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ChinaNet Online Holdings Reports Second Quarter 2012 Financial Results

Second Quarter 2012 Revenue Breakdown by Business Unit (USD in thousands)

  Q2 2012 % Q2 2011 % % Change
Internet Advertisement $ 5,358 41% $ 6,457 71% -17%
TV Advertisement $ 6,144 47% $ 2,059 23% +198%
Bank Kiosk $ 71 1% $ 138 2% -49%
Brand Mgmt. & Sales Channel Expansion $ 1,554 12% $ 427 5% +264%

Revenue from Internet advertisement for the three months ended June 30, 2012 declined by 17% to $5.4 million compared to the three months ended June 30, 2011, primarily due to a significant reduction in value added services revenues, as branded clients reduced their advertising spending. Sales of brand management and sales channel expansion increased 264% to $1.6 million for the three months ended June 30, 2012 due to an increase in the average advertising spending per customer from larger-sized clients. TV advertising revenues increased from $2.1 million in the second quarter of 2011 to $6.1 million in the second quarter of 2012.

Total cost of revenues increased to $9.4 million for the three months ended June 30, 2012 from $3.4 million for the same period in 2011. The increase of total cost of revenues for the three months ended June 30, 2012 was primarily due to the significant increase in costs associated with the TV advertising business segment. 

Gross profit for the three months ended June 30, 2012 was $3.8 million compared to $5.6 million in the same period a year ago. Gross margin decreased to 28.7% from 62.2% for the same period in 2011 as a result of the significant increase of the low margin TV advertising revenue, which accounted for approximately 47% of total revenues for the three months ended June 30, 2012 compared to 23% for the same period of 2011.

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