Chen Tianqiao: Think of yourself as the forerunner of the Times

Chen Tianqiao: Think of yourself as the forerunner of the Times

Author of The Wall Street Journal: Loretta Chao

This year's 34-Year-old flyover sometimes sees itself as the forerunner of the current era--at least for now, and Shanda Interactive Entertainment Limited (Shanda Interactive Entertainment Ltd.) Investors still need some time to catch up with him.

Chen Tianqiao, who has been in the management position in the real estate company, created a grand 1999 online video game with a network enthusiast in China. Now, in the Nasdaq-listed grand by the eight online games attracted hundreds of thousands of fans, became the Chinese video game industry well-deserved "Boss", but also the business tentacles extended to the music and other interactive entertainment areas.

The number of Internet users in China has reached 162 million, after the United States, ranked second in the world. According to data from the Beijing Science and Technology consultancy, BDA China Ltd., online gaming has now grown into a huge industry, earning $818 million trillion in the industry in 2006, a surge of 74% from 2005. The net profit of the grand 2006 was RMB 529.2 million yuan (69.7 million US dollars), income of RMB 1.65 billion yuan.

At the start of the campaign, Chinese Internet companies have focused on improving page views to show investors and advertisers how popular they are. But the working mode of Shanda's software system is different, so it's very difficult to get investors ' favor at first. But Mr Chen and his team persevered, and finally the company successfully financed 151.8 million of billions of dollars in an initial public offering, held in May 2004.

Initially, the grand stock trend was gratifying, but by November 2005, Chen Flyover threw a change in the registration model after the decision, the stock performance plummeted. Previously, Shanda registered users need to pay 30 yuan (about 4 U.S. dollars) per month, but the business model changes after all players can play free game, but need for advanced services or products (such as the characters of virtual weapons, etc.) pay. Shanda also creates profits by selling advertising space in the game.

The launch of the new business model is difficult. In the first quarter of 2006, net profit plummeted 95% from a year earlier, while revenue fell by 31%. The company's shares fell below $13 in April 2006, a comparison of the 45.40-dollar highs of December 2004.

However, the spectacular results later turned, the company's first quarter of 2007 net profit soared to 448.8 million yuan, is 37 times times the same period last year. Shanda is due to announce its second-quarter results later this month. Shanda's stock also regained some of its previously lost ground, with the stock reporting 25.81 dollars in Friday, closing up 8.7% per cent.

But Chen Tianqiao that investors have not fully grasped the value of his new business model. He pointed out that the company's successful transformation has not been fully reflected in the share price. A few days ago, Chen Tianqiao in the grand Shanghai headquarters to accept this reporter's interview.

Q: What happens when you and your partner try to create a non-traditional Internet business in 1999?

Chen Tianqiao: It was really tough at the beginning of the company. Venture capitalists and investors do not understand this business model. Our colleagues have said that page views determine everything, but Shanda provides the product is the on-line game-uses our software does not need to load the webpage, therefore cannot like the search engine company to be able to stimulate the page browsing volume to attract the advertisement revenue, therefore in that browsing quantity first time, the investor all unanimous to say " How can we invest in you? ”。

At that time, Yahoo Company (Yahoo!) in the United States is very famous, Sina (Sina), NetEase (NetEase) and Sohu (Sohu) also because of copying Yahoo's model to walk in China all the way, but as a grand founder, we never go out of the country, to the United States market has no research We have lived in China and never left. We are committed to the game industry, but we do not want to go the way of other companies, because our interest is not in this. That's why companies decide to specialize in games and online chats. But because companies have difficulty finding investors, we have been under a lot of pressure.

Q: When did the situation get better?

Chen Tianqiao: In fact, Shanda is the first company to achieve profitability in the same industry. Even if our business model was not understood in the first place, we were making money, and when the dotcom bubble burst we were still making money, so that Shanda got more recognition and started to get venture capital. The company was successfully listed in the United States after half a year, and its IPO was among the top five in the global market in half a year, when the company's shares rose from 11 US dollars to 45 dollars, worth more than 3 billion dollars.

Q: What are the major differences in your industry in Asia and elsewhere?

Chen Tianqiao: The United States has a slight advantage over us, but it's only a few years. However, because the United States has a huge game industry, online game development is not particularly strong. The gaming industry has earned a bowl of money in the United States, and in China the gaming business has never really developed because of piracy. In addition, the American film and music industry is also very developed, I think they are also competing with the online game customers.

So Shanda has a very good foothold. Companies have the opportunity to become the global network gaming industry overlord. To be sure, Shanda is among the world's largest in terms of revenue and market capitalisation, but in the overall gaming industry, including game consoles, the company may be ranked eighth or nineth in the world.

Q: In your past decisions, which are the hardest? Which is the most satisfying to you?

Chen Tianqiao: The hardest decision is always the one that satisfies you the most, because it's hard to decide, so you'll have to spend a lot of time mulling over it. I'm going to face one of these moments almost every year.

In the first year, the company must make a decision on the first licensing of online games. At that time the grand only RMB 2, 3 million yuan, but the cost of authorization is as high as 300,000 U.S. dollars, and we know that the authorization will also invest to buy new servers and put into marketing costs. At first many people were against it because I would spend all the money on this company. But eventually the company decided to do it, and if not for the success of the game, Shanda could not have successfully developed to this day. But at the time it was a risky game.

Then is when the company's business began to take off, the grand authorized party-Korean game developers Actoz want to improve our licensing fees. Shanda considers this a breach, but Actoz to deprive the company of its only source of profit. Eventually the two sides had to litigate in Singapore, the lawsuit lasted three years. But the time has come to prove that seeking a legal solution is the right decision-the company must prove that it will not bow to this blackmail, that the company must prove itself to be law-abiding, and that we did, and that now Actoz has become a company's business.

Q: Is there anything you know now, but you want to be clear at the beginning of your business?

Chen Tianqiao: I wish I had known more about capital markets. If I had enough knowledge when I first came on the market, the transition would be smoother and the share price would not have fallen so drastically. Companies will be better able to communicate with their shareholders to see how their performance may change.

Q: Do you still play computer games now?

Chen Tianqiao: Of course! Every time the company launched a new game I will personally play. I will log in as a regular user, of course no one knows who I am. Not only do I do it myself, but I also listen to other gamers ' evaluations.