Commentary

Looking Back At China's Top Technology News In 2009

It's the end of a great year at ChinaTechNews.com, and we have compiled a list of our own top ten online technology stories and topics for 2009. The year 2009 began with worries of how the financial crisis would impact Chinese businesses, but those worries soon disappeared as businesses realized China was on its own wavelength.

10. The Curse of World of Warcraft
Online gaming has grown in China, and nothing better illustrates the follies of the sector better than the World of Warcraft curse. The game, created by U.S.-based Blizzard Entertainment, appears to be a curse that adversely affects any Chinese company it touches. The9 originally had the Chinese license to operate the game, but first denied rumors that it would lose the license in 2008. Then in March 2009, more rumors spread that The9 would soon lose the WoW franchise in China. One month later, in April 2009, the rumors were proven true: Blizzard dumped The9 and chose Netease.com instead. Then The9 sued Blizzard in Shanghai and The9 cut 300 of its staff. But then the curse moved to NetEase.com, which angered Chinese online gamers with postponements to a re-launch of the game. Then The9, who now lacked its one-trick pony game, announced a huge profit drop. NetEase.com finally resumed the WoW game in September 2009, and investors in The9 launched a lawsuit in the United States because of lack of disclosure over WoW's fate. The curse again shifted back to NetEase.com in November when the Chinese government announced that NetEase.com had no legal right to operate the WoW game — this caused NetEase.com to announce a poor financial quarter.

9. iPhone Arrives In China
Rumors about Apple's iPhone were swirling for a couple years, but finally 2009 saw the smartphone's entry into China. Initial reports were that China Mobile would work with Apple, but China Unicom finally won the war. China Mobile countered with its own phone called the OPhone, but China Unicom continued to promote the iPhone online and throughout China's major cities.

8. More E-Books On The Horizon
With conferences, trade shows, and advertisements devoted to e-books and e-book readers in China, this sector is expected to grow on domestically-built devices and services. In April 2009, international book publisher Penguin laid the groundwork for e-books in China with a deal, and then Hon Hai announced a new distribution deal. China's Datang unveiled its first TD-SCDMA e-book reader, and China Mobile also worked on delivering reading material to mobile phone users. A Chinese online gaming firm created a subsidiary called Shanda Literature, which announced plans to enter the Taiwanese market.

7. Mobile Value-Added Services Businesses In China Suffer Setbacks
The last month of 2009 was an example of the problems that mobile companies faced in China during the entire year. In an effort to fight mobile pornography, Chinese telecom operator China Mobile announced that it suspended all of its WAP service partners' ability to charge for services as of November 30, 2009. This applies to all of its WAP wireless value-added service partners in China, regardless of a partner's propensity to disseminate pornography. Investors in Chinese companies like Linktone, KongZhong, and Hurray should be worried. Then a couple days later, Linktone announced its unaudited financial results for the third quarter ended September 30, 2009, and stated it had recorded poor wireless value-added services and other revenues of USD13.8 million, compared with USD18.3 million in the second quarter of 2009 and USD16.6 million in the third quarter of 2008. Then KongZhong Corporation became the first U.S.-listed mobile firm from China to admit that the expected downturn caused by the WAP suspension of telecommunications billing would adversely affect its bottom line. Then Hurray finally announced its quarterly earnings, and it too showed a dismal wireless outlook. Hurray's total revenues for the third quarter ended September 30, 2009, were USD6.9 million, representing a decrease of 2.9 million quarter-over-quarter and a decrease of 6.6 million year-over-year! Then, to prove that even the big boys have tough times, Zhang Chunjiang was removed from his positions at China Mobile due to alleged serious financial irregularities.

6. IMEI Mobile Phone Blocks in India (Shanzai)
Some of the most commented news we ran in 2009 dealt with shanzhai mobile phones lacking IMEI numbers. Countries like India banned the import of China-made mobile phones that lacked IMEI numbers, causing consumers to fret over the usability of their wireless devices. At the end of 2009, specific regions within India created their own rules for the phones, causing further consternation for consumers and manufacturers.

5. Internet Travel Ups and Downs
More Chinese netizens are using the Internet to book airline and hotel reservations, and the global financial crisis appeared to not have much affect on the situation in China's online travel sector. 2009 began with China's leading travel website Ctrip.com winning an infringement lawsuit against a Beijing-based travel search engine Qunar.com. But then Ctrip.com found itself on the other side of the public relations window when it made a public announcement in which it apologized to a consumer surnamed Liang for selling him fake travel insurance policies. The passenger subsequently announced plans to sue Ctrip and its affiliates. Then Hong Kong's Shangri-La Hotels and Resorts pleased business travelers with the announcement that the global financial crisis has pushed it to now offer all guests free Internet services. Tencent's online payment tool Tenpay announced a cooperation with Ctrip.com to allow users to log onto Ctrip.com through their Tencent QQ instant messaging accounts to enjoy the one-stop service for ticket queries, airline searches, hotel searches and booking reservations. Chinese budget hotel chain 7 Days Inn announced the trial operation of a social networking site "Happy 7 Days" at its official website, and 33 Chinese media formally set up the China Travel Internet Media Alliance to integrate tourism resources and create sustainable development within the industry. China's leading business travel and meeting planning search engine 51MICE.com announced new features, and Et-china, a Guangzhou-based online travel company, announced that it acquired the Beijing-based Yoee.com, a leading online seller of air tickets in China, for an undisclosed amount. Around the same time last year, TripAdvisor.com announced it was buying Kuxun.cn, a Chinese flight and hotel search engine, but Travelzoo announced it was dumping all of its Asia travel-related businesses. Local governments also got involved in the burgeoning opportunities in online travel as Fujian's First Travel E-Commerce Center, the name of Fujian CTS Group's e-commerce center, was formally opened to netizens at the end of 2009.

4. Profanity And Vulgarity Crackdowns in China
The word "vulgar" comes from a Latin word that partly means "common", and crackdowns in China in 2009 to wipe away vulgarity were far too common. One of the biggest vulgarity-related incidents in 2009 involved a new Chinese software called Green Dam Youth Escort that was meant to limit the ability for China's youth the gain access to pornography. The year also had its share of website closures, campaigns against wireless spam, and a new program to limit the ability for individuals to register .CN domain names. One of the biggest ways online media companies helped stop the tide of online porn was to institute real name registration systems to stop unhealthy online content from being published.

3. Online Video Copyright Concerns
Intellectual property rights and online videos clashed in 2009, and companies scrambled to build new business models around ways to leverage legal videos in China. In July 2009, China International Television Corporation, an affiliate of CCTV, used the Chinese courts to fight six online video service providers, including Ku6.com, 6.cn and aeeboo.com. A month later, CCTV.com and Phoenixtv.com formed an alliance for the protection of the copyrights of online video programs in China. Then Chinese online video service Ku6.com was purchased by Shanda's wireless subsidiary Hurray Holding Company Ltd., and rival Youku.com gained USD40 million from private equity firms. At the end of the year, 530 Internet video service providers in China, including well-known BitTorrent-based download service providers like Btchina.net, were shut because of links to illegal videos.

2. Xinjiang Internet Services Blocked
The riots in Xinjiang in the middle of 2009 had a great effect on businesses in that region in China. Though we did not report much on the Internet activities in the region, we were personally affected at ChinaTechNews.com, as one of our affiliate's colleagues was unable to work because of lack of Internet connectivity. All Internet connections to sites located outside of the province were blocked. We paid close attention to this throughout the second half of 2009 and waited for things to change. Hotel groups like Starwood and IHG had their locations in the province stranded in the middle of an Internet desert — business people trying to get online were unable to do so, leading to unrealized business opportunities and growth. Fortunately, at the end of 2009, things did start to change.

1. Sina.com and Focus Media Merger Fails
Announced at the end of 2008, the merger of Focus Media's digital sign business to Sina.com was planned to be one of the biggest media moves in China in years. But the merger failed 9 months later. Between the original announcement and the cancellation, both companies rode a public relations wave of ups and down. Focus Media said its profit had plummeted, and then Sina.com stated it too had dismal financial returns in China. Then a few months later Focus Media again posted a net loss. While the specific details for why the due diligence and regulatory hurdles were not handled well may never be known, the failed merger is a cautionary tale for other Internet companies in China looking to merge. The last decade had many rumors of merger talks among Tom.com, Sina.com, Sohu.com, NetEase.com, China Mobile, China Unicom, and other big online firms. Maybe it is better for each of them to tread their own path this coming decade?

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