Guidance for 2010
Management reaffirmed 2010 net income guidance of $14.1 million, which represents 67.9% year-over-year growth, respectively. The Company is ahead of its target to decrease its television advertising and as such expects revenues to be between $41 and $43 million for 2010, compared to previous guidance of $45 million.
ChinaNet is focused on strategically expanding its rapidly growing internet service and advertising business, 28.com, which boasts gross margins of 70%-80%, compared to 5%-10% for its TV Advertising business segment. Two components of the Company's strategy uniquely positions ChinaNet to succeed: 1) an exclusive focus on the burgeoning Small and Medium Enterprises (SMEs) market with an emphasis on adding higher-paying branded clients and 2) introducing additional value added services to existing and new customers.
Internet Advertising -- During the third quarter of 2010, the Company's
web portal exchange further increased its estimated market share to more than 35% due to effective branding and marketing. ChinaNet continues to help SMEs increase the profile and value of their businesses through multi-media branding campaigns by integrating internet advertising with TV advertising. Its Internet Information Management (IIM) division was created in August 2009 to offer clients an intelligent software product based on its proprietary search engine optimization technology.
The Company started offering value added IIM services to existing clients, including search engine marketing, and search engine optimization in the third quarter of 2009. It has also offered add-on brand management services tailored for clients in various industries. Over the past year, 18% of clients have purchased add-on services from ChinaNet as adoption has accelerated. With revenues more than doubling in the first nine months of 2010, ancillary services currently represent approximately 30% (including management) of total internet advertising revenues in the small and medium sized franchise industry.
The Company introduced an online consulting service for franchisees during the third quarter, which provides another value added service and will drive more traffic to 28.com. With 75 total research and development staff added since the beginning of 2010, the Company is committed to developing technologies and services to further differentiate ChinaNet from its competitors.