Weibo is one of the popular online destinations in China with a registered user base of more than 300 million. As the display advertising market in China is expected to experience a slowdown in 2012, we expect Sina (NASDAQ:SINA) to focus on monetizing Weibo to compensate for the decline in its advertising revenue. However, Weibo’s growth may be hampered by the latest censorship demands by the Chinese administration requiring that users submit their real identity information to continue using microblogging services in China. Sina has already been working to verify user accounts and is now planning to introduce a new user contract to control the flow of sensitive information on its website and not invoke wrath of the Chinese administration. [1]
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Weibo’s advertising revenue prospects look murky
The new contract will impose a number of restrictions on Chinese microblogging users, which might impact the growth in the company’s registered user base as well as engagement levels on its website, which might directly impact its advertising revenue from Weibo. The new restrictions will be monitored by a points system that will give users a certain number of points initially and dock them if they breach any rule. We should be able to gauge the impact of these new regulations on Sina’s ad revenue growth going forward, but it’s definitely not going to look good for Sina.
Sina is primarily an online media company which also offers mobile value-added services in China. It operates online news and content through Sina.com, a Twitter-like microblog – Weibo.com, and Mobile Value Added Services (MVAS). Sina makes money primarily through its display advertising and mobile value added services. The company faces competition in its different verticals from Internet giants such as Baidu (NYSE:BIDU), Tencent and Sohu (NASDAQ:SOHU) and other companies.
We currently have a $65 Trefis price estimate for Sina, which stands nearly 20% above its current market price.
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