Sina (NASDAQ:SINA) is an online media company which provides services through SINA.com (online news and content), Weibo.com (microblog) and SINA Mobile (MVAS). The company will announce its Q4 2012 results on February 19. In Q3 2012, its sales grew by 18% annually to reach $147.7 million, led by strong growth in online advertising revenues. A favorable impact from coverage of London Olympic games and increased adoption of Weibo platform contributed to growth in advertising revenues.
We believe Sina’s advertising revenues in Q4 will be impacted by weak macroeconomic conditions in China and the lack of similar media events such as the London Olympics. Additionally, we expect the changing mobile operator policies to adversely impact Sina’s MVAS business in Q4. In the long term, we feel increased monetization from Weibo platform will be critical for Sina to grow its revenues. We believe Sina will reduce its focus on MVAS business as it contributes lower margins and is highly susceptible to operator policies changes.
- How Will Growth In The Chinese Online Advertising Market Impact Sina?
- Strong Third Quarter Results Send Sina’s Stock Higher
- Here’s How Market Share And Chinese Economy Risks Could Impact Sina’s Stock
- Here’s Why We Think Sina’s Stock Is Valued At $46
- Here’s Why We Have Changed Sina’s Price Estimate To $48
- Here Are The Key Factors Underlying Our Valuation For Sina
Online Advertising Business
Online advertising revenues, which account for majority of Sina’s revenues grew by 19% annually in Q3 2012, owing to London Olympic games and rising adoption of Weibo platform. In Q3 2012, the total number of registered users on Weibo increased by 15% q-o-q to reach 424 million. Advertising revenues from Weibo doubled in Q3, as compared to the previous quarter. 
In Q4, weak macro-economic conditions and lack of media events (such as London Olympics) are expected to impact Sina’s online advertising revenues. According to the company’s management, advertisers in several sectors including auto, telecommunications, IT and electronics industry started cutting their marketing budget at the beginning of fourth quarter. However, this impact will be more pronounced on Sina.com portal as compared to Weibo platform. We expect the revenue contribution from Weibo in total advertising revenues to increase in Q4.
Focus on Monetization from Weibo
Sina has stepped up its efforts to derive greater monetization benefits from the Weibo platform. The company recently 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 follow. 
Additionally, Sina aims to diversify Weibo’s revenue stream by including e-commerce and games into the platform. Its recent collaborations with Mercedes Benz and Xiaomi Corp (a Chinese smartphone company) to sell their products on Weibo were a step in this direction. 
Sina is focusing on developing its mobile platform to leverage growing adoption of smartphones in China. The company has forged partnerships with companies such as Baidu and AutoNavito to bolster its mobile offering. The mobile channel accounts for around 15-20% of Weibo’s advertising revenues and this contribution is expected to increase in the future. We feel these efforts will allow Sina to increase revenue contribution from Weibo, which will help stabilize its declining share in the Chinese online advertising market in the future.
In line with the company’s guidance, we believe Sina’s MVAS revenues to decline significantly in Q4 on account of change in operator policies. Going forward, we expect Sina to reduce its focus on this segment, as MVAS margins are low and this segment suffers from risks related to changing operator policies and increased use of smartphones.Notes:
- Sina Corporation’s CEO Discusses Q3 2012 Results – Earnings Call Transcript, Seeking Alpha, November 16, 2012 [↩]
- Sina Weibo introduces Twitter-like in-stream advertising in quest to monetize its 400m user base, The Next Web, January 18, 2013 [↩]
- Sina seeks new revenues as WeChat snaps at its heels, China Daily, February 04, 2013 [↩]