Forecast on China’s Internet Sector & New Gov’t Regulations

Posted by morad

January 3, 2008

JPMorgan’s Internet analyst Imran Khan and his team released a report on Internet sector which has a chapter on China’s Internet industry and also reviews Chinese Internet stocks.(tip by Techcrunch)

Based on the analysis, it seems like China’s Internet developement growth is pretty healthy, though it might hit the wall sooner or later due to the goverment’s influence and its policies. An example of this, just recently a report was released from the Canadian press indicating that China has approved new regulations that will require any web site that wishes to show videos in the PRC to obtain government permits. Further, according to the report, permits will only be granted to state-owned companies.

With the continouous of blocking sites such as YouTube in October and having a legal system that is biased towards Chinese owned companies "i.e. Baidu wins a piracy case", it majorly blows any hopes of a more open China. It also brings into question the viability of numerous Chinese video sharing sites that have recently received oodles of funding, including 56.com ($20 million raised) and Youku ($25 million).

But anyway, the JPMorgan analysis displays the trends of online advertising, search and online gaming market. And here they are:

- JPMorgan estimates a 50% growth in online advertising market in China in 2008, driven by 2008 Beijing Olympics in the near to medium term.

- The branded advertising market will witness a 38% YoY growth rate in 2008,

- while the PPC search market enjoys a higher growth rate of 82% to $562 million. Baidu will remain dominant player to take around 65-70% market share.