behemoths weathered a stormy year.

Out of the ten on the line-up, eight are tech/web companies, and mostly big hitters:

1. Giant Interactive (NYSE:GA):
Giant isn’t even China’s biggest online gaming publisher, but it’s doing well, seeing its net profit margin at 52.23 percent for the last 12 months, and its operating profit margin was at 55.76 percent for the same period.

When we last looked at market share in online gaming in China in terms of revenue, Giant was in sixth place, while Changyou (below) was fifth.

2. Changyou (NASDAQ:CYOU):
Proving that social gaming and MMOs can be great business, Changyou is in the exact same field as Giant. Its net profit margin was 50.66 percent for the last 12 months. Its operating profit margin was 57.94 percent for the same period.

3. Baidu (NASDAQ:BIDU):
Baidu needs no introduction, and can now lay claim to being China’s third most profitable US-listed stock this year. Its net profit margin was 46 percent for the last 12 months. Its operating profit margin was 52.53 percent for the same period.

4. Netease (NASDAQ:NTES):
Netease is actually in third place in terms of online gaming revenue in the country, but it’s fourth in this particular list. The company might be better known for its 163.com web portal and email service, and its fledgling Youdao.com search engine. Its net profit margin was 44.36 percent for the last 12 months. Its operating profit margin was 46.77 percent for the same period.

7. SouFun (NYSE:SFUN):
Skipping down to seventh place in this ranking, SouFun is a massively popular real-estate portal. Its net profit margin was 33.83 percent for the last 12 months and its operating profit margin was 41.57 percent for the same period.

8. Ctrip (NASDAQ:CTRP):
Ctrip is a travel e-commerce site whose main rivals are eLong (NASDAQ:LONG) and the Baidu-invested Qunar. Its net profit margin was 32.11 percent for the last 12 months. Its operating profit margin was 33.57 percent for the same period.

9. AutoNavi (NASDAQ:AMAP):
AutoNavi makes GPS gear and apps, and it certainly didn’t get lost en route to a profitable year. Its net profit margin was 32.10 percent for the last 12 months and its operating profit margin was 30.98 percent for the same period.

10. Sohu (NASDAQ:SOHU):
Lastly, another old-skool Chinese web portal shows that dinosaurs can learn how to stay relevant – are you watching, Yahoo (NASQAQ:YHOO)? – with profit margins of 30.61 percent for the last 12 months and an operating profit margin of 34.88 percent for the same period.

If you’re curious, the missing fifth and sixth places belong to China Kanghui Holdings (NYSE:KH), and Noah Holdings (NYSE:NOAH) respectively, neither of which are tech or web related.

[Source: China Analyst]

This is 17173.com with an annoying and un-closable ad at the bottom corner.

Chinese game developer giant Changyou (NASDAQ: CYOU) has announced yesterday that it has agreed to acquire 17173.com from Sohu (NASDAQ: SOHU) for $162.5 million. The deal will be finalized sometime in December 2011.

Together with the deal, both giants — Changyou and Sohu — have also agreed that Sohu will not compete with Changyou in the gaming media portal business for a period of five years (Smart move).

In addition to the deal, Sohu will also provide Changyou with technical support, maintenance, and advertising space. The total service contract (note that this is separate from the acquisition deal) will cost Changyou around $35 million and includes a possible renewal of some of Sohu’s services, subject to Changyou’s decision in the future.

Changyou builds web-based and mobile games and its most well-known title is perhaps Tian Long Ba Bu (‘Novel of Eight Demigods’ in English) — a Chinese novel turned MMORPG game which is hugely popular in China. With the acquisition of 17173.com, it provides Changyou with an influential springboard to promote its games. Although I trust that 17173.com will continue to report, review, and promote non-Changyou games, too.

The CEO of Changyou, Tao Wang, briefly shared his thoughts on the acquisition in a statement we received:

Our leading position in web-based games and our mobile game initiatives give us advanced market knowledge that 17173 can leverage to plan and grow its news channels more effectively. In addition, our offline promotion workforce and our network of overseas game companies can also be used to promote 17173 and further increase its penetration in domestic market and accelerate its expansion into new markets.”

Interestingly, Changyou actually started out as a gaming business unit within The Sohu Group in 2003. It eventually became very successful, with several hits including Knight Online and Blade Online.

In December 2007, Changyou spun-off from Sohu. And in the same year, it also launched Novel of Eight Demigods, its biggest MMORPG hit and a game that remains popular to this day. That game also put Changyou on the global map as it was ranked as one of the “World’s Most Profitable Online Game Franchises” in 2009 by Forbes magazine. In April 2009, Changyou was publicly listed on NASDAQ. And today, it has acquired 17173.com for $162.5 million from the company from which it was spun-off.

Boy, what a story!

Here’s another handy infographic from the folks over at Burson Marsteller. This time it focuses on China’s digital landscape, summarizing the many types of activities that netizens are engaged in, as well as the websites and services they frequent.

Among some of the more noteworthy observations:

• Chinese users spend 32 hours per month online
• 41 percent of netizens’ time is spend on Weibo and SNS
• 23 percent of time online is spent watching video

We should note that some of the data comes from a Group M report, which we mentioned a few weeks back. For more details, please check that out as well.

[View full size graphic in new window]

A trailer for Rio on Sohu's movie portal - the licensed full movie will arrive soon.

Chinese web portal Sohu (NASDAQ:SOHU) is splashing the cash this week, licensing 400 movie titles from Hollywood studio, 20th Century Fox. The agreement stretches over the next three years. In the nearer term, it’ll bring brand-new films such as Rio (pictured above) – the Angry Birds themed animation – to its TV/movie portal very soon.

Whilst some of Sohu’s licensed film and TV series content is free and ad-supported, many require a small fee – generally just 3 to 5RMB (just 50 to 75 US cents). Monthly streaming subscriptions are available for 20 RMB.

This isn’t the first paid deal between Sohu and Hollywood – the company starting licensing content back in 2009, although only after being hit with a lawsuit in 2007 for 1 million RMB that also saw its initial movie section shut down. The new version – such as with Baidu’s evolution of its MP3 portal into a mostly legitimate music site – features only paid content.

Earlier this year, Sohu also bought the rights to stream the X-Men movie, and other blockbusters. The company has previously struck deals with Disney and Warner Bros – as has larger Chinese rival, Youku.

Sohu, despite its tiny share of the video market, is a big spender on video content. Earlier this month we looked at all-time high prices for Chinese TV serials, and saw that Sohu paid a record-breaking 30 million RMB for one drama series. It’s not clear how much Sohu is paying this time for 20th Century Fox’s catalog of 400 titles.

Who are China’s largest video sites? Here’s a graph my colleague made last week, using iResearch data for 2011 Q2:

[Source: Marbridge]

The pixel-art style of Sogou Maps' 3D layer.

Sogou Maps has Google’s rival service in its sight in China as its opens up its 3D maps API and adds voice navigation to its Android app. This marks a significant push forward for this perpetual underdog as it seeks to engage with more third-party developers to expand its business listings and other supplementary features. Its Maps service seems designed to act as a halo product to bring people to its search and social features.

To that end, its map service already has apps for Android phones (pictured below) and tablets, and a web app designed for iPhone and iPad users. It’s not clear if iOS standalone apps are under development.

Sogou Maps for Android shows a suggested route, time, and taxi fare. Look out for the voice navigation update later.

Sogou was designed as a Google and Baidu competitor, with similar areas of expertise in search, music, and maps. It was created by Chinese portal Sohu, which sold parts of it to Alibaba last year.

The 3D feature of Sogou’s online mapping site is a cute-looking pixel-art creation (see the above screenshot, showing Shanghai’s financial district) that gives a better idea of an area’s look and feel than its own satellite imagery – or that of Google and Baidu. There’s no Google StreetView in China – likely due to regulatory restrictions – although a small mapping service, City8, has painstakingly created a StreetView clone. One key feature of Sogou’s 3D layer is that every building is clickable, to give the user more details of what’s inside. That’s where the revamped – and free – API comes in, giving greater access to developers in many industries to use this layer to promote businesses or provide useful local information. The 3D aspect covers 84 cities across China.

At the moment, despite the Sogou Maps app push – as well as nice web browsers and free IMEs to further ingratiate themselves with Chinese netizens – Sogou’s progress is slow. In the last batch of search engine market share data, the company hit just 1.55 percent (to Baidu’s 75.81); while in the mapping arena, Sogou Maps didn’t even register a mention in a segment still dominated in China by Google Maps (with 46.3 percent).

Take a look at Sogou Maps here. The Android app will get the voice navigation update sometime later this month.

[Source: Donews - article in Chinese]

Video content prices are sky high....get it?

Part of what’s hurting online video companies is content costs. As sites struggle for exclusive rights to the most popular content — various TV serial dramas, mostly — prices are pushed up. And up and up, and then up some more.

Recently, Sohu’s video service broke records by spending more than 30 million RMB — that’s about $4.6 million — on the web broadcast rights to 30 episodes of the classic “Ups and Downs”, a serial drama. That’s not an anomaly; earlier this year the rights to 98 episodes of the “New Princess Peach” drama also went to Sohu, for 30 million RMB. Other companies are spending similarly astronomical sums to get their hands on valuable content; Youku, Leshi, and PPS have all spent more than 200 million RMB to secure the web broadcast rights to a single show.

What’s especially remarkable is how much prices have gone up. Just three years ago, web broadcast rights for a single episode of “Ups and Downs” cost 10,000 RMB, or about $1,500. Given that Sohu just paid over 1,000,000 RMB/episode for the rights to that same show, that means web broadcast prices are over one hundred times what they were three years ago.

In this market, only companies with cash to burn — either as the result of an IPO or because they’re affiliated with a larger (and profitable) web company — will survive. But even the market leaders are branching out in new directions, too. Youku has been commissioning original content from films to TV serials on its own for some time now, and several of its products have met with great success. Tudou and several other video sites are also attempting to move into creating original programming, though none have yet been able to rival Youku’s success in that field.

Full disclosure: I do occasional freelance work for Youku.

A scene from Tencent's 'Crossfire' first-person shooter game. (Image credit: cf.131.com)

New figures for Q2 2011 show which Chinese tech companies get the biggest slice of the online gaming market in China, in terms of revenue. Total revenue in the industry is 8.7 billion RMB (US$1.36 bil), which is up 3.1 percent on the previous quarter.

Tencent is still the online and social gaming king in China, with its broad spread of titles – from numerous QQ games, to its Zynga CityVille tie-up, to the 3D first-person shooter Crossfire (pictured above). It took 29.5 percent of all online gaming revenue in the country in the most recent quarter.

Shanda and Netease are joined for second place with a matching 17.1 percent of revenues in the market. Shanda has titles such as the newly-released World Zero, while Netease is known for MMORPGs like Westward Journey.

Beijing’s Perfect World (NASDAQ: PWRD) is in fourth place in Q2 2011; and slightly trailing them is ChangYou, which is a subsidiary of Sohu. We recently looked at how ChangYou had spent $80 million in developing its newest game The Deer and the Cauldron.

Here’s our interactive graph of all the online gaming market shares; data comes from Analysis International and was then compiled by Digitimes:

[Source: Analysis International, via Digitimes]

Of course, Tudou is planning an IPO, and perhaps because of their financial situation, they recently upped the amount they’re seeking to $180 million US.

Still, Tudou is in a tough spot. Its road to IPO has been far from smooth, and the current environment overseas is so unwelcoming that many Chinese companies originally planning to IPO this year have shelved their plans and elected to wait until investors are feeling more friendly. Tudou, it seems, does not have that option; they will have to put together a successful IPO, and soon.

Of course, an IPO at the moment — Tudou’s most recent plan was to IPO on August 17 — could also be dangerous given that the US markets are especially rough after the nation’s credit crisis and subsequent rating downgrade. Youku, Tudou’s chief rival in China’s internet video market, has seen its stock fall dramatically. Many are questioning how much Tudou would be able to raise in the current market.

If Tudou does not or cannot IPO, the next question is whether or not Youku would buy it. Such a move would give Youku dominance of the video market, and the company probably has the money to do it. However, if Tudou runs out of money without being acquired, Youku stands to gain a significant percentage of its market share without spending a dime. Victor Koo, the company’s CEO, told Sina Tech that he “always keeps an open mind” when asked whether or not his company was considering buying Tudou.

Other companies might stand to gain more from acquiring Tudou and its percentage of the internet video market. Baidu could merge the company with its own Qiyi video service to gain some traction, and according to Sina, industry insiders are suggesting that Sohu and Tencent might also be interested.

We’ll keep you up to date as Tudou approaches its IPO. We have also reached out to Tudou for comment and will update this story should we receive a response.

Everyone knows microblogging is big in China. But how big, exactly? And moreover, who are the major players? Sina Weibo is on top, but how close is Tencent to catching it? For these questions and more, Digimind has prepared an infographic that will give you a great overview of the lay of the microblogging land in China.

[Digimind, via Digital East Asia]

Launched into beta at 11am this morning for access to some of China’s keenest gamers, the online game – based on a 1960s book that recounts ancient Zhou dynasty myths – took four years to develop, at a reported cost of US$80 million. The game features 183 characters and a huge world environment that was painstakingly replicated from the novel.

As an multiplayer online role-playing game – or MMORPG for short – it allows for the usual free-roaming, trading, character-building, and fighting activities.

The online game is a joint project between South Korean game R&D and Chinese animators, voiced by a selection of famous Chinese actors and actresses, such as Hu Ge, who’s familiar to TV viewers from numerous costume dramas in which he looks startlingly like a computer game character anyway. There’s also a mix of eastern and western musicians thrown into the production as well.

Chinese director Li Guo-li, who directed lots of footage for The Deer and the Cauldron.

Seasoned Chinese director Li Guo-li (pictured right) was drafted in to direct the 360 hours of high-definition 3D scenes that intersperse the gameplay in The Deer and the Cauldron. Like the actor Hu Ge, Mr Li is well-known for his kung fu-infused period TV dramas and movies, which tie-in nicely with the flavour of this game.

You can download the game at Changyou’s new mini-site, or just check out this video promo of The Deer and the Cauldron:

[Source: Techweb - article in Chinese]

Our search volumes doubled in the past year, which led to very fast growth in our revenue, and I don’t see what’s so difficult about reporting a profit next year. . . Our real aim is to overtake Google in China within a year.

Of course Google’s market share has been dropping in China, according to numbers provided by Analysis (see table right). The company has seen it’s 17.5 percent share at the end of 2009 fall to 11.1 percent a year later.

Sohu’s search engine Sogou has only been hovering at just a couple of percent, but it appears like the company aspires to rise far enough to meet Google on the way down. Sohu reportedly has plans for a Taobao optimized Sogou browser, which might actually give it a bit of a boost. According to Resonance China’s blog post earlier today:

Some shopping sites like Taobao already have their own internal search engines for users to search for target items, but the most used sites of Chinese online shoppers turns out to be search engine sites like Baidu or Google.

When we heard Sohu CEO Charles Zhang speak at the Global Mobile Internet Conference earlier this year, talked about “living on the internet” — and online shopping is definitely one aspect of our lives that the net can greatly simplify.

Sohu CEO Charles Zhang, at GMIC 2011, Beijing China

There’s a recent trend among video websites in China to spend enormous amounts of money to acquire TV and movie content. In the past, such content was usually streamed without license, and as a result many Chinese video sites became wildly popular when they first started. But now that many of them have IPO’d (or intend to IPO) they are trying to go legit with licensed content.

According to 163, citing the a Hunan newspaper, internet video sites are sparing no expense to keep movies and TV content so that their audiences don’t stray:

The price of a hot TV series could reach as much as 600,000 RMB (or almost $100,000) per episode. Just this year, at least five hot TV series sold over 20 million RMB, among which, the remake of the famous 1998 hit series Princess Pearl/ Huanzhu Gege sold for over 30 million RMB, with a total of 97 episodes. Sohu was the big spender on that deal, becoming the only online distributor of the series with this record price. This is especially impressive when compared with the 2006 big seller online Wulin Waizhuan, which sold for 100,000 RMB for 81 episodes.

However, expense is not a major concern for the buyers. Most websites have employed a dedicated team, providing professional advice on their purchases. And this gives websites a new way of marketing. Profit is assured. In the first quarter of 2011, the profit of Chinaʼs online video business reached 660 million RMB, while at the same time last year, the number was only 314 million RMB. (my translation)

An Alternative to buying

If the price continues to grow at this pace, it may bring an end to the era of free online TV series in China. Recently we’ve also written about how many video sites are beginning to produce their own original content themselves. Youku stands out with the popular short film The Ultimate Winner, its own animated web series, and even more content on the way.

As it always has been, the Chinese video space will be an interesting one to watch. Here’s how the Chinese market share is divided right now, the numbers courtesy of 163:

Sina holds a lead over other Chinese microblogs

In 2006, Twitter introduced a new way people communicate and interact. In the following year, the same concept was brought to China by a few Twitter-like services, Fanfou being one of the most influential. However, microblogging did not really catch on in the country until 2009, when most of China’s mainstream websites introduced their own microblog services. We’ve written extensively about a number of these ‘weibo‘ over the past year or two, most notably Sina and Tencent.

While they are undeniably following Twitter’s lead, each of China’s microblogs has at least tried to bring something new to their service. 163 allows its users to put 163 Chinese characters in a single message, while Sina allows 140 characters rather than 140 (roman alphabet) letters. Of course Chinese characters allow one message to carry significantly more information than an English-language Tweet.

Tencent Weibo at t.qq.com

Tencent bundles its microblog closely with QQ, its popular IM client, which brings a significant number of users to their new service. Even search engine giant Baidu has jumped into the weibo battle, as has Xinhua, China’s official news agency.

Microblogs have gained popularity among Chinese netizens fast. Like, really fast. Take Sina for example. It introduced t.sina.com at the end of 2009, and by the end of 2010, the number of t.sina.com users had surpassed 100 million. It’s likely now around 150 million, having passed 140 million about a month back. Although not many know the fact that these services are copied from twitter, and that “t” actually stands for twitter, microblogging is a huge hit among Chinese netizens for it’s openness, responsiveness, interactivity, and fast pace.

Sina's Weibo.com

The service now sits on the coveted domain weibo.com, and it is expected that Sina will soon launch it in English, challenging Twitter for global microblog supremacy. For those not familiar with Sina Weibo, Digicha has an extensive overview of how the service works.

Like Twitter in the west, microblogs are drastically changing China’s online community, emerging as a powerful platform for sharing information. And like Twitter, it’s especially useful for disseminating breaking news of recent events. Microblogs played an important role in the “my father is Li Gang” incident. There was also the case of Yao jiaxin, who injured a lady in a car accident and then killed the lady with a blade in his trunk.

Chinese microblogs have issues though, and the obvious one is censorship (content inspection, key word filter, etc). As microblogs have grown more and more popular, network censorship has likewise reached a level that the country has never seen before. Not only is the official network administration is highly ‘armed,’ but microblog providers also have their own dedicated team monitoring all messages on the platform, deleting whatever they believe may cause troubles. And this was dubbed by chinese netizens as “self-castrating,” because they believe in most cases, providers are over-doing it.

Maybe microblogs are growing too fast in China, and we see lots of unexpected, celebrity clashes, zombie fans, cons, and traps. These issues will need addressing before microblogs could really make a difference.

Quoting sources within Baidu, Sohu.com is reporting that the rumored cooperation agreement between Facebook and Baidu to set up a social networking site in China has indeed been signed.

The reports says that the cooperation between the two companies will not be concerning Facebook.com, but rather it will be to create a new SNS site. According to BusinessWeek representatives from both companies have so far declined to comment, but we’ll be sure to report as soon as we hear something.

Note that even though the report from Sohu has confirmed the partnership between Baidu and Facebook, it doesn’t state that the social network will be working as a separate Facebook.cn domain (which the company owns). It is likely that that both will work on Facebook.cn since Facebook has to follow the Chinese rules and regulations

We previously shared that Facebook might have a good chance to succeed in China with Baidu’s help. If Facebook can succeed where other western companies (namely Google) have failed, it would be a giant accomplisment for the company… And a big personal win for CEO and co-founder Mark Zuckerberg.

But today Baidu decided to let me do more inside its search box, and sadly, this is where the comparisons to my high-school girlfriend end.

Users searching on Baidu will be given the option of ‘Tweeting’ (or microblogging) their search term, only if it resembles a Tweet.

If the search term includes certain adverbs like ‘very’ or ‘extremely,’ or if it ends with an exclamation point or a particle that makes it look like a spoken sentence, then you’re presented with the microblog buttons. Users can choose from Tencent, Sohu, or Netease microblog services. Note that there’s no Twitter there, of course. Still blocked.

This new function is a clever addition by Baidu, capitalizing on the growing popularity of microblogging in China, as well as the fact that the majority of users do their microblogging via the web. This gives the many Chinese netizens who regularly search on Baidu, yet another reason to stay right where they are.

The alternative common alternative, Google, which is having a little trouble these days anyhow.

For its Valentine’s Day special, Sohu first rolled out a matchmaking program in mid January, which saw over 400,000 followers and 10,000 applicants for the matchmaking dates.

In response, Sina Weibo launched a lucky draw campaign earlier this month in which users can take part only by inviting friends to register for Weibo accounts. The campaign helped Sina gained up to 2.6 million users. On a fair note, Sina generously sent out over 4 million gifts to its users.

Tencent, on the other hand, chose to work with the media to stream its microblog content with television partners during Chinese New Year. The result of the partnership wasn’t revealed

Analysys International, a Chinese research company, forecasted that there would be 145 million microblog users by the end of 2011, reported Sina. As I believe, the focus for microblogs in China has always been “product first, revenue later”. That is at least the case for Sina Weibo:

“Revenues and profits can be guaranteed so long as we have a large number of users and form a big ecosystem,” said Charles Cao, CEO of Sina Corporation.

Sina Weibo currently leads the microblog sector in China with more than 50 million users across China, Hong Kong and Taiwan. Sina has recently turned its microblog into an open platform to provide developers with the flexibility to create applications for its users. On business model, Sina Weibo is looking at advertising and content partnership. No concrete plans were announced yet.

While the current situation may seem rosy for Sina, the microblog battle is still far from over as long as Tencent remains in the game.

“Sina is in a dominant position currently, and its open strategy also fits the development of micro blogging, but Tencent, having a (600 million) large user base with its instant message system QQ, should not be downgraded,” said Li Tianfeng, an analyst with Analysys International.

With the microblog battle in the U.S settled, it is China’s turn to be under the limelight. Who will be the “Twitter of China”: Sina Weibo, Tencent or others?

Image courtesy of Marbridge Consulting