Chinese Internet Notes: Baidu, Sina And Perfect World In Focus

December 12th, 2014 by Trefis Team
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In our weekly Chinese Internet notes this week, we look at Baidu (NASDAQ: BIDU), Sina (NASDAQ: SINA) and Perfect World (NASDAQ: PWRD). Baidu invested $3 million in Israeli tech startup Pixellot. [1]. Perfect World, meanwhile, launched an expansion pack for its game Perfect World International on December 16. [2] Sina is doing its bit in developing the Internet of Things in China by offering Chinese mobile phone users access to highly localized weather information. [3]

See our complete analysis of Baidu here, Perfect World here and Sina here.

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Pixellot’s Product And Potential Markets

Pixellot eliminates the need to have an on-site video production crew at events such as sporting events and concerts. It has computer controlled cameras that capture visuals from multiple parts of the venue. These are made available to audiences over the Internet. It also gives viewers the option to switch between various cameras and zoom in on the action. [4]

Pixellot has the potential to become a low-cost and flexible alternative to the large video production crews and equipment that are deployed by television networks at sporting events. In the near term, the company is expected to target college sports leagues. It has been estimated that spending on video production equipment by NCAA Division I colleges is around $360 million annually. [5] Baidu’s investment in this start-up, however, is believed to be targeted at generating quality sports content for its online video portal, IQiyi. [6] This division constitutes approximately 8% of our valuation of Baidu.

We have a $211 price estimate for Baidu’s stock, which is about 8% below the market price.  Our revenue estimate for Baidu is $7.7 billion for 2014, which is slightly less than the consensus estimate of $7.9 billion.

Perfect World Releases Another Expansion Pack

Perfect World also unveiled a new expansion pack for its game Perfect World International, titled Eclipse. This pack adds new classes of characters and new regions to the game. [2] The original game itself was released in the U.S. in 2008. We have written earlier on the release an expansion pack for its MMORPG (Massively Multi-player Online Role Playing Game) Neverwinter, titled Rise Of Tiamat. (See our earlier Weekly Chinese Internet Notes)

Expansion packs are the next best thing to new game launches for online gaming companies as they help sustain player interest in the game. With new in-game purchases, they can also help augment the game’s revenue generation potential. To attract the players’ attention to the new expansion pack, the company is giving a game feature called the Illusionary Crystal free of charge until January 16, 2015. [7] Given how long the game has survived on expansion packs, this new release could help sustain Perfect World’s revenues from its high growth international gaming division.

We have a $18 price estimate for Perfect World’s stock, which is about 20% above the market price.

Sina Merging The IoT, Weather

Sina has come up with a way to provide hyper-local weather data and forecasts to its weather app users. Last year it gave away millions of wi-fi connected weather stations to users in China. These stations measure weather parameters in their environment. Then they upload this data using cloud computing and storage services provided by a California based company called Ayla Networks. Sina’s weather app lets users get details about their local weather from a weather station close to them. [3] Sina is known to use such complementary services to broaden its user base and increase website traffic. [8]

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Notes:
  1. Baidu Makes Investment In Israeli Startup [↩]
  2. Perfect World International: Eclipse [↩] [↩]
  3. Merging The IoT And Weather [↩] [↩]
  4. Baidu Invests $3 Million In Pixellot [↩]
  5. 2014 Division 1 Video Production Report [↩]
  6. Pixellot Raises $3 Million From Baidu [↩]
  7. Get A Free Illusionary Crystal [↩]
  8. Plunkett’s E-Commerce And Internet Business Almanac [↩]