Shanda Interactive (ticker: SNDA) presented at the Goldman Sachs Internet Conference in Las Vegas last week. Here are key points from a presentation by CFO Shujun Li and IR Director Donglei Zhou:
- Becoming an interactive entertainment company.
- Developing more diversified content offerings.
- Growing online advertising and value added services.
- Increasing user growth.
- Rolling out home-user strategy.
- 2.1 million peak concurrent users on platform as a whole.
- 1.1 million peak concurrent casual game users.
- 1.0 million peak concurrent MMORPG users.
- More revenue coming from direct online payments and credit and debit cards.
- Direct online sales using credit cards increased to 6.6% of sales in Q1.
- Operating margin growth due to increasing economies of scale.
- Net margin fluctuated due to one-time items and tax rebates.
Investments / Acquisitions
- Actoz - strategic investment.
- Acquired Bianfeng and Haofang - different game offerings.
- Bianfeng's GameABC - chess and board games.
- Haofang - network PC games.
- Shanda helped Bianfeng and Haofang monetize their existing user base.
- Shanda helped GameABC grow peak concurrent users from 170,000 to 350,000.
- Shanda helped Haofang grow peak concurrent users from 350,000 to 550,000.
- Acquired Digital Red, a mobile games developer for cell phone manufacturers Nokia (ticker: NOK) and Motorola (ticker: MOT).
- Developing Java-based downloadable games which will be ready for arrival of 3G. Phones will then be able to support more interactive entertainment.
- Qidian - literature portal - signed 10,000 freelance writers who publish over the Internet and get 40 million page views every day.
- Popular social and entertainment forum.
- Many young people play games at Internet cafes.
- Usage from home recently passed Internet cafe use.
- More people able to afford home computers.
- Increased broadband penetration should broaden user base.
- Chinese users also play games to make virtual friends and establish relationships using games.
- Shanda has effectively solved the issue of piracy.
- Highly scaleable business - can add additional games quickly and easily.
- Gov't supports online game business.
- For every $1 generated by online game content, telecom operators generate 7 to 8 times more from site traffic.
- MMORPG - highest stickiness - but smallest user market.
- Selling lock to protect virtual items. Sold 700,000 over the last couple of months.
- Shanda not directly affected by The9's (ticker: NCTY) World of Warcraft (WoW).
- But WoW's success is good for Shanda. WoW will educate market to embrace 3D games. Shanda's new licensed 3D game Dungeons & Dragons expected to ride on WoW's coattails.
- Casual games increasingly attracting females and white collar workers.
Distribution of Pre-Paid Online Game Cards
- 320,000 retail points.
- 130,000 Internet cafes.
- 180,000 convenient stores, newsstands, retail shops, etc.
- Sell 3.5 million pre-paid cards per month.
- No single province accounts more than 8% of revenue.
- 700 salespeople travel China educating consumers about games.
- Conduct offline events.
- Shanda built a strong platform of MMORPGs.
- Can introduce new content and applications quite easily.
- Already dominate PC space. But less than 40 million PCs in China - half are PCs in homes.
- Hoping to tap the 400 million TV screens and approximately 400 million mobile phones.
- IPTV delivers TV channels over IP networks and leverages existing internet content.
- Ad and e-commerce opportunities.
- Enhanced PC solution.
Comment: Click here for a link to the presentation.