Putting the PR in PRC

Internet ads add up for China's party mouthpiece

Xinhuanet is an investment rarity: an online media group that is both fast-growing and profitable. Booming advertising revenue is propelling the digital arm of China's state-owned news agency Xinhua towards an initial public offering that could value it at close to $1 billion. Its success doesn't depend on headlines or scoops, but on being the Communist Party's main mouthpiece.

While Western internet advertising rates keep falling, banners and other marketing tools help Xinhuanet pay the bills. Ad sales grew 59 per cent in 2013, fuelling a 24 per cent jump in net profit. Though the company doesn't publish data for unique users, it's clearly attracting eyeballs: Xinhuanet.com has risen to 70 on Alexa's ranking of the popularity of global websites. The New York Times, which charges a subscription fee to regular users, is at 130.

Xinhuanet is hardly a model for online journalism, though. It combines stodgy, heavily censored reports on Party initiatives with a baffling array of slide shows - recent highlights include an album trailing a pretty Korean presenter around the World Cup. Nor is it a tech wunderkind. Despite plans to raise $240 million for initiatives including "new media technology research and development", its current offerings lack creative flair. What it does have is a lucrative monopoly on PR in the People's Republic. Xinhua has had a direct line into leaders' news and views since the thirties, giving it exclusive access to the inner workings of the world's second largest economy. Though this insight comes at the cost of objectivity, outsiders still have to pay attention. Other benefits of state ownership include subsidies, secure licenses, and connections that allow it to attract influential readers and deep-pocketed advertisers.

That could help Xinhuanet's listing repeat the success of People.cn. Shares in the online unit of the People's Daily newspaper have nearly doubled in value since their 2012 debut, and now trade on almost 80 times last year's earnings. A market capitalisation of $960 million would imply a multiple of just 36 times for Xinhuanet.

There are limits: neither Xinhuanet nor People's Daily tempt substantial audiences and revenues from beyond China, and both will continue to depend heavily on their powerful state-backed parents. But as long as ads add up, China may be good enough.