The Tumblr Effect: China's User-Hungry Net Giants Splash Out

Reuters Business Report - REUTERS REPORTER, JON GORDON,

"Ah, summertime is in the air, and so are lofty tech firm valuations. We've had a couple nice U.S. IPOs..."

...and now Yahoo CEO Marissa Mayer has splashed out $1.1 billion dollars for edgy blogging network Tumblr.

But the internet gravy train doesn't stop in the U.S.Chinese tech firms are on the prowl, as well.

Thomson Reuters M&A data shows there have been over 120 China high tech deals year-to-date totaling about four and a half billion U.S. dollars.

Though just a fraction of the global total at about 8%, that's an improvement from the 6% for the whole of last year.

If we break it down you can see these two categories here really dominate: you've got IT software and services as well as e-commerce and B2B deals dominate. They account for 43% of the year's total so far.

Top Chinese search engine Baidu is among the hunters - recently buying out internet video streaming service PPS.

E-commerce giant Alibaba has been another big spender- scooping up stakes in map-maker AutoNavi and more significantly the country's top micro-blogging service Sina Weibo.

Seen as a direct competitor to the swelling userbase of rival Tencent's mobile messaging app WeChat, it's kind of like Amazon buying a stake in Twitter and monetizing it directly with tie-ins to its e-commerce engine instead of through ads.

In China, when a tech startup gains traction, the big players are often more likely to imitate than acquire. But that can only take you so far.

Now, the size of a service's user base is seen as equally important - leading the bigger, cashed-up players to pry open their wallets instead of reinventing the wheel.

That need for a wider userbase has even led China's big three telcos to band together for a online payment system, an out-of-character show of cooperation.

And remember, for China's start-ups themselves, the country's tightly-controlled listing process means few can count on an IPO exit.

REUTERS REPORTER, JON GORDON,

"All this means you can expect more big acquisitions - and big valuations - forChina's tech sector through this hot summer and beyond."