When people talk about the Internet in China, many of them think immediately of three portals: Sina Corp, Sohu.com and Netease.com.
In their eyes, the three portals represent the Internet.
The development process of the three portals is basically the process of the development of the Internet in China; their ups and downs represent the ups and downs of the Internet in China; their prosperity mirrors the popularization of the Internet among the whole population; their miracles on the capital markets and the emergence of company officials among the richest Chinese are evidences of the emergence of the New Economy in China.
A portal is the foundation of the Internet content and services. But will the "Portal Era" last in China? Most people take it for granted, but the fact is that there are changes taking place unnoticed and the Portal Era is nearing its end. A new Service Era surrounding individualized service is coming.
Portals provide the most basic needs of most netizens: Contents such as news and information gain top ranking; mail and search engines are supports; the other services are extensions.
In China, Sina established the basic model of Internet portals and it represents the highest achievement in terms of competition in content. But the Portal Era may end because of these reasons:
In the past two years, Internet portals have made strategic mistakes and the major one concerns short messaging service (SMS). If there is a free lunch, portals still need to pay attention to making money. Because it is easy to start SMS, portals have focused on SMS in the past two years and ignored their main businesses, not to mention their core competitiveness.
The portal model is also facing challenges. The core factor of the success of Internet portals is their attraction for the majority of netizens, so they must meet the basic needs of most Internet users. However, as the population of netizens grew from several millions to almost 100 millions at present and will grow to hundreds of millions in the next few years, the content and services of portals must change in accordance with consumption characteristics and demands. A fundamental trend is the transition of Internet user population from a so-called elite class to ordinary people. Cultural background, incomes and consumption levels will continue to go down, so the tendency of portals to aim for the lowest common denominator is inevitable. So it is not strange in recent years, we have seen the standard of portals continue to go down.
But who will meet the standards of the so-called elite-class? It is not easy to solve this dilemma and it will continue to be highlighted.
The key factor is: As the portals become more common in attitude, professional service websites of online games, personal short messages, instant messaging, wireless services and e-commerce are rising and they are overcoming the gap between comprehensive and professional services. They focus on target services and customers and are hitting the mother lode.
So, when will the Service Era of China's Internet industry will arrive? Actually, the basic scenario has already formed and we only need to observe landmark events. Service-oriented latecomers do not have the media characteristics of portals and their areas are not as in demand as portals. Shanda and Tencent grew up with little notice from the industry, while every move of Sina, Sohu and Netease is watched by the public.
The leadership of Sina among Chinese portals is without any doubt, followed by Netease, Sohu and Tom Online. Among Internet service operators, Shanda has stood out, and Alibaba.com, Eachnet and Linktone follow. The top operators in the two camps are almost equal in terms of business scale, but it is inevitable that when one side grows, the other one will lose.
If I had to buy some stocks of the Internet companies with a China concept, I would choose between Sina and Shanda. Between the two, I would select Shanda.
Xie Wen (former president of Chinalabs.com Ltd and current chief executive officer of the leading Chinese financial information website Homeway) thinks the future of the three leading portals will still be very bright if Charles Zhang of Sohu resigned from the post of chief executive officer and recruited professional managers, if the board of Sina could play a bigger role and overseas executives loading is reduced, and if William Ding could drop his stakes in Netease to less than 50 percent (from the current about 58 percent) in 2004. Otherwise their road will become narrower and narrower.
(China Daily September 15, 2004)
