Eastern freebies and Western mines were passing ships that were fit to be featured this past week. Let's take a closer look.
Free ride to China
When Shanda Interactive (NASDAQ:SNDA) revealed that it was rolling out free versions of two of its most popular online games, it was easy to see why the market's initial reaction was to send Shanda's shares down 6% on Thursday. The company had ushered in the pay-to-play era for its addictive role-playing games, and now it appears to be taking a step back in the near term.
Then again, you can't blame Shanda. It has seen its market share besieged by NetEase (NASDAQ:NTES) and The9 (NASDAQ:NCTY) in recent months. It needed to do something to maintain its audience, especially given the time limitations on playing that the Chinese government has imposed on players.
The free versions of The Legend of Mir II and MagicalLand won't be complete freebies, though. If players want value-added services like virtual items and fancy avatars, they will need to pay up.
No company operates in a vacuum, of course. If Shanda starts pandering to the inner freeloader, the move will ripple throughout the niche. Consequently, shares of NetEase and The9 were also down 4% and 6%, respectively, on Thursday.
The one key variable here is in-game advertising. It isn't much of a factor right now because the interactive advertising market in China is still donning diapers. Stateside, you have companies such as Google (NASDAQ:GOOG) looking to subsidize free Wi-Fi connectivity through contextual advertising and companies such as Massive and News Corp.'s (NYSE:NWS) IGN selling relevant and ever-changing ads within video games. China still has a way to go before a free model, through ads, can make up in volume what the existing pay-to-play revenue model is achieving.
That's why Shanda's move may appear desperate. It is also a move that has come way too early.
Investors should not ignore China and its 1.3 billion residents. It is the world's most populous nation. Online gaming, particularly the multiplayer role-playing adventures, is huge, and it's going to get even bigger as China's economy develops. We saw that coming 11 months ago, when we recommended Shanda and NetEase in the Motley Fool Rule Breakers newsletter service. Both companies are still in attractive positions, but now we will have to see whether Shanda jumped the gun by going to a free model before the revenue streams were in place to make it worthwhile.
So that's why they're called precious metals
It was a week of nice, round milestones for many of the precious metals as gold hit $500, platinum hit $1,000, and Motley Crue started gearing up for a tour that will take them to places like Wilkes-Barre, Kalamazoo, and Fort Wayne.
Gold bugs may argue that we don't dig into the bullion that much around here, despite the occasional articles on Barrick Gold (NYSE:ABX) and Newmont Mining (NYSE:NEM). However, this past week has given a few of us a chance to reflect on the metal and its relative worth. Robert Aronen praised gold as an inflation hedge and as an honest investment that won't be cooking the books during any given quarter. W.D. Crotty explored the notion that higher gold prices help the high-cost producers the most. But even though I would choose a share of Google if I had $500 burning a hole in my pocket, you have to hand it to gold lately. Its performance has been, well, golden.
The headlines behind this week's stories:
Until next week, I remain,
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Longtime Fool contributor Rick Munarriz loves to look back, even if it means he falls on his face going forward. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
