AOL Time Warner and China’s Legend computer manufacturer have established a portal joint venture.
As the Chinese market opens up to outside IT opportunities, analysts pump out exciting figures. Although the country only has 30 million Internet users at the moment, figures published by the China Internet Network Information Center suggest an annual growth rate of around 75%.
Such a huge market seems impossible to resist, yet few companies dare to venture into the comparatively unknown. AOL Time Warner has at least bitten the bullet, and its action could well trigger similar deals during the next 12 months.
It seems natural that with so much content, AOL should choose to target the portal industry. But it has partnered with Legend, rather than the dominant portals. This is perhaps unsurprising, however. The three main portals – NetEase, Sina and Sohu – have all suffered from the downturn in the global Net economy, and look much less attractive than a hardware manufacturer which will almost certainly see growing sales in China over the next few years. AOL has chosen to partner with a company that has visible assets and which can afford to venture into, but not rely on, Internet content.
However, Legend may not just be the ‘safest bet’. This partnership, if successful, could lead to close relations between the two companies. AOL may then look to pre-install software onto Legend’s machines, a quick means to access the growing domestic PC and Internet market. Legend already has a 39% share of the consumer PC market. The $100 million AOL is spending on this first venture could easily make a huge return on investment.
