We could see this coming from a long way off. Monstermob, the UK-listed company that set out to conquer the once booming Chinese market for mobile phone ring-tones, is now considering throwing in the towel on China.
The company, which was recently acquired by Spanish outfit Lanetro Zed -- see this EngagingChina story -- released its results today and its clear that the new interim CEO, Javier Perez Dolset, has been having sleepless nights about China. While sales in the rest of Monstermob's empire are growing fast, China has turned into a horror story.
EngagingChina remembers Perez Dolset when he was wheeling and dealing in Spain's internet boom of the late 1990s. He is astute and has seen too many dotcoms go belly up to ignore the obvious fact that the Chinese market for wireless value-added services -- ring-tones and the like -- is unlikely to return to its former strength.
Last year, China Mobile clamped down on the miss-selling of WVAS and so sales of ring-tones and the like dropped sharply. Monstermob was particularly hard hit because, almost without realising it, the company had become heavily dependent on the Chinese market for growth and had made a string of local acquisitions.
Now its Chinese growth engine has been slammed into reverse. Monstermob's average gross revenues per month in China fell by 62% cent to £1.3m in the second half of last year compared to an average of £3.3m in the first half.
Worryingly, these falls are larger than those experienced by other companies in the market, so it looks like Monstermob's problems have been compounded by failings in other areas. It thus plans a "wide ranging internal and external review" of the Chinese operations which will look at the acquisitions made, including earn-out obligations, the business practices and models, and other factors that could explain the decline in revenues and profitability since the middle of 2006.
"Decisions on the future direction and development of the China
businesses will be taken in the light of the results of this review,"
the company warns ominously.
