Twitter's Doing Exactly The Right Thing Cutting Off Leeches

Twitter's doing exactly the right thing by taking back ownership of its own product and shutting off LinkedIn from leeching off its success.

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New Rumor: Facebook Seeking Local Partner To Enter Mainland China

Mainland China is usually never short on rumors in tech.  However, Marbridge Daily is usually very reliable.  It reported that Bank of America (BAC) would be unloading its stake in CCB several months before it happened last year.

Now, this morning, it’s reporting (via DoNews) that Facebook is preparing to enter the Mainland Chinese market through a joint venture with a local partner.

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Google Still Does $640 Million In Annual Revenue In China

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The Story Behind Today's Earlier Bogus Sina Rumor

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How to Invest in China

From last week's RealMoney....

Stock quotes in this article: 

BIDU

, 

GS

, 

GS

, 

YHOO

, 

SINA

, 

YOKU

, 

PWRD

With CEO Allen Chan's departure from Sino-Forest earlier this week and the halt in trading of its stock, many investors are scratching their heads and wondering how or if they should invest in China.

I've even heard some commentators on TV say that since the Shanghai index has been flat or down in the last few years, this is proof that China is not a great place to invest. Yes, but most people invest in particular stocks. For example, i\If you bought into Baidu(BIDU) at its March 2009 levels and held on to it until today, you would be up 845%. That's not bad.

Of course, if you've invested in Sino-Forest or some of the other Chinese frauds, you have taken massive hits.

So how should you proceed? Here's my advice.

1. Don't ever put your money in a Chinese Reverse-Takeover (RTO) again. There might be some good ones out there, but I can't name any. It's not worth it. There is way too much risk for the potential return.
2. Don't think a Big Four auditor is a guarantee that everything at a Chinese company is kosher. Longtop Financial had one. So did China Agritech. Both are now trading on the pink sheets.
3. Don't think a big name investment bank is a guarantee that a company is legit.Goldman Sachs (GS) took Longtop public a couple of years ago.
4. All things being equal, it's safer to invest in the bigger-cap Internet companies in China -- and they are less likely to manipulate numbers compared to a manufacturing companies over there. The big dogs of the Chinese Internet are Tencent, Baidu, andAlibaba Group. Alibaba is still private but Yahoo! (YHOO) owns 40% of it, which is why I love Yahoo! Sina (SINA) is trying to break into this small group of big dogs and probably will in the next couple of years as its Weibo users grow.
5. Beneath the "big dogs," there is much more risk, so pick category winners. Sina is the category winner in Weibo (Twitter). Youku (YOKU) is the category winner in online video. Taobao (part of Alibaba Group) is the category winner in e-commerce.
6. Look for value plays. Online gaming in China is severely undervalued at the moment -- especially compared to the expected valuation that Zynga is going to get when it launches its IPO. My two favorites in that space are Perfect World (PWRD) and Giant Interactive (GA). I also think Mecox Lane (MCOX) is massively undervalued compared to Dangdang (DANG).
7. There are no guarantees in China. The Chinese government could rewrite the rule book tomorrow. The whole Alipay incident with Yahoo! shows the risks of Chinese investing. Just as it's possible in the U.S., There could be a big accounting restatement in any of the "big dogs" at any time. However, I think there is still another 18-36 months of growth ahead for China before a major correction, so opportunity does beckon for the right companies.

At the time of publication, Jackson was long YHOO, SINA, PWRD, YOKU and MCOX, although positions can change at any time.

TAGS: 

CHINA

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RISK

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INTERNET

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Mecox Lane Is A Bargain Here

My investment thesis for why I like Mecox Lane at these current prices before next Tuesday's earnings.

Read the full post on Forbes.

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China's Train Crash in a Coal Mine

By Eric Jackson08/03/11 - 08:51 AM EDT

NEW YORK (TheStreet) -- With all the noise surrounding the debt-ceiling debate over the last few weeks, you might not have heard about a terrible train crash in Wenzhou, China that took place nearly two weeks ago.

The collision of two high-speed trains killed at least 40 people and injured almost 200. Authorities said a lightning strike knocked out power to one train, causing it to stall, and that a monitoring device then failed to alert the second train.

From a raw numbers perspective, the Wenzhou accident isn't so different from the August 2007 collapse of a bridge in Minneapolis that caused 100 cars to plunge into the Mississippi River. Thirteen people died, and more than 100 were injured.

Firefighters and civilians search for passengers from the wreckage of the Wenzhou train crash on Saturday, July 23.

We don't talk much about that crash today. There was an 18-month investigation by the National Transportation Safety Board. The board's conclusions were that over time the bridge started carrying a higher load-bearing weight than it was designed for.

Unfortunately, we haven't heard whether other bridges built decades ago are also at risk because their current loads are exceeding their designed capacity.

There was a lot of media coverage of the Minneapolis disaster, but I can't recall much public outrage. Eventually, Anderson Cooper packed up and went home and the NFL season started.

Yet, in China, the story -- and the public anger over it -- seems to grow by the day.

I first heard about the crash via a friend on Twitter, who was monitoring updates on Sina's(SINA) Weibo service (China's equivalent of Twitter).

Although Weibo has hundreds of censors on staff, the service saw an outpouring of emotions and information about the crash, which I believe is the first major Chinese tragedy since Weibo became used on a widespread basis.

I wonder whether people used the service as a release valve -- one that had never been available to them before.

[Read the full post in TheStreet.com here]

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Future of Chinese E-Commerce

By Eric Jackson 07/20/11 - 06:00 AM EDT

NEW YORK (TheStreet) -- Last month, I met about a dozen Chinese tech companies to get a better sense of the businesses and industry trends in China that affect e-commerce companies.

All but one of the companies I met with are public. The only private company was called Letao, and it sells shoes in China. Because of that, it's often called by Americans "the Zappos of China." However, there are important differences.

Letao does all its sales entirely on consignment. Also, because it makes more money on private label sales than reselling premium brands, Letao has been putting a big emphasis on its own white label shoes recently. It started as an ecommerce toy company but switched to shoes last year when it believed the market opportunity there was bigger.

Letao also has some big American backers behind it, including Tiger Global. Although there are no plans for an immediate IPO, that is certainly in the cards for Letao at some point.

Here's an edited version of my conversation with Eric Chai, the assistant to the CEO at Letao.

Eric: Tell us about your CEO.

Chai: Letao's CEO, Mr. Bi, used to be the assistant to Robin Li in Baidu(BIDU_).

Eric: And how many employees do you have?

Chai: We had 100 last year, but this year we have 500. The growth occurred after we made the transition from selling toys to shoes.

Eric: What do you think about all the group buying sites that are prevalent in China today?

Chai: I believe only two or three group buying sites can survive; we only collaborate with them so we can reach more people. Since the third quarter of 2009, we started cooperation with Groupon, Lashou and Nuomi. But since we have the customers now, we don't need to spend as much money to use those group buying sites anymore.

Eric: So how do you market yourself?

Chai: We have a very unique business model. We have some private brand names such as Angry Birds from Rovio, and these cheap products can attract many customers. We collaborated with Focus Media(FMCN_) before, but the commercial fees are high, so this is one of the reasons why we created the coupon strategy.

[Read the full post here at TheStreet.com]

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Fixing E-Commerce: China Watch

NEW YORK (TheStreet) -- Contributor Eric Jackson details his findings regarding Chinese e-commerce and what companies need to do to fix problems they currently face.Fri 07/08/11 05:15 AM EST -- Brittany Umar & Eric JacksonStocks in this video: FDX SINA AMZN NTES SOHU YOKU UPS

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Things Never End Well, Otherwise They Would Never End

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Why the “Winner Takes All” Strategy Doesn’t Always Work

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My First-Hand Impressions of the Chinese Tech Sector

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Wall Street Journal China Opinion: 谁将是通吃的赢家？

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Don't Bail on China Tech Stocks

By Eric Jackson
RealMoney Contributor
6/28/2011 1:30 PM EDT
Click here for more stories by Eric Jackson

The second quarter has not been kind to Chinese tech stocks. After flying high from January to April, big China techs such as Sina (SINA - commentary - Trade Now), Sohu (SOHU - commentary - Trade Now) andBaidu (BIDU - commentary - Trade Now) got walloped. Newbie China tech IPOs such as Youku (YOKU -commentary - Trade Now), Dangdang (DANG - commentary - Trade Now), and Qihoo 360 (QIHU -commentary - Trade Now) got hurt even more.

There were many reasons for the sharp pullback in these China tech stocks, some of which are listed below:

• the general market pullback meant that these high-beta names pulled back even more;
• more evidence of fraud in China stocks spreading from smaller reverse takeover companies to larger companies such asSino-Forest and Longtop Financial (LFT- commentary - Trade Now);
• continued worries about a China Internet bubble and concerns that this was the beginning of the end; and
• Jack Ma transferred out Alipay from Alibaba, sending Yahoo!'s (YHOO - commentary - Trade Now) shares down and worrying Americans that there is no rule of law in China.

In the midst of this wave of bad news and worry, I happened to be traveling through China, meeting with several tech companies. I was asked about if we were in a bubble more than anything else while I was there.

What I said then and what I still believe now is that this is not the beginning of the end but the end of the beginning. The Chinese Internet bubble is not bursting now, and I don't believe it will burst this year. I still think we have six to 36 months of good times ahead of us. It's hard to know more precisely than that when the party will end -- at least at this point.

Translated for investors, that means you shouldn't miss out on a second-half bounce-back for these stocks.

There is a range of quality out there, however, so you need to do a lot of research and due diligence before jumping in.

I recommend you stick with two of the biggest quality names: Baidu and Sina. They are solid companies with great management teams that will continue to be in-demand sites for a long time. Everywhere I went in China, I would hear people updating their Sina Weibo status on their iPhones. That is a growing monster service, right there.

Similar to Baidu and Sina, Hong Kong-listed Tencent should also do well in the second half of the year.

...

[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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In New Crop of Chinese IPOs, There’s Not Another Baidu

Don't expect to find the next Baidu in the upcoming crop of Chinese IPOs. However, there are many niche players that will still be very profitable and successful.

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In Chinese E-commerce, Logistics Is Key

By Eric Jackson06/15/11 - 07:00 AM EDT

BEIJING (TheStreet) -- I've spent the last two weeks in China. Most of the time has been devoted to going around and talking to e-commerce and other Internet companies. The sector is hot despite the pullback in stocks in recent weeks. The mood is very positive about the growth ahead.

Most CEOs and CFOs I spoke to in the sector believe the macro growth fundamentals point to very strong growth for them in the coming quarters. You start to hear the same points repeated: only 30% of Chinese are connected to the Internet, people's incomes are moving up slightly, and people are becoming more and more interested in doing business over the Web.

In virtually every major city right now, you are bombarded with outdoor advertising for major public and private e-commerce companies including Tmall (which is part of Alibaba Group, partly owned byYahoo!(YHOO_)), Groupon competitors, 360Buyand Vancl. The latter two both plan IPOs at the end of this year.

CFOs also discuss how Web companies likeBaidu(BIDU_) and the major portals likeSina(SINA_) and Sohu(SOHU_) keep being able to raise their advertising rates because so many e-commerce Web sites are clamoring to get their ads on the front page.

But what most in the States fail to understand is how challenging logistics is in China. We take it for granted back home how easy it is to get Fedex(FDX_) orUPS(UPS_) to fulfill an e-commerce order.

Back in the early days of the Web 10 years ago, companies like Amazon(AMZN_) had to spend a lot of time getting people over the hump of trying to make an online purchase. They then had to spend some time thinking through building up their logistics infrastructure to support their growth. To Amazon's credit, they've done a fantastic job at the latter with world-class distribution centers and fulfillment process.

In China at the moment, it's really the Wild West for most e-commerce when it comes to fulfilling orders. They are still at the stage where they need to get Chinese consumers to buy. Most Chinese think of Taobao when they think of e-commerce. They know they can usually get something online from there if they want to and they've had a good experience. (It was estimated that last year within China, 50% of deliveries made were for Taobao purchases.) However, they know far less about other vertical e-commerce plays.

......

[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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Q&A on Doing Business in China

By Eric Jackson, Senior Contributor06/08/11 - 06:00 AM EDT

NEW YORK (TheStreet) -- I have been on a two-week trip to China since last weekend. Before I left, I asked several American colleagues if they had any questions they'd like me to ask the "real" Chinese about their perceptions of both China and the U.S.

On Monday, I met with a group of my followers on the Twitter-like SINA(SINA_) Weibo service. The event was informal and meant simply to be an exchange of ideas. There were representatives from tech firms, resource companies, and Chinese Internet firms.

Here is a summary of their comments to several of my questions:

Q: Do you worry about a U.S. default weighing on China or China's investment in U.S. Treasuries?

A: No. In general, they thought that the U.S. would be forced to take action in order to protect its own self-interests and those of U.S. Treasury holders. They also thought most average Chinese made no link between the U.S. debt and their own economic interests.

Q: Do you worry that there will be an economic crash in China caused by itself?

A: No. Americans don't understand that the Chinese take a long view to their investments. If their stocks were to drop suddenly, the Chinese would likely stick it out with the stock as opposed to Americans who would immediately sell it.

Q: Do you think the next Chinese president and premier will be more conservative or more permissive?

A: More conservative.

Q: What do you think of the way Jack Ma of Alibaba handled the transition of Alipay, negatively impacting Yahoo!(YHOO_) and Softbank?

A: Most educated people think that Jack Ma didn't do the right thing in the transfer. They can't understand why he would do such a thing. This has seemed very suspicious from the start.

Q: Why do you think so many American companies fail when they come to China?

A: The most important point is that the U.S. company imposes a top-down management structure that is too rigid for the local management team. The companies which win are generally the ones who have given their team total autonomy to run their businesses the way they see fit for the local market. When the Americans put what they know has worked in the U.S., they tend to force local Chinese to follow orders, which isolates them.

.......

[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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No Panic Here in China

By Eric Jackson
RealMoney Contributor
6/9/2011 10:00 AM EDT
Click here for more stories by Eric Jackson

I have been in China for the past week, and have had a chance to visit a number of Chinese Internet firms -- including Tencent, Perfect World(PWRD - commentary - Trade Now), NetQin (NQ- commentary - Trade Now), NetEase (NTES -commentary - Trade Now), Baidu (BIDU -commentary - Trade Now) and AirMedia (AMCN -commentary - Trade Now).

It's been a down market for the last six trading days, and Chinese stocks have been hit hard, including the former leaders such as Sina (SINA -commentary - Trade Now), Sohu (SOHU -commentary - Trade Now) and Youku (YOKU -commentary - Trade Now).

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 of Taobao (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 called Letao.com, which is also private but experiencing extraordinary growth selling shoes online. Some refer to it as the Zappos of 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.

...

[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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