Sina (NASDAQ:SINA), an online Chinese media company, derives around 75-80% of its revenues from online advertising. The Chinese online advertising market is slowing after witnessing a rapid growth over the past couple of years. In 2012, the market grew by 47%, as compared to 54% and 58% growth in 2010 and 2011 respectively. During 2013-2016, it is estimated to grow at a CAGR of 26%, to reach 206.8 billion yuan ($32.9 billion). 
Sina aims to leverage growth in the online advertising market by growing both, its portal and Weibo businesses. It has stepped up its efforts to gain greater monetization benefits from Weibo platform by launching promoted feed advertising and diversifying Weibo’s revenues streams. Additionally, it is focusing on its mobile platform to leverage the rising adoption of mobile Internet in the country. Sina also plans to grow its portal business by focusing on areas such as online video and blogging.
- What Will Sina’s Revenue And EBITDA Look Like In 5 Years?
- What’s Sina’s Fundamental Value Based On Expected 2016 Results?
- How Has Sina’s Revenue & EBITDA Composition Changed In The Last Five Years?
- Online Advertising, Mobile Services: What’s Sina’s Revenue & Earnings Breakdown?
- Robust Weibo Growth Drives Q4 Results For Sina
- How Will Growth In The Chinese Online Advertising Market Impact Sina?
In this article, we evaluate the historical and estimated future growth rate of the Chinese online advertising market and how Sina plans to leverage growth within the industry.
What Is The Size And Estimated Growth Rate Of The Online Advertising Market In China?
The online advertising market in China has matured after experiencing heavy growth over the past years. In 2012, the Chinese online advertising revenue rose by 47% to reach 75.3 billion yuan ($12 billion), according to iResearch. This compares to a higher growth rate of 54% and 58% in 2010 and 2011 respectively. 
The growth rate is estimated to further slow down over the coming years. During 2013-2016, the Chinese online advertising revenue is forecast to grow at a CAGR of 26%, to reach 206.8 billion yuan ($32.9 billion).  Besides market maturity, macro-headwinds in the Chinese economy and difficulty monetizing the mobile platform also contribute to the decline in growth rate.
How Is Sina Leveraging Growth In The Online Advertising Market?
Sina aims to leverage growth in the Chinese online advertising market by growing its Sina portal and Weibo businesses. Recently, Sina reorganized to divide its business structure into two segments – Portal and Weibo, which further enhanced its focus on both the businesses.
Monetization from Weibo to increase in 2013
While the popularity of Weibo platform has grown rapidly, Sina has been slow to derive monetization benefits from the platform. The total number of registered users on Weibo reached 503 million at the end of 2012, as compared to around 300 million in the prior year.  
Sina has stepped up its efforts to gain greater monetization benefits from the Weibo platform. It has launched promoted feed advertising wherein sponsored ads are placed in the user’s account. In addition, the company is also testing an advertising system through which headline ads appear in user’s accounts according to the brands they follow. 
Sina is also diversifying Weibo’s revenue stream to include e-commerce and games. Its recent partnerships with Mercedez Benz and Xiaomi Corp (a Chinese smartphone company), to sell their products on Weibo were a step in this direction. The company looks forward to more collaborations of this kind in 2013.
In addition to this, the company is also making efforts to enhance its mobile offering in order to leverage the growing usage of Weibo through the mobile platform. It has prioritized the mobile platform for any new product development. The share of Weibo advertising revenues in total advertising revenues stood at 19% in Q4 2012, and we expect this figure to grow in the future. 
Sina also plans to further develop its Portal business
In addition to Weibo, Sina also plans to enhance revenues from the portal by focusing on areas such as online video and blogging. Online video has been one of the hottest growing segments of the Chinese online advertising market with its share growing from 3.4% in 2008 to 7.7% in 2012.  If Sina is able to successfully execute its strategy in the online video segment, we believe this could translate into higher revenues for the company.
While Sina’s market share in the Chinese online display advertising market has decreased rapidly in the past, we believe these efforts could lead to a stabilization in its share in the future.
- China Online Advertising Revenue Impressively Increases 46.8%, iResearch, February 04, 2013 [↩]
- China Online Advertising Revenue Impressively Increases 46.8%, iResearch, February 04, 2013 [↩] [↩] [↩]
- Sina’s CEO Discusses Q4 2012 Results – Earnings Call Transcript, Seeking Alpha, February 19, 2013 [↩] [↩]
- SINA Corporation Q4 2011 Earnings Call Transcript, Morningstar, February 27, 2013 [↩]
- Sina Weibo introduces Twitter-like in-stream advertising in quest to monetize its 400m user base, The Next Web, January 18, 2013 [↩]