By Chen Jing & Huang Xin

Beijing Federal Software Co., Ltd. (Federal Soft) announced a few days ago in Beijing that 8844.com, its software portal website, had been officially launched online and users could download and purchase software by way of the software portal website. So Federal Soft as a channel distributor of software has also begun to place expectations of making profits on the Internet. Wang Jianhua, President of Federal Soft, expressed that it was forecasted that the revenues from its online sales would keep balance to those from offline sales by the end of next year.

The panorama can be detected through a part. The Internet is creating more and more profit-making patterns just like E-commerce, software sales or Web2.0 upsurge (the second generation of Internet services). It is just like what Fang Xingdong, Chairman of Chinalabs.com had said that to make more profits has become the common choice for Internet enterprises when they have obtained larger website traffics. The boundaries between subdivided Internet markets such as Entertainment, online advertisements and search engine are becoming indistinct.

Recurring to genuine digital audio and video products

The latest statistics disclosed by China Internet Network Information Center shows that netizens in China have amounted to 123 million, the second largest in the world, with 77 million broadband users included. The huge amount of netizens makes the Internet a market that traditional entertainment must break through, while the prevalent broadband does have provided a platform to realize the downloading and playing of digital video-audio products.

So far as video products are concerned, on the one hand, the purchase of genuine web video products is becoming more and more convenient: Apple has upgraded its iTunes online music store to cover video products; Amazon.com announced that its online store would sell movies to be downloaded by users. On the other hand, genuine web video products combined with web advertisement have become an option for ISPs to get rid of copyright lawsuits and get a new source of profit growth. At the beginning of last month, google.com announced that it had purchased YouTube, the biggest website for share original videos, with shares worth US$ 1.65 billion. In the domestic market, baidu.com has especially established a special channel of MTV music in baidu.com's video search service jointly with MTV. With well-known brands like Motorola and P&G providing web advertisements, users can browse these original videos attached with advertisements online free of charge or make payments to download such original videos.

Music downloads onto mobile phones are more enthusiastic in the domestic Internet market. Mobile phone manufactures, such as Motorola, Nokia and Sony-Ericsson etc. have provided more and more products in their respective online music supermarkets. Whereas those operators of mobile telecommunications trying to turn into content providers also seek for opportunities on the Internet, China Mobile has launched a set of wireless music strategy to provide online music consumption and entertainment services for registered users of mobile phones. It is forecasted by iResearch, a professional market research company, that revenues on mobile music will increase from RMB 2.5 billion yuan in 2004 to RMB 17 billion yuan by 2010.

Exploring potentials of web advertisements

At the beginning of this November, various major websites issued their respective financial reports for the third quarter of 2006 successively. The rapidly increasing revenues from web advertisement attracted attention once again just as they did in the second quarter. By exploring the specific demands for advertisement in fields like automobile and consumer electronics, sohu.com's revenues from the brand advertisement during the third quarter have hit a record high of US$ 21 million, up nearly 35 percent year on year; sina.com's financial report for the third quarter shows that its advertisement revenues, accounting for nearly 60 percent of its overall business incomes, reached US$ 32.7 million; thus, the third quarter has seen the rapidest increment to its advertisement revenue since the company's foundation.

Web advertisement is becoming an important part of Internet profit-making. Zhang Zhaoyang, president and CEO of sohu.com, expressed that it would become a main business pattern for portal websites to rely on web advertisement for profits in the future. But for various Web2.0 websites that have failed to find out an appropriate business pattern, their web advertisements in various innovative forms have begun to show investors the possibility of making profits.

Analysts expressed that web advertisement of new forms having integrated new technologies can bring the advantages of Internet on information communication into a better play and thus bring a new market and profit margin for numerous Web2.0 websites.