The mood amongst most of these companies, however, remains upbeat. Most now point to the recent worries about Chinese frauds as the reason for the bigger pullback in the entire sector. Most say they have received no uptick in questions from their own investors about their auditors or their own corporate governance.
One thing I couldn't help but notice, as I drove around Beijing, was the large number of advertisements being bought in the offline world (as in buses, billboards or kiosks) for new private consumer-oriented e-commerce sites such asLashou.com(the No. 1 group-buying site in China),VANCL(a clothing retailer) and Tmall.com, which is part ofTaobao(of whichYahoo!(YHOO-commentary-Trade Now) is a 40% owner).
Most of these companies expect to hold initial public offerings in the next six to 18 months. They have obviously been trying to drive traffic to their sites in the last few months in order to dress themselves up for investors -- and they don't mind spending money to do it.
Earlier this week I met with a company calledLetao.com, which is also private but experiencing extraordinary growth selling shoes online. Some refer to it as theZapposof China even though there are subtle differences that, in some ways, make the company a more attractive business. Letao is probably further away from an IPO than some of those other companies I've mentioned. Even though they have money to spend on advertising, it is trying to do this wisely, through search marketing and group buying primarily. Nevertheless, Letao is aware of the feeding frenzy for buying ads of all kinds in China now, and it sees how this is leading to higher ad prices each time they renew.
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