Shanda's Investors Are Gloomy

Filed in archive Internet on June 16, 2010

We recently talked about the fact that game company Zygna had moved into China. So it seems appropriate to comment on reports that Chinese game giant Shanda is facing a drop in investor enthusiasm.

Xiaofan Zhang wrote back in April about problems with investor sentiment in China's gaming industry. He attributed the mood among investors to a slowdown in revenue growth, reduced profits and regulatory uncertainty in the online games industry in China (with the Ministry of Culture raising questions about some business models).

More recently Zhang looked specifically at Shanda, which is facing many of those same investor attitude issues. He's puzzled at the attitude of investors because Shanda has more paying accounts than ever before and the average revenue per paying user is also up.

If you confine your analysis to Shanda's massive roleplay games, user spending has declined. But in Zhang's view, Shanda has adapted well to that, improved the quality of user experiences, and created a sustainable revenue model.

We'll see whether investor sentiment remains pessimistic over the long run - and what impact that has on industry growth.