Jul 26, 2010

Deutsche Bank - Equity Research - Asia

China TMT Daily : AdChina: China's DoubleClick; also BIDU, GAME, SNDA

FEATURE:

As China's on-line ad market grows, so have the mechanisms enabling crucial elements such as improved efficiency, ad targeting and return-on-investment. We recently had the chance to sit down with senior management of AdChina, regarded widely as the "DoubleClick of China."

Very simply put, AdChina's platform connects those seeking to advertise on the Chinese internet through banner ads and other media on one hand, with more than 400 of China's leading portals and web pages (video verticals, social networking sites, e-commerce sites, etc) on the other. We estimate that AdChina can access over 9b page views (PV) and reaches over 350m unique visitors (UV) per month.

With this deep exposure to leading sites on the internet, and growing data warehousing and data mining capabilities as its ad serving expands, AdChina also is increasingly able to offer advertising customers increasingly rich intelligence and guidance as to how to best spend their on-line ad budgets. The company counts a large number of Fortune 500 MNC's as clients, and of its 600+ client engagements, it for instance provided cosmetics brand Maybelline with an ad campaign that it claimed reached over 90% of its targeted female audience (eg - 132 women's websites, 170m UV, 27 PV per UV/month.) Many of its engagements go well beyond standard banner ad serving. In the case of its Maybelline project, once a consumer submitted a registration through a Maybelline ad space, she would receive a mobile SMS coupon for a free trial at an offline store in her locale.

Driving web meritocracy, adding new opportunity; Hold Sohu

We believe the rise of dominant on-line ad exchanges such as AdChina, and the ever-expanding attendant services they offer, will significantly broaden the number of portals through which ads appear beyond the current household names such as Sina (SINA, Buy, USD41.8) and Sohu (SOHU, Hold, USD45.04). We however notice the increased flourish of popularity around Sina subsequent to its launch of its Weibo micro-blog site and other new services. But generally speaking, vertical sites which might offer advertisers even more highly targeted and effective ad campaigns are likely to win ad share from the incumbents.