The site for cultured folk

Culture not cash with Douban yet to make a profit

Douban w

Creative bunch: office of the Chinese website

For years, many of China’s internet companies have been dismissed as imitators of successful American firms. And it’s true to say that many of the biggest internet names like Baidu, Alibaba and Sina Weibo have borrowed ideas from Google, eBay and Twitter respectively – at least at the beginning of their commercial lives.

So when there’s a Chinese internet firm that doesn’t have an obvious Western equivalent, that definitely get investors’ attention.

Douban has been around for a while, bringing in $2 million in its first batch of fundraising in 2006 and several million more in 2009. Two years later, it raised another $50 million in a Series C funding round from Sequoia, Bertelsmann Asia Investments and Trustbridge Partners.

Little known outside China, Douban is named after a spicy Sichuanese sauce and serves as China’s most popular platform for discussion of anything cultural. In its most basic form, the site is a forum where contributors can discuss or review books, films and music. It also has a social networking angle. TechRice, a technology blog, calls it China’s “truly original social network”.

Founded in 2005 by Yang Bo in a coffee shop, Douban now has more than 72 million registered users, with monthly visits of nearly 200 million. The site is so popular it has even turned some of its contributors into minor celebrities, like Lao Huang, a critic who writes extensively in the film forum.

Like many internet firms, Douban has had less success making money than attracting an online audience. The company reckons that it will be “nearly profitable” this year with expected annual revenue of Rmb80 million ($13.17 million), says Tencent Technology, an internet portal. Renren, another social networking site founded at around the same time as Douban, reported $176 million in revenues last year.

“After eight years of hard work, Douban has plenty of fame but no fortune,” is Southern Weekend’s verdict.

The problem? Unlike other social sites that have commercialised as soon as they reached critical mass, Douban has held off on plans to monetise its audience. In fact, it didn’t even sell advertising space until 2010 and even now the commercial presence is sparse and infrequent.

“I really want to know how Yang Bo makes money with so few ads on the site. How do you feed so many people and maintain the daily operations of Douban?” one user asked.

The company has been trying to expand its revenue streams. Douban also makes money from commissions by directing users to online book retailers like Dangdang and Amazon China. But sales have been slow, perhaps because many of its users are less inclined to purchase the bestseller items that drive business at many online booksellers. “Those wanting One Hundred Years of Solitude might click a link on the site to buy from the online retailers. But those wanting How To Become the God of Stock Picking [a major bestseller] almost definitely won’t be clicking on the links [meaning that these sorts of readers aren’t likely to be a fan of the site]. In fact, it’s hard to say whether Douban users even discuss that type of literature,” TMTPost, a technology news portal, muses.

Another source of income is Douban Movies, one of the two most popular film review sites (the other being Mtime). While Mtime is dedicated primarily to film reviews, Douban Movies likewise offers a ticket-booking service that allows cinema-goers to choose their seats online.

Douban has also introduced a social shopping channel called Dongxi, where users can browse various product lines, such as consumer electronics, cosmetics, food and garments. The company takes a commission by directing users to other e-commerce sites like Taobao and Tmall for the final sale. Douban says that it launched Dongxi after finding that 20,000 out of 38,000 interest-based discussion platforms on the site are related to shopping.

Investors don’t seem to mind that Douban is not delivering a profit. “We are certainly not in a hurry to push Douban to make money. Douban is the only company in China that isn’t modelled after other internet firms in the world and we are very patient with our investment,” says Long Yu, managing director of Bertelsmann Asia Investments.

© ChinTell Ltd. All rights reserved.

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.