My Internet Notebook

Xinhua-PRNewsWire reported that China’s largest out-of-home multi-platform life-style media company Focus Media (Nasdag: FMCN), has announced that it has entered into a definitive agreement to acquire Allyes Information Technology Company Limited, the largest internet advertising service company in China. This acquisition will enable Focus Media to enter China’s growing Internet advertising market.

According to a new report released by China Internet Association, the online advertising market in China reached RMB $4.98 billion in 2006, and is projected to grow at 50% annual rate to reach $11 billion in 2008. No surprise that FMCN wants a piece of the action as well.

Chinese wireless communications company KongZhong (Nasdaq: KONG) won the title of the Best Small Cap for 2007 in a Motley Fool contest.

The reason cited for picking KONG was not entirely convincing though. Okay, it is an emerging market and it is a pure play in wireless communication. The competition in China’s WVAS 9wireless value add service) market is just too fierce. It would be a hard press to believe that KongZhong has the winning formula against Sohu, Sina or Tom Online in the wireless market.

The other four are Atheros (Nasdaq: ATHR), Walter Industries (NYSE: WLT), Portfolio Recovery Associates (Nasdaq: PRAA), Syneron (Nasdaq: ELOS).

Full stories, see: And the Best Small Cap for 2007 Is … [Fool.com: Commentary] December 11, 2006

The Wall Stree Journal reports that the leading Chinese language search engine Baidu.com is entering the Japanese market.

This looks to be a high risk bet on Baidu’s part. While the Japanese search market is large and tempting (10 times bigger than that of Chinese search market), the risk associated with such as a big undertaking can never be underestimated. For one, Yahoo (with local partners) and Google already owns the majority of the internet search market there. Secondly, Google is breathing down at Baidu’s neck in Beijing to try to steal market share away from Baidu. This is like, for Baidu, openning up two big battle fronts at the same time, while the resource at Baidu’s disposal is substantially smaller than either Yahoo Japan or Google. Maybe Baidu should be contemplating a secondary public offering of shares pretty soon.

ComputerWorld story: Outsourcing in China
Most providers target the burgeoning domestic market, but a few offer a hybrid approach that appeals to the West.

IDC analyst Eugene Wee says that the Chinese outsourcing market is growing at about 30% annually but was still worth only $586 million at the end of 2005.

Trombly and Marcus are freelance business and technology writers based in Shanghai. Contact them at maria@trombly.com and BillinChina2004@yahoo.com.

In the annual meeting of the U.S.-China Joint Commission on Commerce and Trade, the delegates from China promised a harsher crackdown on copyright / IP infringement. I think this is a great thing for China to do if the government is serious in developing a service and creativity based economy. One of the key reasons why the software industry in China has not developed to a stage where it should have been is exactly because of the lack of copyright protection. Piracy is a huge dis-incentive for software companies in China.

News link – http://www.mercurynews.com/mld/mercurynews/14318660.htm