Two weeks ago Baidu, Inc. ((ADR) NASDAQ: BIDU) rolled out iTieba (in Chinese), an addition to the Tieba topic forums (think Google Groups, but much much more popular – Tieba literally means “post bar”). iTieba is a personal status page for Tieba users, a throw back to the original idea behind Twitter.

The site immediately caught the attention of the Chinese media, with many stating that Baidu has joined in the competition of microblogging platforms. Comparisons were immediately made to the Twitter clone launched by Sina Corporation ((USA) NASDAQ: SINA), as both prominently featured celebrity accounts. Sina is the master of using celebrities to push its services, as can be seen by its massively popular Sina blogs where it seems most Chinese stars from all walks of life reside (including Kaifu Lee, former head of Google Inc.’s (NASDAQ: GOOG) Chinese group). For Baidu’s iTieba, at launch it already had a number of popular celebrities such as Jet Li, and one pop artist has already amassed 1MM followers.

Interestingly, Shu Xun, the division manager of Baidu Tieba, went on the record on his Sina microblogging account to say that iTieba is not a microblogging service:

“Sina Microblog is very fun and I check it regularly. Thank you for all your interest in iTieba. iTieba is just the personal center of Tieba, and is a function of Tieba, so people who don’t use Tieba may not be used to it. According to my knowledge, Baidu has no plans for a microblogging service.”
– Shu Xun, Division Manager, Tieba

So it remains to be seen whether iTieba is a serious microblogging play from Baidu, or just a very Twitter-like new function for Tieba. Sina Microblog (which remains to be creatively named) has gained good traction in the past few months, both thanks to its celebrity strategy and the competition vacuum created when most of the leading Twitter clones in China were shut down for political reasons (the former leader, Fanfou, is still down, while Digu has returned). Microblogging is still a very new thing in China, and the potentially huge market is up for grabs, so it won’t be surprising if Baidu does want a piece of the action.

On Oct 16th China Real Estate Information Corporation (NASDAQ: CRIC), a joint venture between Chinese portal Sina Corporation ((USA) NASDAQ: SINA) and realty agency E-House (China) Holdings Ltd.(NYSE: EJ), IPO’d on the NASDAQ and jumped 18% on its first day of trading. The stock, whose IPO price is $12, had a run of up to $17 last week, but is now more modestly priced at $14. That gives CRIC a market cap of US$1.96B, just US$300MM shy of Sina’s current market cap of US$2.24B. Sina owns 33.35% of CRIC (E-House owns 50.04%).

The IPO is an indication of the new ambitions of Chinese Internet portals, and also fits with the general strategy outlined by Sina management after their failed merger with Focus Media Holding Limited ((ADR) NASDAQ: FMCN) . This IPO is the third spin-off IPO of a major Chinese Internet player, after Sohu.com Inc. (NASDAQ: SOHU) spun-off Changyou.com Limited (NASDAQ: CYOU) and Shanda Interactive Entertainment Ltd. (NASDAQ: SNDA) spun-off Shanda Games Limtied (NASDAQ: GAME).

CRIC is not the industry leader in the real estate vertical space in China. That honor belongs toSoufun (which literally means “house search”). Sohu’s Focus is second in market share, while Sina’s vertical (now injected into CRIC) is third. After the CRIC IPO, Soufun seems to be stepping up the pace of its own IPO plans. In an interview with QQ.com (link in Chinese), Soufun CEO Tianquan Mo expressed that “major announcements will be made soon.” Earlier in June he had expressed that Soufun is considering an IPO in 2010.

Meanwhile, Zeng Fuhu, a VP at Sohu Focus comments (rather skeptically):

“Just like China.com was the first portal to IPO, while you get some first mover advantage, being the first to IPO doesn’t affect the competitive landscape.

Spin-offs aren’t the only way an Internet company can grow. Compared to western counterparts, Chinese companies seem to see this as an effective way to incentivize employees, but it’s not right to over-emphasize spin-offs… Most US Internet companies like Yahoo and Google have never done spin-offs.”
– Zeng Fuhu, Vice President, Sohu Focus Network

While Mr. Fuhu’s remarks sound rational, the wave of spin-offs and vertical portals seeking IPOs appears to be just beginning. It may not be too soon before Sohu also considers spinning off Focus.

Following up on Doug’s earlier post, I would like to point out what the Chinese media has deemed to be the bigger story for Sina – the $180MM equity financing. This was quite casually mentioned in Wall Street Journal’sarticle on the failed acquisition of Focus Media Holding Limited ((ADR) NASDAQ: FMCN) by Sina Corporation ((USA) NASDAQ: SINA). However the Chinese press and blogosphere seems to be having a field day over this (example: check out this special feature by Techweb, in Chinese), calling it Sina’s MBO (management buyout).

The significance in the financing is that Sina’s management now has stronger control over the board, after acquiring a 9.41% stake and becoming the No.1 shareholder (Sina’s poison pill plans prohibit institutional investors from acquiring more than 10%).

Influential Chinese tech blogger Keso (somewhat sentimentally) comments that (link in Chinese, below my translation):

“… This should have happened a long time ago, but I never expected it to actually happen. Sina’s shares are extremely diversified, with no controlling shareholder that is responsible for the company’s future. This is why for 9 years since Sina’s public offering, it has always been a great tool for capital market manipulation, but never really anyone’s enterprise. CEOs are changed like a circus show, and the company’s market value is now less than 3/4 of Sohu…

… Now that Sina people are biggest shareholders, for the first time they have the right dream about the company’s future. I like this change.”

Rich Tong, MD of Qiming Venture Partners, shares with the press (link in Chinese) that the move was probably spurred by the likely failure of the Focus Media acquisition, and that he expects Sina to make some pretty big moves in the coming 12 months.

Sina CEO Charles Chao revealed (link in Chinese) that plans for the “MBO” began two months ago, and hints that Sina will focus on growing vertically, for example in its real estate site, video and mobile. Management apparently wants to spin-off these vertical properties – for example a few months ago there was news of Sina’s real estate site merging with E-House, and now it seems there are plans for a US IPO for this JV.

Well, headlines today are certainly a surprise (at least for me – I haven’t been following this space closely). Sohu, who has just led the formation of a “Online Video Anti-piracy Coalition” (my translation) with some other web partners, has decided to sue Youku.com 50-100MM RMB (about 8-15MM USD) for copyright infringement. A quick google search shows that lawsuits in this space have been heating up – earlier this year H.Y. Brothers, the leading local private film studio, sued a bunch of Internet properties (including Sohu and Youku); and before that Youku had also sued competitor Tudou.

While it’s clearly obvious that these lawsuits are tactics to pursue vested interests, I feel they are helping to push the industry towards a more mature stage where laws and regulations are properly enforced. One reason businesses like Netflix and Hulu don’t exist in China is because the cost of piracy is so low. Of course, Chinese consumers are spoilt in the sense that they have become accustomed to the fact that almost all forms of home media entertainment are free or very cheap (thanks to piracy), so any movement to enforce adequate copyright laws will be met with consumer resistance. But it should be clear that real businesses shouldn’t be founded in the hope that they will thrive due to the piracy environment – free may be a business model, but piracy isn’t.