ZW Data Action Technologies Stock

ZW Data Action Technologies Inc. provides Internet advertising, precision marketing, e-commerce online to offline (O2O) advertising and marketing services, as well as the related data and technical services to small and medium enterprises (SMEs) in the People’s Republic of China (PRC).

The company primarily operates a one-stop services for its clients on its Omni-channel advertising, precision marketing and data analysis management system. The company also develops blockchain enabled web/mobile applications and provides software solutions, i.e., Software-as-a-Service (SaaS) services for clients.

The company derives its revenue principally by distributing the right to use search engine marketing service it purchased from key search engines to increase the sales lead conversion rate for its clients’ business promotion on both mobile and PC searches; selling Internet advertising space on its advertising portals and providing related data service to the company’s clients through the Internet advertising management systems developed and managed by it; providing Blockchain-based SaaS Services; and providing other e-commerce O2O advertising and marketing and related value-added technical services.

In 2018, the company commenced to expand its business into the blockchain industry and the related technology. With the introduction of blockchain technology, it engaged two unrelated parties to develop two blockchain-technology powered platform applications named BO!News and OMG, respectively.

In 2021, the company delayed the launch of BO!News application, and decided to suspend the launch of its OMG application. Alternatively, the company enhanced the development of the blockchain infrastructure platform, i.e., Blockchain Integrated Framework (BIF) platform under the OMG development contract, which platform have membership management, trusted and decentralized payment management and Non-Fungible Token (NFT) management etc. features, so that the BIF platform could be further integrated into other blockchain application scenarios to provide data storage, assurance and analysis services to the SMEs. The company also developed a more comprehensive and upgraded open-core version of BIF in the SaaS model with an open-end control panel to a greater extent, allowing its clients to use it to develop their own NFTs for their IPs and branding in China for the reauthorization use of both domestic and overseas users. The BIF platform is being developed into a subscription model with a starting subscription fee and the fees will be increased in accordance with number of apps subscribed, transactions or the size of data stored through the platform. In addition, the company’s clients will be able to self-code themselves based on the existing modules of the smart contracts for the customization on their own specific needs in a low-code practice, and extra usage fee will be charged on the top of monthly recurring revenue. The company completed the development and integration of the BIF platform, and officially launched the BIF and Bo!News by the end of 2021.

From early 2022, the company started to introduce its blockchain-based SaaS services to its clients, which were designated in providing one-stop blockchain-powered enterprise management solutions via its BIF platform in forms of unique NFT generations, data record, share and storage modules subscriptions etc. The company modified its short-term tactics of SaaS services into a more SMEs-friendly way, for example, it introduced a more flexible payment method of pay per generation of NFT. In December 2022, the company decided to terminate the promotion of its Bo!News application and concentrate its resources on the BIF platform in future.

In 2023, the company planned to further develop its core business, i.e., its Internet advertising and related data service business to broaden and diversify its online marketing channels for customers, reinforce its industry competitive advantages and secure its client base, and to continue to develop and optimize the functions of its blockchain-based applications, and to market and promote its SaaS services to its SME clients.

The company has been building its blockchain infrastructure platform on Ethereum platform, and is integrating with hyperledger solution to ensure the openness and easiness of the blockchain platform.

Principal Products and Services

Internet Advertising, Precision Marketing and Related Data Services

28.com and liansuo.com are two of the leading Internet portals for information relating to small business opportunities in China, and 28.com is one of the earliest entrants in this sector. The company further developed and upgraded the system and tools of its advertising portals, including customer user interface, and integrated its mobile functions. Besides its advertising portals, the company also has established solid partnership relations with key search engines in China, which entitle it to the distribution of the right to use their search engine marketing service, which allows its customers to invest in their online advertising and marketing campaign through multi-channel to maximize market exposure and effectiveness.

The company’s Internet advertising, precision marketing, and related data services provide advertisers with tools to build sales channels directly in the form of franchisees, sales agents, distributors, and/or resellers; and have the following features, which enable them to be attractive to the advertisers:

Allowing potential entrepreneurs interested in inexpensive franchise and other business ventures to find in-depth details about these businesses in various industries and business categories, with real-time and online assistance through an instant messenger;

Providing one-stop integrated Internet marketing and advertising services for SMEs by offering customized services and advertisement placement on various communication channels through intelligent based promotion systems;

Generating effective sales leads information; and

Bundling with advanced traffic generation techniques, search-engine optimization and marketing and other Internet advertising management tools to assist the company’s clients with monitoring, analyzing, and managing their advertising and data collected on its web portal.

For the year ended December 31, 2022, the company had approximately 760 clients who used its Internet advertising, marketing, and data services.

Blockchain-based SaaS Services

From early 2022, the company started to introduce its blockchain-based SaaS services to its customers. The SaaS services were designated in providing one-stop blockchain-powered enterprise management solutions via the company’s BIF platform in forms of unique NFT generations, data record, share and storage modules subscriptions etc.

Subsidiaries and Variable Interest Entities (VIE) Structure

The business of the PRC Operating Entities falls under the class of a business that provides Internet content or information services, a type of value-added telecommunication services, for which restrictions upon foreign ownership apply.

Exclusive Business Cooperation Agreements:

Pursuant to the Exclusive Business Cooperation Agreements entered into by and between Rise King Century Technology Development (Beijing) Co., Ltd., a wholly foreign-owned enterprise (Rise King WFOE) and each of the PRC Operating Entities, Rise King WFOE has the exclusive right provide to the PRC Operating Entities complete technical support, business support and related consulting services during the term of these agreements, which includes but is not limited to technical services, business consultations, equipment or property leasing, marketing consultancy, system integration, product research and development, and system maintenance.

As of December 31, 2022, besides China Net Online Media Group Limited, a company organized under the laws of British Virgin Islands (China Net BVI), CNET Online Technology Co. Limited, a Hong Kong company (China Net HK) and Rise King WFOE the company had five other indirectly wholly-owned subsidiaries, ChinaNet Investment Holding Ltd, a British Virgin Islands company (ChinaNet Investment BVI), Grandon Investments Limited, a British Virgin Islands company (Grandon BVI), Winner Glory Limited, a Hong Kong company (Winner Glory HK), ChinaNet Online Holdings Co., Ltd., a PRC company (ChinaNet Online Holdings), and ChinaNet Online (Guangdong) Holdings Co., Ltd., a PRC company (ChinaNet Online Guangdong Holdings).

ChinaNet Investment Holding Ltd. (ChinaNet Investment BVI) co-founded ChinaNet Online Holdings Korea, a Korean company (ChinaNet Korea) with four unaffiliated individuals and beneficially owns 15% equity interest in ChinaNet Korea. Grandon BVI obtained a 15.38% equity interest in New Business Holdings Limited (New Business BVI) in fiscal 2021, for jointly developing blockchain, key opinion leader and e-sports platform and jointly operating IP data for e-sports and games with strategic partners. ChinaNet Online (Guangdong) Holdings Co., Ltd. (ChinaNet Online Guangdong Holdings) beneficially owns a 10% and a 9.09% equity interest in Guang Dong WeFriend Co., Ltd. (Guangdong WeFriend) and Shenzhen Global Best Products Import & Export Co., Ltd. (Global Best Products), respectively. Guangdong WeFriend is primarily engaged in Internet private traffic operating, and Global Best Products is primarily operating an online marketplace for health products retailing. The Business activities of ChinaNet Korea and Global Best Products are dormant.

VIEs, VIEs’ Subsidiaries and Other Ownership Interest Investment Affiliates

Through Rise King WFOE, the company beneficially owns two VIEs: Business Opportunities Online and Beijing CNET Online. Business Opportunities Online is primarily engaged in providing Internet advertising, precision marketing and related data service to the SMEs. The business activities of Beijing CNET Online are currently dormant.

As of December 31, 2022, Business Opportunity Online (Beijing) Network Technology Co., Ltd. (Business Opportunity Online) had the following directly or indirectly wholly-owned subsidiaries in the PRC: Beijing Chuang Fu Tian Xia Network Technology Co., Ltd. (Beijing Chuang Fu Tian Xia), Business Opportunity Online (Hubei) Network Technology Co., Ltd. (Business Opportunity Online Hubei), Beijing Chuang Shi Xin Qi Advertising Media Co., Ltd. (Beijing Chuang Shi Xin Qi), Beijing Hong Da Shi Xing Network Technology Co., Ltd. (Beijing Hong Da Shi Xing), and ChinaNet Online (Guandong) Technology Co., Ltd. (ChinaNet Online Guangdong Technology). Except for ChinaNet Online Guangdong Technology, which entity is primarily focuses on developing and operating blockchain technology-based products and services, all other Business Opportunity Online’s wholly-owned subsidiaries are engaged in providing Internet advertising, precision marketing and related data service to the SMEs.

As of December 31, 2022, through its operating VIEs, the company also beneficially owned a 19% equity interest in Business Opportunity Chain (Guangzhou) Technology Co., Ltd. (Business Opportunity Chain Guangzhou), a 17% equity interest in Xiao Peng Education Technology (Hubei) Co., Ltd. (Xiao Peng Education), a 15% equity interest in Guangzhou Gong Xiang Technology Co., Ltd. (Gong Xiang Technology), a 9.9% equity interest in Guangdong Yong Fu Xiang Health Management Co., Ltd (Yong Fu Xiang) and a 9% equity interest in Guangzhou Yuan Qi Man Man Technology Co., Ltd. (Yuan Qi Man Man), respectively. Business Opportunity Chain Guangzhou is primarily engaged in the development of livestream platform-based business promotion service and franchise consultancy service, Xiao Peng Education is primarily engaged in providing precision marketing services to online education service providers, Gong Xiang Technology is primarily engaged in providing franchise projects management and consultancy services, Yong Fu Xiang is primarily engaged in providing health care consultancy and health management services, and Yuan Qi Man Man is primarily engaged in providing franchise consultancy and marketing services. The business activities of Xiao Peng Education and Gong Xiang Technology are dormant.

Sales and Marketing

The company employs experienced advertising sales people and provide in-house education and training to its sales people to ensure that they provide its prospective clients with comprehensive information about its services, the benefits of using its advertising, marketing and data services and relevant information regarding the advertising industry. The company also markets its advertising services from time to time by placing advertisements on television and other well-known portals in China, participating in domestic and international franchise exhibitions in China and other countries and acting as a sponsor to third-party programming and shows.

Intellectual Property

As of December 31, 2022, the company had thirty-one software copyright certificates issued by the State Copyright Office of the PRC, including but not limited to, software systems covering monitor and management platforms on Internet advertising effects, analysis systems on Internet traffic statistics and Internet user behavior, analysis systems on log-based visit hotspot and browsing trails, analysis systems on mobile advertising platform, customer relationship management (CRM) system, cloud-compute technology, and blockchain technology.

Research and Development

The company’s research and development expenses were approximately U.S.$0.23 million for the year ended December 31, 2022.

Competition

The company competes with other Internet advertising companies for business opportunities in China, including companies that also distribute the right to use the search engine marketing services provide by key search engines in China, such as Zhong Shi Lian Dong Technology (Beijing) Co., Ltd.; Shenzhen Jiu Xing Hu Dong Technology Co., Ltd.; and Hao Shang Hui Media (Guangzhou) Co., Ltd, as well as companies that operate Internet advertising portals for business opportunities of the SMEs, such as 78.cn, zhaoshangbang.com, and 1637.com etc.

History

The company was founded in 2003. It was formerly known as ChinaNet Online Holdings, Inc. and changed its name to ZW Data Action Technologies Inc. in 2020.