Will China get a new web portal? Will it become as popular as the three existing ones? And how soon will this happen? These are some of the questions being asked in the country's Internet and IT sectors today. For, the entrepreneurial bug has finally bitten a self-proclaimed entrepreneurial executive.

But Victor Koo would rather not disclose his plans in detail now. That he has decided to sever his almost six-year relationship with Sohu and start something on his own is official, though. During his stay with Sohu, Koo served as its chief financial officer and then chief operations officer before becoming its president.

"I joined Sohu in early 1999, about a year after it was set up," Koo says. Witness to the most dramatic ups and downs in the Internet business, he says: "It's as if we are operating in a condensed time frame." It can happen to any Nasdaq-listed company's stock - like (Sohu's equity) sinking below US$1 when the dotcom bubble burst and skyrocketing to US$40 last year and then coming down to be stable between US$15 and US$20.

This year, the company is expected to collect a revenue of about US$110 million, and earn a net profit of US$30 million. That proves "our profit margin is over 30 per cent," Koo says, scotching rumours that Sohu lags behind Sina and Netease. Actually, there has been a paradigm shift in all the three portals, set up at the turn of the millennium, because "one cannot get into every department and expect to excel in it."

In fact, Netease has been moving towards the online game business, from which it gets much of its revenue, while Sohu is strong in community services. "There are only two de facto portals now, but they are no longer the only battleground where online companies duke it out," Koo specifies.

Even Sina, with arguably the strongest news service in the industry, does not earn most of its profit from online advertising. "The name of the 'three portals' may still not be outdated, but they don't encompass all the aspects of the Internet business. Yet portals do have the ability to attract users, who can then be diverted to other business areas." And this is where China's portals enjoy an advantage - having more opportunities than their Western counterparts because being fewer in number, most of them not only survived the bursting of the Internet bubble, but also were spared its aftershocks.

"Yes, we experienced some short-term pain, but in the long run it was good for us. It made us more rational... Had there been a dozen publicly listed online companies in China, I'm sure some of them would have bitten the dust."

There are other players in the crucial online game business and value-added mobile services. "The name of the game keeps changing and it's often unclear who the next winner will be," he says. And, of course, there can be areas with no winners. For example, the concept of online shopping malls never really took off in China. Because, Koo argues, "China does not have a proper payment scheme that would make the consumers feel at ease to use their credit cards... For this sector to be as well-developed as in the West, the value chain has to be complete - making sense for companies to create value."

There are other challenges too in the area of value-added mobile services. Sohu downgraded its earnings in the third quarter when China Mobile suspended its multimedia messaging service (MMS) for a year for violating the country's dominant mobile carrier's regulations. Koo prefers not go into the details of the punitive action, saying Sohu understands the government and the carriers' need to adapt to new technologies. "New policies take some time to be formulated, during which a carrier's management team could change. Therefore, it's imperative that we maintain a sound cooperative relationship with all the parties."

Koo is optimistic about China's Internet industry. "China has formed a unique front and is leading the world in some areas. We're ranked second, next only to the US, in terms of the number of Net users. But we're still far behind when the size of the industry is measured in terms of revenue." Since Koo is not aware of any comparative nation-to-nation research on the size of the Internet industry, he says it would be difficult to evaluate the wolrd scene because of the difference in the business character in each country.

"In China, the Net has a far greater impact on the people's lifestyle, whereas in the US it directly affects commerce. That portends well for our future here. It means China still has a lot of potential for growth," he says.

China doesn't simply have to learn from the US model. "We learn from the best from across the world. For example, South Korea is far ahead of the US in broadband and online games. So the South Koreans can help point the way for us in those areas. For, as far as mobile applications are concerned, China has surpassed the US."

This raises hope, Koo says, of an Asian Net firm buying out a US rival in the near future - the way Lenovo acquired IBM's PC business. "To a certain extent, this is already happening", he says, referring to the acquisition of Lycos US by Daum, a South Korean company. Though China started later than the US in the Net business, "all the ebbs and flows of business cycles are still there, only that they happen much faster."

That brings up the present, which Koo considers to be the second phase of high-tech investment. "This time, investors are more rational and their decisions, more cool-headed." Koo sees 2005 to be big for hot money in the tech sector. "The exemplary stock market performance of the listed companies is a major driving force behind the new round." But he warns that this time money will be poured into all areas, except the portal.

Koo won't disclose which specific area he intends to target to capitalize on the second boom, but he is sure "it won't be Sina or Netease". For, he does not want to repeat himself. "I call myself an entrepreneurial executive, and we're lucky to be living in the golden age of innovation. After participating in one or two start-ups, I'll return to venture capital, where I came from," he says.

Before coming to the mainland, Koo spent ten years in the San Francisco Bay area, where he earned two degrees and then worked for a venture capital firm. "During the first few years of my stay here, people were shocked at my career move. They could not understand why I would want to settle down in China. But in the past few years, people have been amazed by my prescience," he laughs.

Life in the mainland is pretty comfortable, he says. During the first few years, he worked so hard that he didn't have time to pay attention to other things. It was only later that he began savouring the spices of life, like realizing that the choice of cuisines in Beijing and Shanghai had widened. "Now you can even have Mexican or Vietnamese food here."

Everyone seems to be making a beeline for China. The media too is here, and its market will gradually expand, he says. Foreign money was already in magazines. Now it has been allowed in TV production too. And unlike others, he does not see anything going seriously wrong in the long run.

"The only trick is to grasp the right thing at the right moment," he concludes.

(HK Edition 01/05/2005 page16)