2. Baidu (52x) Tecent (62x)
10,000
1,000
100
10
2004 2005 2006 2007 2008 2009 2010 2011 2012
Data: Yahoo Finance, prices are close prices of August 6, except for 2012 (April 5)
Two Best performing Chinese stocks in the last 10 years.
3. Percentage of price gain
3
2
217%
2 124%
101% 95%
68% 53%
1 47% 44% 31% 30%
0
TUDO NQ RENN DANG KUTV QIHU YOKU PWRD NTES GAME
Data: imeigu.com, as of market close April 20
Big price-gainers since 2012
4. HOW TO FIND
THESE STOCKS?
• Good industry
• Good product
• Good monetization model
5. Housing Relationship
GOOD
INDUSTRY
• Large potential user scale Investment Education
• Growing markets
• Lifelong/Frequent demands
House Maintenance Marriage
6. • Open & Interactive
GOOD • User, not traffic
PRODUCT • UGC, not PPC
2.0 products, of course • Personality, not universality
• Long tail
7. • UX enhancement
WHAT DOES • UGC re-org & re-use
2.0 DO? • Userrelationships as
The runner-up is bound to die an asset
• Monopoly (platform)
9. WHEN IT COMES TO
MONETIZATION MODEL...
• Charge for products > Traffic conversion
• Core services > Value-added services
• Commission-based > Ad services
• Performance ad > Brand ad
12. Operating income
Revenue (in $thousands)
1,300 3,000
975 2,250
BAIDU
Unlimited market growth 650 1,500
Simple business model
Problematic governance 325 750
0 0
2009 2010 2011
Data: Baidu (in $million)
13. IMAU Revenue
800 30,000
600 22,500
TENCENT
Deep moat built on social graph 400 15,000
Monetization model less ideal
200 7,500
0 0
2007 2009 2011
Data: Tencent (in RMB million)
14. Operating profit Revenue
400 3,000
ALIBABA 300
2,250
GROUP 200
1,500
Good product & governance 100
Monetization has just begun 750
Valued at $32b (Sep. 2011) 0
-100 0
2009 2010 2011
Data: Yahoo 20F (in $million)
19. China Internet Users (m)
WHY THE 600
INTERNET SECTOR
450
• Large potential user pool
• Under expansion from media to
300
other businesses
• Monetization models being
150
ungraded
• Registered system lowers entry
0
barriers 2004 2006 2008 2010 2012
Data: World Bank 2011, CNNIC
