China continues to grow at jaw dropping levels across many different industries and the most recent mobile phone, internet and e-commerce data does not fail to impress.
According to consulting and research firm, BDA, China has surpassed the United States as the world’s largest internet population with over 216 million users. Based upon current growth trends, there will be over 280 million internet users in China by the end of 2008.
What are these users doing? Gaming, instant messaging, file sharing and spending!
BDA estimates revenues from China’s online games sector totaled RMB13.3 billion (US$1.88 billion) in 2007. China’s online games revenues exceed the combined revenues from its online brand advertising (RMB6.6 billion, or US$930 million) and search (RMB2.8 billion, or US$395 million).
BDA estimates China’s online game players totaled 50.4 million at year-end 2007. In instant messaging, the “QQ” brand instant messenger client of Shenzhen-based Tencent reportedly served 289 million active user accounts by Q3 2007.
Let’s not forget that China has the world’s largest mobile communications user base with 560 million subscribers.
According to the China Internet Research Centre in Beijing, 55 million of these internet users shopped online in 2007 spending US$8.25 billion dollars, up from 43 million shoppers in 2006 and US$4.3 billion dollars spent.
Businesses are joining the internet game as well. According to iResearch, China internet advertising expenditure will reach RMB9 billion (US$1.3 billion) in 2007 and maintain over 30% annual growth for the next eight years.
BIG NUMBERS across the board and there are many companies vying for a piece of China’s internet, e-commerce and online advertising pie. But who is best positioned to benefit from this growth? The privately held Alibaba Group. How so? Lets take a look at each of their assets, a few stats and their closest comp’s in the global market.
Alibaba Group is made up of the following companies:
1. Alibaba.com (1688 HK) – Alibaba Group owns 72.8% of this publicly listed company.
This company is made of online assets Alibaba.com, Alibaba.cn and the newly relaunched Alibaba.co.jp.
Alibaba.com – The world’s largest online business-to-business marketplace focused on global trade.
Alibaba.cn – China’s largest online business-to-business marketplace focused on domestic trade.
Alibaba.co.jp – This site serves as a bridge between Chinese exporters and Japanese importers but may be enhanced after a pending joint venture is solidified with Softbank.
Revenues – RMB2,162,757,000 (US$306,587,000) in 2007, a 39% increase Y-O-Y.
Profit – RMB967,795,000 (US$137,192,000) in 2007, a 340% increase Y-O-Y.
Registered Users – 27,599,959, a 40% increase Y-O-Y.
Paid Members – 305,545, a 39% increase Y-O-Y.
Comparable - Global Sources (GSOL) who is a distant second to Alibaba.com’s dominance.
According to Analysys International, Alibaba.com dominates China’s RMB4 billion (US$567 million) online B2B market with 69% compared to Global Sources’ 8%.
2. Taobao.com - China’s largest consumer-to-consumer marketplace.
Gross Merchandise Volume (GMV), the total value of all successfully transacted items on Taobao.com - RMB43.3 billion (US$5.99 billion) in 2007, an increase of 156.3% Y-O-Y.
Users - 53 million, 77% increase Y-O-Y.
Product Listings - 75 million, 100% increase Y-O-Y.
I want to highlight that the transaction volume of RMB43.3 billion makes Taobao.com responsible for 80% of total e-commerce turnover in China. Yes, read that again, folks - 80%! Taobao.com is now China’s second largest retailer and this includes both offline and online industries.
Comparable – eBay (EBAY)
Gross Merchandise Volume (GMV) - US$59 billion in 2007.
Revenues – US$7.7 billion
Registered Users – 276 million
Market Cap – US$36.6 billion
Product Listings - 637 million new listings added to eBay worldwide in Q4-07. At any given time, there are approximately 113 million listings worldwide, and approximately 6.7 million listings are added per day.
3. Alipay.com - China’s most popular and extensively used online payment tool for all areas of e-commerce. Alipay.com dominates with over 55% market share of the third-party e-payment service industry in China which facilitated transactions valued over US$3 billion.
Transactions - 1,170,000 daily, facilitating US$23 million in daily GMV.
Users - 62 million, growing by 80,000 new users per day.
Second place goes to ChinaPay with a measly 17%!
Comparable – PayPal, which is owned by eBay (EBAY)
4. Yahoo! China – China’s third largest consumer portal/search engine.
Market Share - 10.4% of China’s search market, which, according to Analysys International, was worth an estimated RMB10 billion in 2007.
Comparable - Baidu (BIDU)
Revenues – US$1.75 billion in 2007.
Market Share – 60% of China’s search market.
Market Cap – US$7.52 billion
5. Alisoft.com - An Internet-based business management software company targeting SMEs in China. Producing sales and contact management software, and communications applications. Partners include Microsoft and Cisco.
Alisoft will be selling into the millions of businesses using Alibaba.com, Alibaba.cn, Alibaba.co.jp, Taobao.com and Alipay.com. I’d say that’s more than enough to get this company off the ground quickly! Also, imagine what may happen if Microsoft acquires Yahoo! Alisoft will obviously be a major focus of that future partnership.
Comparable – Salesforce.com
Revenues – US$749 million in 2007.
Users – 41,000
Market Cap – US$6.75 billion
6. Alimama.com - An online advertising exchange/network.
Publishers - 150,000, increasing by 4,000 daily.
Personal Blogs - 135,000, increasing by 10,000 per day.
Users - 1 million
Advertisements - 380,000 positions for sale
Transactions - 20,000 per day
Traffic - 1+ billion network page views per day
If you are not familiar with the value of advertising networks, look at this list of recent M&A activity in this space:
Google buys DoubleClick for US$4.2 billion in 2008
Yahoo!’s purchase of BlueLithium for US$300 million in 2007
AOL’s purchase of Advertising.com for US$435 million in 2004
Today, China’s largest advertising network is managed by Focus Media Holding Limited. who recently announced very good 4th Quarter and Full Year 2007 results:
Revenues – US$507 million, up 46% Y-O-Y.
Market Cap – US$4.06 billion
7. Koubei.com - China’s largest local classifieds and discussion forms. Topics include, restaurants, apartments, and employment. This is 53.5% owned by Alibaba Group.
Comparable – Craig’s list, which is private and 25% owned by eBay.
We all know China will continue to grow wildly for a long time to come and we expect to see Alibaba Group do exactly the same thing!
