Wireless value added services providers in China are switching their focuses, after latest shake up in the sector, which began when China Mobile implemented its user protection policy last July.
“We are developing cross media advertising services to diversify our business. We want to decrease our dependency on wireless services and China Mobile,” said Edward Liu, investor relationship director of Linktone, a wireless value added services provider listed in Nasdaq.
The company currently gets 95 percent of its revenue from providing wireless services and 70 percent from China Mobile alone. But the latest shake up in the sector is making the company to re-think about their long term direction.
Linktone wants to be an advertising company. Company CEO Michael Li talked about the bright prospect of China’s media market in conference with analysts in the latest quarter result announcement.
The company’s newest services are to offer advertisers, such as chip maker Intel, TV advertisements together with some interactive promotion services through the wireless platform. It had made a deal on interactive wireless services with Shanghai Media Group, which controls the TV and radio stations in China’s second largest city, and it has also become the exclusive advertising agents of a second tier television station in China, Qinghai Satellite Television.
Whether Linktone can revive itself via its new direction remains questionable, but its determination to find new opportunities other than China Mobile is clear.
Linktone targeted its non-wireless revenue to be 20 percent by year end and by the end of 2008, it hopes to decrease revenue from China Mobile to 50 percent, said Mr Liu.
Other wireless value added services providers are doing the same. “Hurray, another Nasdaq listed services provider, want to be a record label company,” said Dick Wei, China internet analyst of JP Morgan. The company acquired a local record company, Secular Bird, in March. Before that it has signed up local singers and published its own music albums.
“The largest wireless service provider Tom Online is developing its internet presence,” said Jin Fei, analyst of Beijing based market research firm, Analysys. Tom Online has a joint venture with U.S. based internet telephony services provider, Skype, to develop its China operation. It has also acquired online auction giant eBay’s operation in China.
“Sina and Sohu are not highly enthusiastic on wireless services anymore. Their online advertising is growing strong. Netease focused on online game,” said Mr Wei.
The only major third party service provide which remain to focus on wireless service alone is Kongzhong. “But even so, Kongzhong is focused on developing free WAP, services which does not depend on China Mobile for collecting revenue,” said Mr Wei.
Last July China Mobile issued a series of new rules for user protection. All service provides are required to send reminder to all existing subscribers on their active subscription during last August and September. Moreover, one month free trial and double confirmations are needed from users for subscribing any new monthly services.
The one month free trial has stopped since last October, while the other rules remain. The incident caused significant revenue and profit drops to the wireless value added service providers.
“I believe those policies were indeed aiming at making a healthier business environment. After all, incidents, such as, users got cheated for paying for services they do not want, are happening in China,” said Mr Jin.
“But on the other hand, it is also nature for China Mobile to want a bigger share of wallet from its subscribers,” said Mr Jin.
Value added services have become more and more important for China Mobile to sustain its growth. China Mobile’s revenue from value added business reached 69.3 billion yuan last year, up 38.1 percent from a year ago. It accounted for nearly a quarter (23.5 percent) of China Mobile’s revenue.
China Mobile is not longer solely depending on the third parties to provide value added services. They are offering those services themselves and actively promoting their own brand of services, said Mr Jin.
Mr Wei also agreed China Mobile want a bigger share of revenue on valued added service. For some services, such as interactive voice responses, China Mobile required a higher commission of 30 percent, said Mr Wei.
“In long term, I believe more revenue would go to the mobile operators and content providers (such as record labels) and less to the wireless value added services providers,” said Mr Wei.
If that is the case, is there any future for the third party services providers? “I believe eventually the sector is going to revive. After all, China mobile can not do everything on its own. It will need the third party service providers for some services,” said Mr Jin.
But different companies might revive at different rate and via different paths, said Mr Jin. For example, impact to Hurray has been the least for the current shake up. “This is because Hurray is able to switch from monthly base services to message based services. China Mobile’s policy change last summer affected mostly the monthly base services,” said Mr Jin.
I am a journalist and I work for the leading English language newspaper in Asia, South China Morning Post. For the past two and a half years, my focus is China Internet. I witnessed its increasing importance in the Chinese society and its gradual acceptance to investors worldwide.
More about Me
- Sherman So
- Before that, I worked on a startup with a partner and had been a business strategist of a Hong Kong tycoon who wanted to develop Internet business as an extension of his hotel and property enterprise. I hold an MBA and my undergraduate degree is computer science major. Just like many of the entrepreneurs I talked to in my job, I had had the same dream as founding my own company as Internet emerged. I took the job as journalist because I wanted to have first hand access of the development of China Internet sector, as many of the material written on the subject looked shallow if not bizarre, as if they were done by someone don’t know much but merely to satisfied an instant curiosity on the subject. Or they just looked a single factor of the whole picture.
Book draft - China Internet
I am currently working on a book about China Internet.
With both business and reporting experience, I think I can write a book that is comprehensive, informative and entertaining, reaching audience worldwide who really want to know about China Internet, entrepreneurships in one of the world fastest developing economy, as well as a good story.
Helping me to write the book is a former colleague of mine, James Allen, who has been business editor for the past twenty years – working for prestige business news agencies, such as, Wall Street Journal, Reuters, Bloomberg, etc.
view Book draft - Introduction
view Book proposal
With both business and reporting experience, I think I can write a book that is comprehensive, informative and entertaining, reaching audience worldwide who really want to know about China Internet, entrepreneurships in one of the world fastest developing economy, as well as a good story.
Helping me to write the book is a former colleague of mine, James Allen, who has been business editor for the past twenty years – working for prestige business news agencies, such as, Wall Street Journal, Reuters, Bloomberg, etc.
view Book draft - Introduction
view Book proposal
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