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August 20, 2007

Linktone and KongZhong Report 50% Drop in Revenues

posted by MR WAVETHEORY at 8/20/2007 05:37:00 PM
Chinese wireless service VAS providers I have been following reported earnings tonight. KongZhong (Nasdaq KONG) revenues dropped by 50% from a year ago but broke even. KongZhong's sales for the quarter dropped year-over-year to $17 million from $30.1 million. Linktone reported even worse results and reported a loss (press release). Revenue during the quarter fell to $11.7 million from $23.3 million. A director from Linktone (Nasdaq LTON), Mark Begert, also resigned. Mark was one of the founders.

The way I see it these companies have no compelling applications of their own and serve as distributors of third party apps or content. Not all WVAS are bad, but there are some bad players in the industry and everyone if having to pay for the sins of the bottom feeders. One of the biggest complainsts is that bottom feeders rip off customers by charging fees for services that they advertise for free, double bill for services, and spam their inboxes with premium rate messages. It's replay of the carnage of what happened in Europe and the US two years ago. It's kind of their own doing. On top of that, China Mobile is doing more of the content themselves and keeping more of the revenue.

On the other hand, companies with real applications like QQ are doing well.

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