CReATION: Dotcoms turn to traditional media

The once-fashionable dotcoms are now buying traditional media companies in a bid to bring much-needed revenue into their balance sheets. Hong Kong-based entertainment website Stareast recently took over the 61-year-old local daily newspaper, Sing Pao Daily. In a similar move, Hongkong.com acquired Miller Freeman Asia's travel and tourism group, as well as its publishing services as part of its B2B travel service strategy. After burning millions of investment dollars and following the bursting of the Internet stock bubble, dotcom companies are now striving for a sustainable, profitable business model. Tom.com CEO Wang Shen admitted the company had taken up a more "realistic" approach with the adjusting of its business positioning from merely a portal to an integrated media and IT venture. Having acquired shares at YC Press, Kunming Fench Star, 163.net and shawei.com in China, Mr Shen said the company would invest in any media, which was profitable. The immediate task of most dotcoms is to curb, or at least lower losses, otherwise, these companies will see their investment cycles in the market shortened, said one financial analyst. The Internet has done little to deliver the expectations of dotcom investors: advertising and ecommerce revenue on the Web is fairly low. Adspend on the Internet accounts for about one per cent of total media advertising income in Hong Kong, and ecommerce has yet to be proven as an active revenue channel. Therefore, the analyst said, buying out profitable traditional media businesses can help generate income. "The Internet started up as a zero revenue business, and therefore, the dotcoms still have a long way to achieve, at least break even," added the analyst. The plunge of stock prices has signified the bottom line asset value of dotcom companies, bringing a reality check to dotcom business development. Stock prices, to a big extent, reflect the value and prospect of businesses. And, the reality of the business is that you have to make a profit to lift the company value in the market. "If they (dotcoms) don't look into some actual profit-driven business, they are still operating in a virtual model," said the analyst. Established, profitable old media offers dotcoms concrete "cash flow" to sustain businesses, said Cash senior research analyst Barbara Hon. "These dotcoms are still in the investment phase and are losing money at the moment," said Ms Hon, adding that acquiring profitable businesses would enhance the financial positioning of Internet companies. Internet and media form the best marriage, as offline and online media can create a business synergy in the long run, explained Ms Hon. The AOL/Time Warner merger set out a new media scene in the new economy: vertical integration is an inevitable trend in the industry. When new media bought into old media, issues were raised concerning whether the Internet would finally swallow traditional media. However, the coming together of the Internet and old media has demonstrated to the industry the fact that new media still has to rely on traditional media to generate substantial income.

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