Notes from the Piper Conference

Piper Jaffray held an investment conference in Beijing last week. Here are some key points from this week's Piper report:

Summary:

• Advertising, gaming, and travel showing solid growth.
• Online gaming companies continue to show greatest potential.
• Wireless - The industry is still unstable. The hope is that China Mobile's
  (ticker: CHL) upcoming decisions on the format and overall framework of
  relationships with service providers may bring some stability.
• Piper believes that expectations for advertising growth are modest.

Online Advertising:

• Industry likely to grow at a rate of 40%,
  despite cautious guidance of 30% by the three portals.
• While
  some sectors like autos and real estate were slightly overheated last
  year, new segments are starting to replenish growth in the
  sector.
• Prices are expected to increase 10-20% a year, given the strong
  demand.
• The front pages of most portals are usually sold out well in
  advance. The smaller web sites are gaining market share
  as advertisers start to use a wider range of online destinations.

Internet Search:

• Dominated by Baidu.com and Google.com (ticker: GOOG).
• Other online destinations
  have yet to establish a strong brand.
• No clear winner yet.

e-Commerce:

• Online transactions remain minimal.
• But listing services and auction sites (which do
  the vast majority of their transactions offline) are growing.

eBay (ticker: EBAY) and Alibaba:

• Increasing competition between the two.
• eBay's strong global power cannot be
  underestimated and the company's focus on China makes it even clearer
  that they intend to win.
• Here too, a clear winner has yet to be determined.

Wireless Sector:

• Sector remains unstable.
• China Mobile has yet to
  finalize its framework for using service providers.
• China Unicom (ticker: CHU) had positive comments about its relationship with service providers. It does not
  intend to increase its revenue shares.
• Growth in 2.5G and IVR looks promising.

Quick thought: If any readers attended the Piper conference, we would appreciate your thoughts.