Internet ads add up for China’s party mouthpiece
By Katrina Hamlin
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
Xinhuanet is an investment rarity: an online media group that is both fast-growing and profitable.Â Booming advertising revenue is propelling the digital arm of Chinaâs state-owned news agency Xinhua towards an initial public offering that could value it at close to $1 billion. Its success doesnât depend on headlines or scoops, but on being the Communist Paryâs main mouthpiece.
While Western internet advertising rates keep falling, banners and other marketing tools help Xinhuanet pay the bills. Ad sales grew 59 percent in 2013, fuelling a 24 percent jump in net profit. Though the company doesnât publish data for unique users, itâs clearly attracting eyeballs: Xinhuanet.com has risen to 70 on Alexaâs ranking of the popularity of global websites. The New York Times, which charges a subscription fee to regular users, is at 130.
Xinhuanet is hardly a model for online journalism, though. It combines stodgy, heavily censored reports on Party initiatives with a baffling array of slide shows – recent highlights include an album trailing a pretty Korean presenter around the World Cup. Nor is it a tech wunderkind. Despite plans to raise $240 million for initiatives including ânew media technology research and developmentâ, its current offerings lack creative flair.
What it does have is a lucrative monopoly on PR in the Peopleâs Republic. Xinhua has had a direct line into leadersâ news and views since the thirties, giving it exclusive access to the inner workings of the worldâs second largest economy. Though this insight comes at the cost of objectivity, outsiders still have to pay attention. Other benefits of state ownership include subsidies, secure licenses, and connections that allow it to attract influential readers and deep-pocketed advertisers.
That could help Xinhuanetâs listing repeat the success of People.cn. Shares in the online unit of the Peopleâs Daily newspaper have nearly doubled in value since their 2012 debut, and now trade on almost 80 times last yearâs earnings. A market capitalization of $960 million would imply a multiple of just 36 times for Xinhuanet.
There are limits: neither Xinhuanet nor Peopleâs Daily tempt substantial audiences and revenues from beyond China, and both will continue to depend heavily on their powerful state-backed parents. But as long as ads add up, China may be good enough.