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Jaime Gottlieb
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A south Florida native, Gottlieb is a Creative Writing graduate from Florida State University and was a freelance Arts and Entertainment feature writer before joining ADOTAS in 2004.

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China’s Online Market: Growing Up Too Fast?

Written on
Dec 6, 2005 
Author
Jaime Gottlieb  |
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China’s Online Market: Growing Up Too Fast?


And catch up they will, but not without a few bumps in the road ahead. Take for example the rush to Baidu: during their recent IPO, everyone ran, not walked, to their nearest stock broker to get themselves a piece of the action, blowing up the scene with that 353 percent explosion. But then a couple of analysts shot the company’s value down, pegging it as overvalued and assigning an “underperform” rating to the stock—which left it more than 48% off its trading high of $153.98. And to add insult to injury, this week a Beijing court ruled against the company for allowing free downloads on its web site, finding that Baidu must now compensate the EMI record label for lost revenues.

Baidu may be but one company, but the overvaluation and the hysteria it caused in our own marketplace is worth batting an eyelash or two at. Does it preface a broader trend we ought to be concerned about? Could we be moving a tad too fast for a Chinese internet marketplace that may not yet be fully prepared for such momentum?

Palmer, for one, doesn’t think so. On Baidu’s stock fluctuation, he offered “Sure, this kind of huge price swing brings back memories of the dot-com boom and bust… [but] Baidu, for one, is reporting real revenues and in fact reports that it is profitable. So that’s a very different situation from the Internet overload of the late 1990s, when investors shifted their attention from revenues and profits to other, non financial measures.” Still, he admits that some caution may be appropriate, as “any new and somewhat unknown market is likely to be highly volatile.”

But from his perspective the time to ask questions about whether, given the risks, it’s worth it to invest in China are over. “Plenty of companies and industries have been burned in China [in the past],” Palmer says. “However, the situation is different now than it has been…Western companies once were attracted by the sheer size of the market; now they are attracted by a large and growing consumer class. There’s plenty of risk but, again, the market is too large for any company with global ambitions to ignore.”

With so much money and faith moving quickly into this particular foreign market, it seems important, in closing, to ask one question no one seems much interested in answering in these heady days. It is a question of threat. Isn’t it possible—and increasingly likely—that China could come to take the reigns of the internet marketplace? Does a Baidu or an Alibaba in the making, some entity we haven’t even yet heard of, have a shot at dethroning the likes of Google or Yahoo as masters of the internet universe all the way from the Eastern hemisphere?

Yahoo, at least, isn’t so concerned about that possibility. When I spoke with Yahoo spokesperson Mary Osako, she offered nothing but an excited outlook on their Alibaba deal and how it will affect their China standing. “We believe that through the Alibaba deal, we will combine the best of commerce, search and communications capabilities in new ways for consumers and businesses in China,” Osako said. “The combined company will become one of the largest Internet companies in the fastest growing Internet market in the world. We believe this is the most appropriate strategic structure in order to continue to grow and achieve a market leading position.”

Palmer, who was willing to address the matter as well, also sees only bigger and better things in the China market, even if that means the U.S. has to hand over the blue ribbon. “International borders are no longer the barrier that they once were,” Palmer said, “so there’s no reason to think that a successful online company in China wouldn’t look to crack the U.S. as well.” And from a global business perspective, that might be just fine.





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