Sina (NASDAQ:SINA), a leading Chinese online media company, has stepped up its efforts to increase monetization from the Weibo platform. Advertising revenues from Weibo currently represent around 15% of the company’s total advertising revenues. It aims to enhance its advertising revenues from Weibo by introducing promoted feed advertising and bolstering its mobile platform. Additionally, it also plans to diversify Weibo’s revenue stream to include e-commerce, games and other value added services.
Sina’s recent efforts also aim to counteract concerns regarding growing popularity of WeChat (a mobile messaging application by Tencent), which has become a threat to Sina’s Weibo platform. Having more than 300 million registered users, WeChat has had an impact on the average time users spend on Weibo. ((Sina Weibo, ‘China’s Twitter’, racks up 731,102 posts during first minute of Chinese New Year, The Next Web, February 11, 2013))
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Measures Taken To Bolster Weibo Advertising Revenues
Sina aims to derive greater monetization benefits from the growing popularity of Weibo platform. The total number of registered users on Weibo increased by 15.2% to 424 million in Q3 2012, from 368 million users at the end of June 2012. Sina has introduced promoted feed advertising in which sponsored ads are placed in the user’s account. Moreover, the company is also testing an advertising system through which headline ads appear in user’s accounts according to the brands they like. ((Sina Weibo introduces Twitter-like in-stream advertising in quest to monetize its 400m user base, The Next Web, January 18, 2013))
Sina is also enhancing its mobile platform to leverage the rising adoption of smartphones in China. In July 2012, it collaborated with Baidu to integrate Baidu search in its mobile platform. In December 2012, it partnered with AutoNavito to improve social networking and navigational aspects of its current mobile offering.
We believe these measures will allow Sina to increase revenue contribution from Weibo, which will help stabilize its declining share in the Chinese online advertising market.
Diversification Into E-commerce and Games
Sina is also diversifying Weibo’s revenue stream by integrating e-commerce and games into the platform. Recently Sina collaborated with Mercedez Benz and Xiaomi Corp (a Chinese smartphone company) to sell their products on Weibo platform. After achieving success with these initiatives, the company is looking to form more collaborations of this kind. ((Sina seeks new revenues as WeChat snaps at its heels, China Daily, February 4, 2013))
Sina is also planning to increase revenue from Weibo by distributing more games on the platform. While diversification into these other streams will enhance revenue, we expect advertising revenue to remain the major source of revenue from Weibo in the future.
Our price estimate for Sina stands at $68, which represents a premium of 25% to the market price.