NEW YORK, NY -- (Marketwire) -- 05/18/12 -- China's internet stocks have posted mixed results recently as government restrictions, high costs, and a shift to mobile devices have made it difficult for companies to tap into the nation's vast online market. It is estimated that only 37.7 percent of China is online according to the China Internet Network Information Center (CINIC). Five Star Equities examines the outlook for companies in China's Internet Sector and provides equity research on E Commerce China Dangdang Inc. (NYSE: DANG) and Youku Inc. (NYSE: YOKU)
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China currently has more than 500 million internet users. China's internet growth has lagged in recent years, 55.8 million users were still added in 2011, according to the CINIC. Estimates from eMarketer, a digital-marketing research firm, projects that online advertising revenue is projected to grow from $4.6 billion in 2011 to $9.5 billion in 2014. With tight restrictions from the government and growing competition, internet companies have struggled to turn users into reliable sources of revenue.
"A lot of these problems are coming from the fact that most of these firms are still figuring out what the ultimate business model is going to be," said David Wolf, chief executive of Wolf Group Asia. In regards to slowing internet user growth, he added, "It will be about who has the deeper pockets and who is going to be able to evolve their service to keep users. We are looking at more spending before we see more revenue."
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E-Commerce China Dangdang Inc. is a leading business-to-consumer e-commerce company in China. Dangdang recorded an operating loss of RMB107.2 million ($17.0 million) in the first quarter of 2012, as compared with an operating income of RMB1.3 million in the corresponding period in 2011.
Youku Inc. is China's leading Internet television company. Their Internet television platform enables users to search, view and share high-quality video content quickly and easily across multiple devices. Youku, which stands for "what's best and what's cool" in Chinese, is the most recognized online video brand in China. The company received an Internet Publication License from China's General Administration of Press and Publication (GAPP) on March 28.
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