Baidu TV recently received another round of investment another round of investment from Baidu, Intel and other key investors. The first round, back in 2007, brought in USD 5 million. Because of its name, many people do not know that Baidu TV is actually run by Adsit, an online advertising company in Beijing. Baidu provides funding, its brand name, and its network of existing customers.
The service has attracted the ire of many Chinese netizens, who complain that the video ads appear without warning, suck up bandwidth, and slow down the browsing experience. It will be interesting to see how this plays out. Baidu has become popular in large part because it catered to user demands; in the case of its mp3 search service, it did so against the objections of many in the music industry. Now Baidu seems to be aligning itself with the companies, but will it drive away its users in the process?
I wanted to follow up on what I wrote several days ago regarding Alibaba's foray into offline advertising. Based on my understanding of Alibaba Group, it would surprise me the company actually makes a strong push into offline advertising at the moment. A key reason is that despite its recent success and growth, Alibaba faces plenty of troubles with its existing business. With the renminbi continuing to gain value versus the dollar, many suppliers in China are finding it more difficult to export their goods. These exporters bring in a large part of Alibaba's revenue, and when they are unable to pay their membership fees, Alibaba will feel the pinch.
Another problem for Alibaba group is the wave of criticism that Taobao has endured for collecting fees from some merchants on its B2C platform. Many smaller sellers feel that Taobao is playing favorites and promoting paying merchants at the expense of the masses of unpaying sellers whose offerings have helped Taobao become popular. C2C auction competitors Eachnet (a subsidiary of Ebay) and Paipai (a subsidary of Tencent) are using the opportunity to lure sellers away. Moreover, Taobao cannot count on the kind of financial support from other companies in Alibaba Group, now that sister company Alibaba is publicly traded.
With all these other problems to worry about, I just don't think it's very likely that Alibaba will make a major push into offline advertising. With the "Media Supermarket", the company is most likely just testing the waters. I wouldn't be surprised if, after learning more about offline advertising, Alibaba used some of its new wealth to buy its way into the sector.
QQ is by far the most popular instant messaging service in China, with almost 320 million active accounts, according to owner Tencent. And while major international competitors have tried and failed to break QQ's dominance, one service in particular is worth a closer look: China Mobile's mobile-IM platform, FeiXin (Fetion).
Since its release in 2006, the service had around one million active users by the end of 2007. More importantly, China Mobile had 400 million users overall--a huge pool of customers to pull from.
Any China Mobile user can register for the service. The service is free of charge for PC users sending SMS to China Mobile users--up to 600 messages per day. Messages from phones to PCs are charged at the standard RMB 0.1 rate for SMS; phone users can choose between an SMS interface or a more traditional instant messaging window (if the phone can support this function).
Would China Mobile’s subscribers like to use this? I think so. SMS is the most popular form of communication for many Chinese people. During peak times, such as Chinese New Year, operators have recorded as many as 12 billion SMS sent every day. Much of Tencent's revenue over the past ten years has been paid by the mobile operators, in exchange for the mobile value-added services (MVAS) that Tencent provides, and the company would have difficulty giving up such a steady revenue stream without anything to replace it.
Because it already handles most of the SMS sent in China, China Mobile is in a strong enough position to challenge QQ's dominance. I don't think Fetion is a threat to QQ in the near term, but with China Mobile's backing, it is certainly positioned to become QQ's biggest competitor in the future.
China Mobile's move into instant messaging is further proof of its increasingly aggressive expansion into what was formerly the terrority of wireless value-added services (WVAS) providers such as Tencent, Sina, and Kongzhong. In fact, the operator and Tencent had previously partnered on a similar service a few years ago. The name? Fetion QQ, of course.
In August 2007, Alibaba launched its online advertising platform, Alimama.com, marking its entry into online advertising. The business model of Alimama is similar to that of Taobao, Alibaba's C2C/B2C online auction site, though with online advertising space being sold. Once a price is decided upon, advertisers can make payment through Alipay, Alibaba's payment arm.
Alimama is not the only evidence of Alibaba's interest in advertising. On Alibaba.cn, there is a link to a "Media Supermarket" (媒体超市) on its home page. The Media Supermarket is a platform where media providers -- grouped as magazine/newspaper, TV, radio, outdoor advertisement, or new media/internet -- seek out advertisers and sponsors. (See the screen capture below; the picture, along with those of all the major Chinese websites, is in gray and white in honor of the victims of the recent earthquake in Sichuan.) Unlike Alimama and Taobao, there is no charge for this Craigslist-style service; perhaps the company intends to again follow Craiglist's example and eventually start charging for the postings.
Recently, Alibaba CEO Jack Ma stated that he wants his company not to be a purely internet company but to be a "service company" targeting small and medium-sized businesses. The "Online Supermarket" may offer an example of how Alibaba plans to use its online auction and sales expertise to enter the world of offline advertising.
Click here to read the second part of this two-part series.
On May 5, Eachnet, which just a few years ago controlled 90% of China's C2C online auction market, announced a permanent shift to free services for its users. One of the main reasons Taobao overtook Eachnet several years ago was by offering no-fee auctions. Eachnet has been charging for its services since 2001. Interestingly, it was only last month that Taobao launched a B2C platform and started charging fees to some merchant B2C sellers on it.
Will Eachnet regain its market share through the no-fee services? I think it's unlikely. When Alibaba came on the scene several years ago, the main need was to build up the habit of online shopping in consumers and ensure a wide selection of products online. These days, China's e-commerce sector continues to show strong growth, and trust and security have become key concerns for the tens of millions of Chinese netizens who already shop online. The success of C2C auction sites depends largely on how well they can keep consumers' trust.
With such a strong position in the market, Taobao should be able to hold onto its lead. Eachnet's announcement may produce marginal gains in users, but the company is unlikely to regain its previous position.
