The S&F law blog

China’s Internet sector getting overcrowded
April 29, 2011, 11:48 am
Filed under: Baidu, Technology, Uncategorized | Tags: , , , , , , ,

The immense success and potential of China’s internet sector has reached a point of attracting too many contenders. Parallels are being drawn between the US’s bursting tech bubble in the 90’s although industry executives and venture capitalists almost unanimously said that the paring down of competitive companies willĀ  be more productive than devastating.

The key difference lies in China’s immense population; there are enough users and business models to support internet sector growth and justify speculative spending. Sock from standout companies Baidu Inc., and Youku have surpassed 50% growth and Sina Corp is trading at 77 times its 2011 earnings.

More companies have been raising billions in funds to invest in logistics and support an initial public offering, making start-up companies difficult to evaluate.

The severity of internet sector over-competition will likely be determined by how fast China can connect greater numbers of its population. Even though China has the biggest internet population in the world, the penetration rate is still a small 35 percent.

Source: Reuters