In advance of its March 2011 IPO, QIHU engaged iResearch to provide a market survey report and provide detailed statistics to quantify QIHU's market presence in China. The report itself was never made public, but references to it are cited heavily in the IPO prospectus including that QIHU:
For just $300, I was able to engage iResearch to provide me with proprietary data and a one-hour consulting session. The biggest surprise was that iResearch data is compiled using the computers of only around 200,000 paid computer users. That represents about one-half of one-tenth of 1% of the Internet users in China, an absolutely miniscule sample size which ignores 99.95% of the Internet users in China. It is hard for me to understand how such conclusive market statistics could be generated using this sample size or methodology.
According to CFO Alex Xu, the report cost approximately 10,000 to 30,000 RMB (roughly $2,000 to $5,000). This also struck me as an incredibly small sum given that iResearch is cited 66 times in the IPO prospectus and is effectively the only independent verification of QIHU's market presence. The IPO raised in excess of $200 million and QIHU has a $2 billion market cap which would seemingly justify a more thorough and extensive (and presumably more expensive) due diligence effort.
My primary goal was to verify the revenue potential of QIHU's website. iResearch initially told me that the price of links on this type of web page should be no more than 100,000 RMB ($16,000) per month. When I pointed out that QIHU discloses an average of 350,000 RMB ($55,000), and sometimes as much as several million RMB, I was told that this simply wasn't possible, but that they would look into it further. They subsequently called QIHU and confirmed what I had said, that QIHU charges much more than the original iResearch estimate.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV