Dotcom economy

cctv.com 02-12-2004 16:55

At the end of last year, two major events in China's Internet market attracted international attention. The number of net surfers exceeded 80 million, and is still increasing. And Ctrip.com was listed on the NASDAQ with an 89 percent increase in its share price on the first day. What does this mean for China's Internet market and how are domestic dotcom companies doing?

Internet use has been expanding at such a rapid rate in China that the traditional friendly greeting of "Have you eaten?" has been replaced by "Have you surfed the net?" The Internet has totally changed Chinese people's way of life. Without leaving your room, there's so much you can do online, ranging from education, meeting people, playing video games and shopping. Dotcom enterprises seem to have moved out of slump with Ctrip achieving unprecedented earnings on the NASDAQ and more (dotcom companies) planning to go public on the international market this year. Economic specialists believe that economic growth in different areas is closely related to the development of the information industry: the greater the internet access, the faster economic growth.

Ensuring that the world's capital markets maintain confidence in them is one problem China's professional dotcom enterprises have to face. People still remember that when the three main Internet portals were listed on NASDAQ three years ago, it soon became a symbol for the emergence of a bubble economy in China. Have China's dotcom companies become any more mature with the backup of 80 million net users? Or is it a new bubble emerging? These are some of the problems concerning people in the wake of the temporary success of dotcom enterprises.

In December 2003, Ctrip.com, a Shanghai-based online hotel, air ticket and holiday service provider, was officially listed on the NASDAQ. The stocks were priced at US$18 and rose to US$33.90 at the close of after-hours trading, a rise of about 90 per cent, the highest debut on the NASDAQ in three years. Financing experts affirmed that this would encourage many more dotcom companies in China to go public on international markets.

Ctrip.com features in many travel service offerings. In 2000, the company acquired the country's biggest traditional hotel reservation center, and in 2002, a professional air-ticket booking company. Ctrip is now China's largest hotel agent and has established the largest professional air-ticket booking service network, covering 35 cities in China.

The company coordinates information on hotels and flights, and enables customers to make informed and cost-effective hotel and flight bookings. It acts as an agent in a substantial proportion of booking transactions in China. Ctrip cannot be compared with China's three main Internet portals, namely, Sina, Sohu and Netease, in terms of brand recognition and profits, but its popularity on Wall Street was no accident, nor was it the result of some blind impulse from US capital markets. Today, NASDAQ puts more value on focused business, as well as stressing good prospects for making profits.

Another important point is that the US capital market may not really know about Ctrip nor the actual operation of this dotcom enterprise, but its enthusiasm is backed by the confidence of a large number of net users. Statistics show that there are over 80 million net surfers in China.

The 80 million and still increasing net users constitute a large consumer group. They skim the news, chat with online friends, or play games. Online game enthusiasts, in particular, are the most active consumers. These net surfers of different ages go online to play their favorite games either at home or at work. But most of them prefer internet cafes, where there is a special atmosphere and a sense of identification with other users.

Baidu.com is a professional dotcom enterprise specializing in search engines. Targeting to list its initial public offering on NASDAQ this year, the company has developed unique technological advantages over other Chinese search engines, including advanced searches, time searches, regional searches, and news reminders. Morgan Stanley, which helped Sina.com go public, will do the same job for Baidu.com.

For China's Internet enterprises, going public on the NASDAQ is a symbol of success and the dream of many. About a dozen professional dotcom companies like Shanda and Baidu are planning to get listed on NASDAQ. These dotcoms offer specialized services in certain areas and have their own ways of attracting targeted resources and customers. They also have different business modes and many of them have been making a profit for a long time. The three main Internet Portals didn't even have these advantages when they went public in the US. So these dotcom enterprises that are planning to be listed on the NASDAQ will offer investors something more substantial and real, which in return reinforces investor confidence. But there are still some problems.

A dozen dotcom enterprises being listed on the NASDAQ sounds like heartening news, but in fact, there is likely to be a considerable gap after the listing of these companies. Many more similar enterprises with favorable business prospects are still to emerge. For the large number of Chinese net users and potential future users, these existing Internet companies are far from enough to meet the full variety of consumer needs. On the other hand, this problem demonstrates that there is still room for the development of dotcom enterprises in the country. Hopefully, people's worries will prove unfounded.

Editor:Zhang Wenjie  Source:CCTV.com