China Dotcoms to Survive by Self-supporting

Survive or die, it depends on yourself.

China's pure dotcom companies, who used to flatter the venture capital support for survival, have to face the acute situation since the tumbles on the U.S Nasdaq stock market has also cooled down foreign investors' enthusiasm in China's Internet market.

Many venture capital investors (VCs) have claimed that they will no longer invested in the pure dotcom companies.

However, those VCs cultivated and supported hundreds of Chinese-concept Internet start-ups in the past two years.

Since most of them have not yet gone public to develop a normal capital-raising channel from the stock market, VC's withdrawal resulted in two consequences: die or survive through self-supporting.

``It's not a fussy assertion that 90 per cent of Chinese dotcoms will go bankruptcy by the end of this year,'' said Zhi Tan, chief executive officer with 8848.net.

``The Internet companies should seek ways to grow up by themselves, and the external support can only play a sub role.'

In an effort to become profitable, a popular trend among e-commerce dotcoms' strategy transitions is shifting from the B2C or C2C to B2B mode.

8848.net, China's B2C flagship player, also bows to the pressure of profit perspectives.

The company became known for its Chinese-version of Amazon.com to establish an online supermarket for consumers.

After one-year B2C operation, 8848.net has shifted its development strategy to build an e-commerce application platform for the country's small-and medium-sized enterprises (SMEs) since the second half of this year.

Tan claimed that the company will take advantages of experienced online service and good market reputation to help those SMEs apply their own e-commerce services on the open platform of 8848.net.

The company has signed co-operative agreements with the State Economic and Trade Commission (SETC) and seven provincial governments to popularize the e-commerce applications among the country's SMEs.

Statistics show that China currently has nearly 17 million SMEs. However, many of them, in lack of computer know-hows and necessary Internet accession equipment, can hardly take use of Internet for business operations.

Experts say that the country's Internet service providers (ISPs) have already dominated the SME Internet application market before the dotcom companies began to be involved in.

Yabuy.com, a popular C2C online auction Website, recently also joined with banks and enterprises to conduct B2B services.

Experts say although China's Internet players rush to promote e-commerce as a creative business mode heading for the new economy, few of them can break through the last-mile barriers against the online purchasing.

These barriers have been attributed to the lacks of a standard credit system and an effective express network, two critical elements for the operation of online shopping and business transaction.

``Whatever e-commerce mode adopted by Chinese dotcoms, B2C or B2B, they must experience a hard time to cultivate the markets,'' said Liu Zheng, an economist with Chinese Academy of Social Sciences.

Moreover, Liu said that the qualified B2B services, unlike B2C on the basis of social resources, need strong technology and personnel support.

``The pure dotcom players, with less than two-year operation experiences, are unlikely to meet the standards,'' said Liu.

He predicted that only a few of them can survive to be successful in the next few years.

Seeking another way for survival, some Internet start-ups began to bundle with the off-line businesses.

Shanghai-based C2C auction player Eachnet.com acquired a mobile phone retail chain store to extend its profit portfolios.

The typical convergence case of online and off-line operations is Guaweb.com, a joint venture invested by China Guardian Auction Corp, Hong Kong Telecom and Japan's Softbank.

``The establishment of Guaweb.com is naturally extending the traditional auction business onto the Internet platform,'' said Angela Lu, CEO of Guaweb.com.

``We are not anxious to make money, but serving as an auction information platform at the initial stage.''

Guardian Auction, known for its art works operation, is one of China's leading traditional auction players.

Guaweb.com itself extended the platform to serve mass consumers by acquiring Clubciti.com, a C2C auction Website.

Lu said that China's dotcom companies should adopt a business mode coincided with China's living traditions.

``It's a main reason for those Ebay imitators have never succeeded in China where people don't like buying second-hand products,'' said Lu.

Lu said that It's an effective way for pure dotcom companies to combine with the traditional businesses.

``The key part of e-commerce is just commerce, the traditional one.''

Till now, the most successful Internet start-ups in China, to some extent, are the four Internet portals listed on the Nasdaq stock market.

The most unfortunate dotcom companies, however, are those ICPs (Internet content providers) except Sina.com, Sohu.com, Netease.com and China.com.

``It's a proved principle that the first ICP is great, the second and the third are OK, and the rest are forgotten,'' said Daniel Mao, chief operation officer with Sina.com.

Although Sina also opens a shopping mall on its Website, more than half of its revenues come from online advertisement.

``The revenues of online advertisements are the real money made through the Internet,'' said Mao.

He noted that by accurate calculation, a big part of so-called e-commerce revenues are gained off line.

Although most of dotcom companies keep losing money, the online advertisement revenues will be their main profit source in a long period, Mao said. (China daily)



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