SCMP today continued covering the fallout from China Mobile suspending services to Mtone Wireless, Sohu, Shanghai Sifang, Guangzhou Rui Shi Communications.
A VC picks up on the theme of overfunding in the mobile gaming market.
I think this is going to end badly for a lot of these investments. For one, its too much money in the individual companies. For another, there are too many "me too" investments. Overfunding and me too investing are the two most rampant diseases in the venture business today.It looks like mobile gaming is the latest industry to catch that disease. And its too bad. Because its a nice niche market that could have produced decent returns for a few VCs. But not for the whole industry
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Ive held similar views on the whole SMS/IVR business in China. Last week Sina advised it had suffered temporary suspension. "Market watchers" described the moves as part of the Government's pressure to clean up questionable content (read sex) and billing practices (not sure what this refers to?).
Mtone Wireless as a result has cancelled its Nasdaq offering of US$55M.
Tom Online's share price has fallen to record lows (crashing 20% in a week) as investors fear the backlash will hit the largest IVR business on the mainland. Tom maintains its content contains 'nothing offensive'.
Overall though the China portals have run up considerable gains after discovering SMS/IVRS services as a revenue stream alternative to online advertising. Without controlling the distribution channel to end customers Ive had a hard time seeing a sustainable business model. Nevertheless significant fortunes have been made but where they go next is going to be tough. Gaming? see the start of this post!
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