China’s internet penetration rate is approximately 38%, which is very low compared to developed economies. Chinese internet companies are adopting various strategies to increase the penetration. Internet usage in China will to rise to 718 million users by the end of this year compared to 538 million users by end of June 2012. These three Chinese internet companies are providing various facilities to increase their penetration in the market. Let’s discuss each in detail.
Initiating e-commerce for higher profits
SINA Corp (NASDAQ:SINA)’s blogging website, Weibo, grew its user base by 6% quarter-over-quarter to 536 million in the first quarter. This website contributed revenue of $25.8 million, which is around 20% of total revenue.
Weibo’s revenue comes from two segments: value added services and advertising. However, the company wants to diversify Weibo’s revenue by including e-commerce services for its users. Therefore, on April 29 it formed a strategic alliance agreement with privately owned Alibaba group, a major player in providing e-commerce platforms to Chinese residents. Under this agreement, Alibaba acquired 18% of SINA Corp (NASDAQ:SINA)’s shares for $586 million. This deal will accelerate SINA’s entry into e-commerce, and Weibo will account for 30% of the total revenue by the end of 2013.
Value added services on mobile devices accounted for 13%, or $15.9 million, of the company’s revenue in the first quarter. There were approximately 1.1 billion mobile users, out of a population of 1.4 billion, by the end of 2012. With the high number of mobile users, the company is developing more applications, or apps, for mobile devices including apps for financial news, sports, and many more. This will increase revenue from mobile value added services to $66 million by the end of 2014.
Strong revenue growth from gaming
Renren Inc (NYSE:RENN)’s online gaming revenue grew 52.9% year-over-year to $26.7 million in the first quarter, accounting for 57.3% of total revenue. With the growing rate of Android use among Chinese residents, it will increase the number of subscribers from 222 million in 2012 to 300 million in 2013. Therefore, the company plans to launch various games on the Android platform, and make existing games Android compatible by the end of this year. This strategy will contribute towards the gaming revenue from $90 million in 2012 to $160 million in 2014.
Renren Inc (NYSE:RENN)’s e-commerce website, Nuomi.com, reported revenue growth of 105%, year-over-year, in the first quarter of 2013. This accounted for 11% of the company’s total revenue. Approximately 30% of its transactions came from mobile devices compared to 20% in the first quarter of 2012. The company will launch Nuomi’s mobile app for Android and iOS mobiles by the end of this year, as these devices dominate the market. Additionally, Nuomi is present in 59 cities and plans to expand. These strategies will increase Nuomi’s revenue from $16.1 million in 2012 to $28.5 million in 2013 and $42.5 million in 2014.