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Illustration by Emilio Rivera III. Buys a Plan
Dotcoms go in search of old-economy profits

What a combination. Hong Kong business baron Li Ka-shing was launching an Internet firm. Superman's acumen, wealth and mainland clout paired with new-economy buzz. Li would dominate China's Net portal market. Everyone was going to get rich quick.

That's what thousands of local investors thought when they nearly rioted trying to get forms to buy shares of Li's portal,, which went public in March on Hong Kong's Growth Enterprise Market. It hasn't worked out that way. Despite the platinum veneer and the $89.5 million Li raised by going public, lacked a catalytic ingredient — a plausible business plan. Today,'s stock price, once as high as $1.97, languishes at about 38 cents a share. And after scrambling for five months to fulfill the promise in its prospectus, Li's lieutenants are expanding their content-based portal plan by rapidly acquiring old-economy assets in a bid to generate revenue.'s strategic turnaround began in August with the arrival of new chief executive Wang Sing. Within a month he had shed 130 staff members and gone on a buying spree to turn into a multimedia business aimed at Greater China. In September, bought China's top sports web site, a deal quickly followed by the purchase of event management and sports advertising firm Yang Cheng Press and China-based e-mail service provider

Perhaps the surest sign of's intention to be a multimedia player was the purchase last month of the Chinese-language newsmagazine, Yazhou Zhoukan (once a sister publication of Asiaweek). Gaining access to YZ's 100,000 subscribers was but a small part of the deal's significance, according to analysts. "The material benefit is that is communicating to the market that they are pursuing a new-media strategy by acquiring old-media assets," says Victor Lai, Internet analyst at Chase JF in Hong Kong. A official says YZ is just the first step towards expansion into other print media businesses. Hong Kong Chinese-language newspapers Ming Pao and Sing Tao are both possible targets for stakes. is not the only money-losing Asian dotcom that, since the global meltdown of technology stocks, has changed character in a frenzied effort to offset high expenses with income. Another Chinese portal,, recently spent part of its IPO windfall to acquire Miller Freeman Asia's travel and tourism publications business. hopes to increase advertising revenue — which is certainly not being generated to any meaningful degree by its Internet content portal — by repositioning as an old-fashioned media business.

These days, just about any old-media business seems fair game to the Internet set, as long as it can bring in some bucks. in October bought one of China's most profitable outdoor media and advertising companies, Kunming Fench Star Information Industry. Tom's Hong Kong division has even started to organize public relations events, forcing some editorial staffers to apply their talents to marketing. The company recently hosted a performance by Olympics gymnastics medallist Liu Xuan and online chats with winning divers Fu Mingxia and Xiong Ni. Motorola sponsored the Hong Kong events and covered most of the expenses. "It's difficult to scramble for advertising dollars based on content alone," says a executive. "By organizing events it boosts our publicity and helps build customer loyalty."

Will the strategy work? Vickers Ballas analyst Tommy Ho estimates that the new acquisitions will cut the dotcom's losses in this quarter by more than half from the $21 million the firm spent in the previous three-month period. Even with the slower burn rate, Ho doubts if's share price will get much above 26 cents per share for at least a year. Li Ka-shing's baby will have to do more than assemble a group of loosely related media companies if it is ever to fulfill its promise at birth.

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