Surfing China’s Internet for Profits

Internet-related stocksChinese real estate prices may be slowing, but the demand for the Internet is going through the roof. The numbers don’t lie. Internet usage in China is tops in the world, with a whopping 505 million users on the Internet at the end of November 2011, according to the China Internet Network Information Center (CNNIC). This means that about one out of 2.8 Internet users in the world, based on around 1.8 billion users (JupiterResearch), are found in China.

The number of broadband users in China stands at around 15.51 million users, up 18.6% year-over-year. There are also over 340 million smartphone users.

In addition, about 58% of Internet users in China roam the Web via their cell phones, according to the State Council Information Office.

And what is impressive is that the Internet penetration rate in China is still low at 37.7% versus over 70% in theU.S., so there is still plenty of room to grow.

These massive numbers point to the staggering growth in this area. With the enormous Internet market, having some cash in Chinese Internet stocks makes some sense.

Below I have listed several Chinese Internet-related stocks that are worth a closer look. Note that these are not meant to be recommendations, but they are just stocks in this area that are interesting.

As a play on the Chinese online dating space, take a look at Jiayuan.com International Ltd. (NASDAQ/DATE, $5.48; Market Cap: $172 million). Jiayuan.com operates the largest online dating site catering to urban dwellers in China, according to the company. The company was rated number one based on the number of unique visitors, average time spent per user, and average page views per user in 2010, according to iResearch. The web site had an impressive 50.51 million registered users and averaged 5.56 million monthly active users (up 32.3% year-over-year) in the third quarter ended September 30, 2011. About 5.1 million users were added in the third quarter. The number of those paying averaged 1.25 million in the third quarter, up 92.6% year-over-year.

A Chinese social networking play that is interesting is Renren Inc. (NYSE/RENN, $5.42; Market Cap: $2.13 billion). Renren operates a real-name social networking Internet platform in China. The platform is for social networking and allows users to connect with each other. Services include social networking, online gaming, social commerce, and business social networking. The company had about 137 million activated users as of September 30, 2011.

Qihoo 360 Technology Co. Ltd. (NYSE/QIHU, $22.58, Market-cap: $2.71 billion) is a top Internet site in Chinabased on the active user base. The company is also the top provider of Internet and mobile security solutions in China based on the active smartphone user base, according to iResearch. Qihoo 360 develops web browsers and application stores where it can sell online advertising and Internet value-added services. The number of monthly active users that use the company’s products is around 400 million.

Not only is the Internet in demand in China, but so are raw materials, which I discussed in How China’s Craving for Raw Materials Will Affect You.