Who will benefit from the ecommerce boom in China?

Implications

Chinese ecommerce grew over 120% last year, projected to grow very rapidly in the next 3-5 year. who will benefit from the ecommerce boom in China? Portals like sina/sohu? search engine like baidu? any other potential players in the market?

Analysis

Chinese ecommerce grew over 120% last year, projected to be in high growth for the next 3-5 years. Now large companies such as Mcdonald, KFC, Haier, Gome, Lancome are all going ecommerce, who will benefit from the ecommerce boom in China? consumers of course, some businesses as well.

Companies that are already in this industry will no doubt thrive on the growth. Alibaba, who is not only the largest B2B ecommerce platform in the world, but also owns the largest C2C website in China - Taobao.com, though Taobao is not very proftable due to the free listing strategy(beats ebay out of China this way), it does have dominant position and could quickly turn into a cash machine once good model is implemented. Its new ad system had a pretty good feedback. Other large ecommerce companies such as dangdang.com and 360buy.com will likely to be on a short list of future public companies.

Baidu, and other search engines will be the largest indirect benefitors. They has been largely replying on advertising dollar from traditional SMEs. It's all going to start to change once ecommerce takes off. Google has hugely benefited from ecommerce. Chinese search engines will probably do the same. However, a couple of minor drawbacks for baidu are its technology and some doubtful business practices. SEM for ecommerce is very much data-oriented. Baidu need to have better technology to support advanced bidding and optimization. Baidu is also notoriously known for its somewhat bad practices such as, dont allow tracking, high fraud clicking, blacklist etc. They have to change before its too late. the only good thing is that they do have a very strong position in the market, and consumers dont have any other good alternatives to go to. (well google.cn is good, but its so damn hard to spell for Chinese )

Portal and vertical media will benefit as well. A lot of ecommerce companies will have to rely on advertising on portal sites to build their brands. Verticals are very good places to advertise to their target audience. We have already seen that the search engine traffic is not enough for ecommerce businesses in China. therefore portals and verticals could become good complimentaries of traffic source for large ecommerce businesses.

Networks, mostly performance based will experience a large growth as well. Analaytics, SEM based companies, leads generation and web consulting companies will somewhat benefit from ecommerce boom as well.

In a way, the nature of ecommerce, will bring Chinese online advertising to a new level where data became much more important. In the past, this area is hugely underdeveloped.

Source: http://www.glgroup.com/