A US media giant is racing to capture China’s booming internet market. No, we are not talking about News Corp, the media company controlled by billionaire Rupert Murdoch; nor Disney or Viacom, either.
As it turns out, CBS, the US television network, has been quietly developing a presence in China’s internet industry through its interactive unit, CBSi. When CBS bought CNET Network, the struggling internet firm, in 2008, the $1.8 billion deal also brought with it several mainland internet firms. One is ZOL, which is a portal for internet and technology information. Another is 5izk, one of China’s most popular online coupon sites. After the deal was completed, both the mainland firms were put under CBSi.
Since then the company has used $200 million to acquire 20 other Chinese internet firms. In 2009, CBSi’s China operations made about $60 million in revenue from China – 10% of its global sales – surpassing the UK as the company’s second biggest market after the US. Though the company doesn’t disclose its bottom line performance, Wang Lu, president of CBSi China, told CBN Weekly that the mainland division is definitely turning a profit.
Its success has caught many industry observers by surprise. China has been a notoriously difficult market to crack for overseas internet companies. Google, eBay and Yahoo, not to mention social networking sites like Facebook and Twitter, have all struggled, in the face of strong domestic competition as well as government blocking and censorship.
Part of the company’s success, says CBN Weekly, is that it has avoided many of these headaches by focusing on e-commerce and specialised websites in the IT and auto domains — and sidestepping the difficulties of government censorship. Focusing on niche sites also means CBSi does not compete head-to-head with large domestic players like Baidu and Alibaba.
Moreover, CBSi has dodged criticisms that foreign internet firms are clueless about the needs of local internet users. Instead of applying a foreign business model, the company has kept local managers in charge but also forged strong capital partnerships. This hands-off management style has won the company respect locally. “We believe that China’s internet industry should not be a product of globalisation, and should retain distinct local characteristics,” says Wang.
What’s next? CBSi is looking to attract female internet users. Some of CBSi’s recent investments in China include fashion and cosmetics site Haibao.com, cosmetics and beauty products site Kimmiss.com, and (wait for it) dream interpretation site 51 jiemeng.com. The three sites, along with OnlyLady.com, which CBSi already owns, will be integrated into one platform to target female internet users, a segment that is growing increasingly lucrative because women traditionally spend more time on the internet than men, an executive for CBSi told Sina Tech. He added that the company expects the new unit to generate Rmb100 million in operating revenue this year.
In large measure, CBS is hoping that CBSi’s success in the internet sector will eventually help it to get access to China’s fast growing TV market. The company is said to be in talks with state-run Xinhua News Agency to set up a joint venture that will tap shows from CBS’s programme library, which holds series such as CSI: Crime Scene Investigation and Survivor.
But getting into broadcasting in China is not going to be straightforward. Just ask Rupert Murdoch. After years of frustration over government restrictions, News Corp sold a controlling stake in three Chinese television stations and a movie library to a private equity fund backed by the Chinese government (see WiC74) in July.
Will the CBS approach see more success?
© ChinTell Ltd. All rights reserved.
Exclusively sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.