China-based NetQin Mobile Inc. (NYSE: NQ) sells mobile security services via freemium model. Its primary users are feature phone and low-end smartphones, mostly to Chinese customers but also some internationally. Qihoo (NYSE: QIHU) is a key competitor.

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INSIDE
NETQIN MOBILE
NYSE: NQ
REPORT BY
iChinaStock.com profiles Chinese firms
that are publicly-listed or may list soon in
overseas markets
© March 2011 iChinaStock

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SUMMARY
 NetQin Mobile Inc. uses a freemium model to sell mobile security
services. NetQin claims that its users are virtually all “smartphone”
users, but many definitions of the term would likely classify their
users as feature-phone or low-end smartphone users.
 NetQin’s three main services are:
 Mobile security
 Mobile productivity
 Personalized cloud services
 Initial stock price range from $9.50 - $11.50 USD. At the midpoint,
NetQin will raise $75 million at a $475 million valuation. Aims to list
with the ticker name “NQ” and Piper Jaffray as its underwriter
 IMPORTANT NOTE: It is difficult to obtain accurate statistics on China’s mobile
market. NetQin appears to have commissioned to companies, Sino-MR and Frost &
Sullivan, to provide “3rd party statistics,” but the quality and objectivity of the reports is
questionable. Still, much of the data in this report (and NetQin’s F-1) are from these
sources, accompanied by additional analysis from iChinaStock.

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TIMELINE
Nov. - Partnership with
PhoneGuard to launch in
North American markets
CCTV exposé alleges
Dec. - NetQin Anti-virus NetQin conspires with Feilu
(Chinese version) and NetQin Oct. - NetQin Mobile Guard to plant viruses on
Mobile Manager (Chinese (Chinese version) a free customer’s phones, delays
version) preloaded on Nokia mobile security software-- NetQin IPO
NetQin founded and and Amoi smart-phones.
launched
NetQin submits updated
NetQin 1.0 (Chinese listing application to SEC
version), an Anti-virus Jun. – Sequoia, Linsha River Sept. - ~30 million subscribers
invest $3 million in Qin in more than 200 countries with proposed financing of
software for mobile phones, $75 million
launched
Network and regions
2005
2007
2009
2011
2006
2008
2010
~200,000 subscribers in 100 Oct.- Number of users exceeded
~10 million subscribers in 200
countries and regions, NetQin 2.0 60 million
countries and regions
(Chinese version) launched
Apr. - $20 million funding from
investors, Sublicense to Options
Media Group in North America
NetQin was warned and
deducted credit by telecom
partner China Mobile due to its
inadequate fee notices for users

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NETQIN USERS
90.0
86.0
80.0
71.7
70.0
NetQin Users (Millions)
60.0
50.0
Registered
users
40.0
35.6
MAU
30.3
MPU
30.0
25.4
20.0
15.2
12.0
10.0
5.5
3.2
3.7
1.0
1.1
0.0
2008Q4
2009Q4
2010Q4
2011Q1
(MAU= monthly active users and MPU= monthly paying users )
Source: NetQin F1 file

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MARKET SHARE I
Frost & Sullivan: Market Share of Activated Users* by Provider
Key:
• Unit: 10,000
• Percent
The consulting firm Frost & Sullivan reports that NetQin had 68% market share with 49 million “activated
users” in China. NetQin “activated users” includes users of any of NetQin’s security products.
IMPORTANT NOTE: This data is suspect as much of Frost & Sullivan’s report displays questionable objectivity
and the firm previously presented an award to NetQin. It was likely commissioned by NetQin to produce the
report, as is the case with most of the “3rd party statistics” on NetQin.
*Activated users is the total amount of users who activated mobile
security software after installation
Source: Frost & Sullivan

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MARKET SHARE II
iResearch: Market Share for Mobile Security Products
Kingsoft Mobile Guard
4.8%
360 Mobile Safe (by Qihoo)
360 mSafe (by Qihoo)
55.6%
6.1%
NetQin Mobile Guard
Other
8.5%
9.5%
iResearch used a sample of 5338 “representative users” in Nov-Dec 2010 to
measure market share for mobile security products. The mobile product in
question for NetQin here is its “NetQin Mobile Guard.” This data was likely
commissioned by Qihoo (NYSE: Qihu), a competitor to NetQin.
Source: iResearch iUserTracker

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MARKET SHARE III
Enfodesk: Market Share for Mobile Security Products
(Q4 2010)
Source: Enfodesk

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PRODUCT AVAILABILITY
Symbian
Mobile Anti-Virus Android
Free
&
Paid
Mobile
Manager Windows
NetQin Mobile
Free Mobile
Guardian
iPhone
BlackBerry
Source: NetQin official website. Note English and Chinese products vary in some instances.

9. INSIDE
SMARTPHONE OR FEATURE-PHONES?
NetQin claims that, “Substantially all of our users are smartphone users, which we
believe have attractive demographic characteristics.” The problem is that there is
no one industry-standard definition of “smartphone,” but NetQin seems to be
stretching the definition.
NetQin produces applications for the most advanced mobile operating systems
(OS) like Apple’s iOS and Google’s Android, but does not disclose the percentage
of its users for each mobile OS.
iChinaStock believes that the majority of NetQin’s users are using feature-phones
or ‘low-end smartphones’ (e.g., Nokia phones running Symbian). NetQin has
reached agreements with many such handset manufacturers so that their
products come pre-installed on the phones.
Because these phones lack a mature app paid marketplace or mobile payment
options, NetQin is still largely dependent upon mobile payment service providers
and telecom partners to bill its customers, though it is attempting to reduce that
dependency.

10. INSIDE
Viruses by Mobile Operating System (2010)
Android
Windows
Blackberry
iPhone
2.40%
Mobile
0.30%
0.10%
0.70%
According to NetQin, the vast
majority of viruses on mobile
are found on the Symbian and
Java 2 Platform,
Java 2 Platform (J2ME). It is
Micro Edition (J2ME)
therefore likely that these
27.30%
Symbian
operating systems are the focus
69.10%
for NetQin’s products.
Source: NetQin “Cloud Safe” Data Analyis Center

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PRODUCT DISTRIBUTION
 Pre-installation: NetQin, Nokia, Samsung, Sony Ericsson mobile phone
manufacturers all have models that come pre-installed with NetQin. NetQin plans
to continue with pre-installation partnerships in overseas promotions
 Products are available as a direct download on the official NetQin website, which is
available in multiple languages.
After negative media publicity and accusations of installation of viruses onto users
phones through pre-installed software, Nokia temporarily removed its NetQin
applications on their online store, but has since restored it re-allowing its customers
access products through this channel.
Source: NetQin F1 filing

12. INSIDE
Millions USD
FINANCIALS
8
6.3
6
5.4
3.6
4
2.3
1.5
1.5
Revenue
2
1.1
1.2
0.9
0.1
-­‐
Profit
(Loss)
(2)
(1.1)
(1.3)
(1.3)
(1.4)
(4)
(0.4)
(6)
(8)
(10)
(12)
(10.5)
Note: In Q4 NetQin experienced a loss of $10.5 million. NetQin explains that was due to a significant
increase in operating expenses: a major non-cash, share-based compensation expense and adjustment cost
for management and administrative costs. This was a non-cash equity adjustment cost and will not become
a regular business expense that affects operating results.
Source: NetQin F1 file

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REVENUE STREAMS
Mobile Operator
NetQin Reducing Dependence on Mobile
China Mobile, China Payment SPs
Unicom, China Telecom
90.0%
80.0%
Mobile Payment Service 70.0%
Provider (SP)
28.0%
60.0%
Primarily Tianjin Yidatong and
NetQin’s Beijing Technology 50.0%
subsidiary
48.0%
China
Mobile
40.0%
Tianjin
Yidatong
30.0%
52.7%
10.0%
“Qin Credits”, NetQin’s 20.0%
Virtual Currency 10.0%
20.0%
21.4%
Monthly, Six Months, Yearly
0.0%
2008
2009
2010
Third-Party Payments
(PayPal, Alipay, Debit, Credit • “Yidatong charges us at a lower fee rate than other mobile payment service providers
through which we cooperate with wireless carriers.”
Cards)
• “We have become less dependent on any specific mobile payment service provider or
wireless carriers, such as Yidatong or China Mobile, as we establish more diversified payment
channels. ”
Source: NetQin F1 file

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FREEMIUM MODEL
NetQin’s apps typically operate on a freemium model: free to install, but certain premium services are
for paying users only. Principal services include mobile phone safety, cellular performance,
personalization and cloud services.
Source: NetQin F-1 filing

15. INSIDE
DOMESTIC COMPETITORS
NetQin was a huge innovator in China when initially providing virus protection for mobile devices. In 2005,
NetQin launched the first mobile phone anti-virus software, but over the past two years, as traditional antivirus
vendors have set foot into the field of mobile security in China, NetQin is facing competitive pressure
360 Mobile Safe is a free mobile security product by Qihoo 360 (NYSE: QIHU).
iResearch’s user tracker reports that it had the largest market share (58.2%) of
active users for any single mobile security product in China as of January 2011.
Qihoo uses the traffic from that product to generate revenues. Qihoo’s free
services are a serious threat to NetQin.
mSafe Mobile Security was founded in 2006 and is available to consumers free of
charge. In January of 2010, Qihoo 360 (QIHU) acquired mSafe Mobile Security.
(Symbian / Windows Mobile / Linux/ iPhone)
Kingsoft Mobile Security is a free product.
(Symbian/ android)
Rising Anti-Virus Software for Handheld Devices is a free product.
(Symbian / windows)

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FUNDING
• JUNE 2007 | - Sequoia Capital and GSR Ventures invest $3 million in NetQin
• OCTOBER 2007 | Fidelity Asia Investment invests in NetQin (amount
undisclosed)
• APRIL 2010 | One of the original investors in NetQin, GSR Ventures, and
Ceyuan Ventures invest $20 million in NetQin
• NOVEMBER 2010 | HTC invests $2.5 million in NetQin
• DECEMBER 8, 2010 | Gaintech, a subsidiary of Taiwanese chip maker MediaTek,
invests $2.2 million in NetQin
Source: NetQin F1 file

17. INSIDE
NETQIN-FEILU SCANDAL
On March 15th 2011, China’s largest broadcaster, CCTV ran an exposé alleging that
NetQin conspired with another mobile software provider, Feilu to plant viruses on
customer’s phones. The user’s would then be prompted to use NetQin’s security
services to eliminate the virus. The allegation came just as NetQin intended to IPO
and probably caused its subsequent delay.
NetQin subsequently admitted that it was one of the investors in Beijing Feiliu, but
denied any attempt to spread malware. Beijing Feiliu held a press conference
questioning CCTV’s report as an “elaborate plot” by its competitor Qihoo 360
(NYSE: QIHU) to slander the company.

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IPO STATUS
April 19 | According to foreign media reports, the NetQin will visit the
NYSE on May 5.
 April 9 | NetQin announces initial IPO price range from $9.50 - $11.50
USD. At the midpoint, NetQin will raise $75 million at a $475 million
valuation
Funds will be used for:
1. R D projects
2. Marketing Operations
3. Possible Acquisitions

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CORPORATE STRUCTURE
NetQin Mobile Inc.
(Cayman Islands)
100%
100%
NetQin International Ltd.
NetQin US Inc.
(Hong Kong)
(United States)
Offshore
100%
100%
l
PRC
Contractua (1)
ents
Arrangem
NetQin Mobile (Beijing) Co., Ltd.
Beijing NetQin Technology Co. Ltd.
51%(2)
Fuzhou NetQin Mobile Information
Technology Co. Ltd.
Source: NetQin F1 file

20. INSIDE
NETQIN MOBILE ANTI-VIRUS
Anti-virus
(Free)
Anti-Lost can “locate and lock”
lost phones. That includes
Anti-Lost
position tracking, destruction
(Premium) of private documents, phone
lock, phone alarm and other
functions
Note: Screenshots from the official NetQin Chinese-language website.

21. INSIDE
NETQIN MOBILE MANAGER
(SYMBIAN)
Mobile Manager provides services such
as black list/backup contacts/privacy
eraser/private space and so on.
After choosing certain
contacts, a record of their
calls and text messages will
be encrypted and saved into
a password protected area.
Private Space
(Premium)
Note: Screenshots from the official NetQin Chinese-language website.

22. INSIDE
NETQIN MOBILE GUARD
(SYMBIAN)
NetQin Mobile Guard
(Free)
Includes network monitoring, speed-boot, system
clean-up, a mobile backup and more.
Note: Screenshots from the official NetQin Chinese-language website.

23. INSIDE
NETQIN SPACE
(SYMBIAN)
NetQin Space
(Free)
Mobile
PC
Requires the user to have “NetQin pass to synch their PC users can schedule meetings and access their
PC and mobile phone
calendar via NQ Space.
Note: Screenshots from the official NetQin Chinese-language website.

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© March 2011 iChinaStock