Sina’s Weiba Discussion Forums Step On Baidu’s Turf

Sina‘s (NASDAQ:SINA) microblogging platform Weibo, which has over 350 million registered users, has launched a platform called Weiba for hosting discussion forums. These forums are wide-ranging in scope and cover niche topics like Fashion, Reading, Movies, IT, Cartoons and yes, even Gossip! ((Sina Weibo Launches Discussion Forums, No Longer Any 140-Character Limit))

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With this latest move, Sina has now invaded search engine giant Baidu‘s (NASDAQ:BIDU) turf by posing a challenge to its popular Tieba discussion platforms. Weiba incidentally sounds similar to Teiba. One wonders if this is mere coincidence, given that the similarity doesn’t merely end with names. What seems clear to us though is that we are about to witness some real competition between these two giants in the Chinese social media space.

Weiba had been in the beta-testing mode since the end of last month. Weibo has leveraged its Twitter-like approach to allow users to “follow” discussions on Weiba and it scores over Tieba in this respect.

Internet penetration in China is rising at a rapid rate and expanding the overall user base. ^[1] So the prospects for online advertising may not turn out to be bleak despite China’s slowing economy. It is critical for Sina that online advertising spending by companies don’t go down for they constitute the bulk of its revenues. Online advertising, in turn, is a function of the number of users and user engagement hours. We believe that it is with focus on these aspects that Sina launched Weiba and a few days ago its Internet TV service. Weiba, if it becomes popular, will keep users around for a longer time and also give more advertising space for Sina to exploit.

We will have to wait and watch how Weiba’s competition with Baidu unfolds over the next few months. Since Sina has adopted a tried-and-tested model by launching Weiba, we believe that the success or failure of Weiba will be determined more by the outcome of its competition with Tieba than anything else.

Even if Weiba gains ground, it will take some time to be reflected in the company’s earnings and valuations. Sina has already warned investors that due to a planned increase in investment spending on the Weibo platform it is likely to post operating losses this year. ((Sina results beat view, warns Weibo to eat into second quarter, Reuters))

In light of the above, there is no change to our $66 Trefis price estimate for Sina which is nearly 30% above its market price.

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1. China’s Internet Users Cross 500 Million, PCWorld [↩]