The Washington Post has an interesting article on the internet industry in China. Lots of outrageous price-to-earnings numbers, incredibly optimistic internet entrepreneurs, and venture capital firms that believe that China is different.

I don’t really follow the internet space. I never understood how companies made money during the US dot com boom and have even less insight into the Chinese boom. Maybe China’s amazing internet growth combined with a blind belief in the future ubiquity of the internet conflated with population statistics can defy basic accounting principles.

The article closes with a very familiar story:

On principle, he refuses to consider any business model that charges video creators to use the site and said that he’s convinced that the key to profitability will be “click-throughs” — the number of people who click on a video. Since the company’s Web site went live in April 2005, the number of advertisers has grown steadily and it now counts Adidas and McDonald’s as major clients.

Wang, 34, who returned to China after graduating with a computer science degree from Johns Hopkins University in Baltimore, refused to estimate when the company might become profitable but said he hopes it will be “self-sufficient” by the end of next year. The dream IPO is probably years away.

Wang said he knows that if the fate of his competitors is any indication, odds are against him and his investors, U.S.-based IDG Ventures, Granite Global Ventures, General Catalyst Partners and several other VCs. But, he said, “if the chance for success is low, that makes life a little more interesting.”

I wonder if his investors feel the same way. Best of luck, Gary.

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