China's Qunar Considers Duping American Investors

Jan. 17, 2012 11:14 AM ETCCME, BIDU, QUNR
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Yesterday, Bloomberg published your usual Chinese propaganda hoping to lure more American investors into China's next scam: Qunar is yet another travel portal who will be raking in "millions" of dollars within a travel industry that is growing at "14 percent annually." Even so, it doesn't sell airline tickets, hotel deals or vacations packages. Rather, they sell "a few hundred million" yuan in ads, which amounts to 1% of total adspend done online in China.

With the avail of Boston Consulting Group, "the world's leading advisor on business strategy," the Chinese hope to grab more funds from American mutual and pension fund managers who are willing to breach their fiduciary duties and please the Chinese by handling to them whatever amount of money they happen to be managing without asking them any questions.

Qunar has already been injected with 300 million dollars that used to belong to American investors. Such a feat was accomplished by Baidu, a company incorporated in the Cayman Islands that claims to be making billions of dollars in profits, claims to have billions of dollars in cash, and still needs billions of dollars in additional financing.

Like other Chinese executives before listing their companies in American exchanges, Chenchao Zhuang, Qunar's CEO, doesn't know how much his company sold last year. He doesn't know what to do with the $300 million either. And yet, he knows what he is going to do with the money raised in the IPO: buy mobile device applications because "mobile travel is going to be big."

Have a look at the Bloomberg article:

Qunar Considers U.S. IPO as China Travel Demand Fuels Search Site's Growth

As you can see, it is loaded with the usual Chinese propaganda, courtesy of the Boston Consulting Group and Chenchao Zhuang:

China travel industry revenue is expected to increase 14 percent annually to 5.5 trillion yuan ($871 billion) in 2020 from 1.5 trillion yuan in 2010.

China's tourism market may overtake Japan's as the world's largest after the U.S. by 2013.

Travel booked on the Internet accounts for about 7 percent of China's tourism market and that ratio is expected to surge to 30 percent in the next five years, similar to current levels in the West, Zhuang said.

Qunar broke even in 2010 and more than doubled sales in 2011 to "a few hundred million" yuan, Chief Executive Officer CC Zhuang said in an interview.

"In the next few years, mobile travel is going to be big," he said.

After being bombarded with exciting-sounding Chinese propaganda, you are explained Qunar's business model:

"We are a unique platform that connects the traditional IT system of airlines and hotels with massive information searches on the Internet," Zhuang said.

The website gets most of its revenue from cost-per-click travel ads.

That's right, their website connects to the IT system of airlines and hotels in order to sell online ads. You know, it is more profitable to build a "unique platform" in order to sell online ads than to sell travel tickets in the "world's fastest growing travel industry" TM. Although Qunar gets most of its revenue from online ads, Zhuang is eager to convince you that his company is an online travel company, and a proud member of a booming travel industry that will be the next "largest market after the US."

In addition, the article contains pictures that show you that they have a reception and an office full of employees. With that visual evidence, you can rest assured that the company is real and the employees are not hired actors who used to work for China MediaExpress Holdings Inc.

To further convince you that Qunar is a legit company, they want you to know that a multi-billion dollar company has entrusted them with $300 million. If others are throwing millions at them, you should too, and soon Zhuang will give you the opportunity to do so:

[Qunar] may raise money from U.S. investors after selling a $306 million majority stake to Baidu

It will be the "opportunity of a lifetime" because thanks to a "visionary" like Zhuang, Qunar will tap the growth potential in mobile device applications. He goes on to explain why:

"In the next few years, mobile travel is going to be big"

But what has Zhuang done with that money?

Qunar hasn't used the cash from Baidu's investment so far, according to Zhuang.

An yet, he wants to go after more American money.

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