Daqi Case Report Case Study Solution
Pros:
There are many benefits associated with this option. Zhou would be able to post news content through different methods such as the company can form licensing agreement with the large news sites and they would then grant the permission to Daqi to post their news articles on In this way, the legal risk would be minimized and the quality of the content would be high and it could be easily maintained (See appendix 3). Secondly, Zhou also had the option of expanding the content database of the company and including the news content. In this way, the company can position itself more appropriately in the eyes of its customers and the company would be able to generate huge growth (see appendix 4).
Cons:
The copyright laws would also affect the news content. For instance, under article 5 of the CCL, the news on the current affairs was not eligible for the copyright protection (see exhibit 7). The company might face copyright related lawsuits because the awareness related to the copyright laws has increased significantly. The number of copyright lawsuits has also increased between the content owners and the ISPs. Apart from this, the regulatory obligations for Daqi would also increase and the enforcement of the copyright guidelines and regulations would increase the costs for the company. This is the reason that the forecasted revenues and profits would be lower under this option (see appendix 4).
Option 3
The third expansion option for Zhou is to expand the existing UGC base of Daqi. The popularity of the individual bloggers has increased significantly and there are millions of daily readers. These bloggers included many people ranging from celebrities to bloggers which had no previous fame. Both sets of these bloggers would emphasize only on creating their content for their respective audiences. The company can expand into this area and provide space to the daily bloggers for publishing their content on This would increase the current user base of the company from the high popularity of all the featured bloggers.
Pros:
This approach would be an easy and feasible approach for expansion because there is no required licensing arrangement with these popular bloggers. This would enhance the revenues of the company through social media interaction (see appendix 1 & 3). It will also provide a quick boost to the site usage. Through this option, Daqi would be able to provide unique service to its users who can discover the popular blogs around China. This would boost the advertising revenues and WOMM Campaigns for Daqi.
Cons:
The issues associated with this were the government censorship as strict enforcement policies had been implemented by the government. Zhou was not aware about how the users would react when their blogs made them more popular. There is also a risk that the bloggers might demand licensing fees and it is uncertain that whether Daqi would be able to generate unique UGC content by handpicking UGC from the mass audiences.
Decision
After looking at the pros and cons of the three options available to Zhou, I would recommend that Zhou should go ahead with option 2 and option three both. Option 3 is less risky as compared to the other two options but it would generate growth for the company. Zhou would be able to leverage on the bloggers content and it would appeal to the internet users. Secondly. Zhou should form licensing agreement with the large news sites and they would then grant the permission to Daqi to post their news articles on This would reduce the legal risks faced by the company and it would enter into a new arena of online space. It would not be feasible to target music content at this point because of the changing landscape in China (see appendix 2 and 3)
Appendix
Appendix A
SWOT MODEL
Strengths
- Daqi is a UGC market pioneer in China.
- Top community site in China with 12 million users and more than 200 employees.
- The financial position of the company is strong and the company is financially sound.
- The estimated compounded annual growth in revenues and earnings is highly significant. (See appendix 1).
Weaknesses
- The internal controls at Daqi were quite weak in the initial years which led to lawsuits against the company such as the so called ‘human flesh search’ lawsuit.
- Around half of the users were engaged in UGC in China and Daqi was leveraging on this opportunity quite well, however, since the inception of the company it did not enter the news or music arena.
- Despite huge revenue and profitability growth the operating costs for Daqi were high not only in startup year but in 2007 and 2008 also.
Opportunities
- The company has an opportunity to expand its UGC base in China.
- There are a number of different areas, where Daqi can grow its business in China. These include music, news and popular bloggers(Mozur, 2016).
- The company can expand its current line of business of blogging by collaborating with some of the China’s top bloggers(Custer, 2014).
Threats
- The expansion of the growth strategy was the next important move for Daqi however; this would require significant capital investments.
- There were a number of other threats which could threaten the UGC business of the company such as government censorship and private lawsuits(Custer, 2014).
- Daqi faced significant competition from a number of sites such as and (Syed, 2011).
- The company also faced threat of business growth from online marketing firms like Hy link Advertising and Allyes which offered competing WOMM products.
Appendix B
PORTER’S FIVE FORCES
Bargaining Power of Buyers - LOW
The user generated content business is expanding rapidly in China. Online portals of different businesses are there in the Chinese market for selling the advertising space. This means that all those who advertise or post content on their sites are their buyers. There is a high competition for UGC in China and the number of the companies competing on the online advertising space is bound to rise in the next years (Barboza, 2010). Therefore, the power of the buyers is low in the market and will continue to decline in future also..........
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