Shanda (SNDA) presentation from Goldman Internet conference

| About: Shanda Interactive (SNDA)
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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:


Company Focus

  • 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.

Q1 Highlights

  • 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.

Online Gaming

  • 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

  • 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.

Marketing

  • 700 salespeople travel China educating consumers about games.
  • Conduct offline events.

Home-User Strategy

  • 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.