Archive for May, 2006

China’s Internet Boom Looks Very Familiar

Aug. 15 2005 (Bloomberg)—China is partying like it’s 1999.

The reference here isn’t to pop star Prince or the Y2K bug, but the height of the dot-com stock bubble. In the last year of the 1990s, hysteria over Internet companies that later disappointed investors reached a fever pitch. Are we seeing the beginnings of a similar phenomenon in China?

China’s dot-com boom is in its infancy, whereas 1999 marked the beginning of the end of the U.S.’s. Yet with Yahoo! Inc. agreeing to pay $1 billion in cash for a 40 percent stake in Alibaba.com, it’s hard not to wonder if Internet mania is underway in Asia’s No. 2 economy.
China’s biggest online retailer isn’t considered a corporate basket case. The question is whether Yahoo, seduced by a potential market of 1.3 billion people, is overpaying for a piece of the Hong Kong-based company.

The $1 billion figure seems like a huge amount for less than half of an e-commerce outfit with 2,300 employees that reported sales of $46 million last year. The investment is easily the biggest by an overseas company in China’s Internet industry. It certainly won’t be the last.

China’s Allure

The deal came after shares of Baidu.com Inc. soared almost fivefold in its Aug. 5 initial public offering, the biggest IPO debut in more than five years. The Beijing-based owner of a popular Web search engine instantly became the most valuable technology company in China, with a market capitalization of almost $5 billion. The IPO caught the attention of investors the world over.

It’s easy to understand the allure. China holds tremendous promise, considering that less than 10 percent of the nation has Internet access. At the moment, China has 100 million Web users, half the number of the U.S.

That’s why Amazon.com Inc., EBay Inc., Google Inc., Microsoft Corp. and Yahoo are clamoring for Chinese partners. But should investors be so quick to own shares in Chinese dot-coms? Haven’t we seen that such IPOs can be the financial world’s equivalent of fool’s gold?

Maybe China will prove the skeptics wrong. Executives and investors searching for the next big thing are mesmerized by the nation’s growth. The Chinese economy expanded 9.5 percent in the second quarter and retail sales rose 12.7 percent to a four-month high in July. Retail sales increased 12.9 in June.

Eye On Consumers

China’s Premier Wen Jiabao is counting on consumer spending and exports to sustain growth at the 8.6 percent annual rate of the last decade as he steers the economy away from its dependence on investment. The focus is on developing a thriving domestic market driven by household consumption.

Profiting from that growth is what Yahoo has in mind with its Alibaba.com investment.

All this is contributing to an environment where investors are ignoring Alibaba.com‘s tiny revenue and eyeing its 14 million users. This is what got so many investors in trouble in the 1990s: ignoring concrete measures such as revenue in favor of squishy numbers like “clicks” or “unique visitors” to a website. Old- economy business realities took a back seat to hype.

Any number of risks might complicate Yahoo’s plans.

For one thing, Internet censorship regulations by the Chinese government can be unpredictable. For another, China’s market for online advertising is immature at best. And there is the question of the Chinese consumers’ willingness to pay for Web services.

Dot-com Mania?

Do China’s already shaky stock markets really want to attract the same breed of investor who bet on Boo.com, Globe.com and Pets.com, companies that went bust once the frenzy passed?

For years now, a gold-rush mentality has pervaded boardrooms of multinational companies. So excited are executives about cheap labor that they’re willing to look past the warts. China’s banking system is awash in hundreds of billions of dollars of bad loans and social unrest could boil over as the gap between rich and poor widens. Analysts also worry that China’s economy may overheat.

China itself almost seems like the economic equivalent of the dot-com boom of the 1990s. It’s thought to be run by omnipotent geniuses who can do little wrong. It’s Asia’s New Economy, its potential is boundless and anyone who doesn’t see that is either a fool or a dinosaur.

Lessons Of The 1990s

All this leaves the Communist Party with the burden of achieving goals that are both unprecedented and seemingly at odds with one another: Creating hundreds of millions of jobs to maintain social stability while cooling growth to avoid inflation. It needs to accomplish both feats without traditional tools like short-term interest rates, which have little influence over China’s economy.

None of this means Yahoo’s Alibaba.com investment won’t pay off. The company already has proven its mettle in Japan, where it established itself as an important Internet power. And given China’s vast potential, not investing there would be a risk in itself.

It’s imperative that investors remember the lessons of the U.S. dot-com boom and bust and apply them to China. At the moment, it’s not clear that they are.

William Pesek Jr. is a columnist for Bloomberg News. The opinions expressed are his own. To contact the writer of this column: William Pesek Jr. in Wellington, New Zealand at wpesek@bloomberg.net.

This is really a debate going on…Google AdSense for Feeds

Now you can post AdSense ads on your blog feeds. To get the code, login your AdSense account, click on “AdSense for Content” and you will see an option for AdSense for feeds.

The link to applying for this feeds version of AdSense is here.

However, Mike Hogan disputes that more people may be seeing ads in the feeds but the clickthroughs won’t increase significantly. Why? Ads in feeds are never commonplace to begin with. Second, most marketers and webmasters are already trained to shut their minds of ads. This is his post.

Defining Entrepreneurship

Anyone can own a business, but what exactly sets an entrepreneur apart from a mere business owner?

It has to do with one’s definition of entrepreneurship and the values he brings with him to his business. With more than just a single-minded focus on profits and losses, an entrepreneur is one who also wants to add value to the community he operates in.

He is also a dreamer, but most importantly one with the conviction to see his ideas through.

But there is no blueprint or roadmap to set out on the entrepreneurial journey, nor is the argument of whether an entrepreneur is born or made relevant in today’s world. For as long as you have a clear vision in mind, no skeptic can pin you down.

As Shenzi Chua Siong Chee of NewUrbanMale.com sums it up: “It’s about being independent and not relying on someone else for one’s job security. It’s about using your own talents to obtain the recognition you deserve instead of always being in someone else’s shadow. It’s about challenging yourself and seeing if that business plan you had in your head all this while was more than just a theoretical one. It’s about fulfilling dreams.”

Reproduced from “Most inspiring stories from Singapore’s Entrepreneurs”, a Spirit of Enterprise publication

Mini Criteria For Writing Articles

Here’s my mini criteria for writing articles. Write something that helps people:

1) Save time.
2) Save money.
3) Where to look for help.
4) How to do it yourself.
5) Find more people.

When you finish writing one, upload a .txt file in your domain. Example: www.yourdomain.com/yourarticle.txt

Then go to Copyscape and key in the text URL to do a plagarism check. Amend further.