Weibo Lifts Sina’s Results In Yet Another Quarter

Despite increasing competition in the mobile and social space, Sina (NASDAQ:SINA) posted net revenues of $197 million for the fourth quarter of 2013, up by 42% compared to the year ago period. This strong growth in the top-line was primarily driven by improving monetization on Sina’s Weibo platform. Weibo is a microblogging and social networking website that enables users to follow celebrities and share user-generated content. It accounted for about 36% of the company’s net revenues—$56 million from Weibo’s advertising and $15.6 million from Weibo’s non-advertising business. ^[1]

Sina also registered an improvement in profitability in Q4, with an expansion in both gross and operating margins. Gross margins grew sequentially from 57% to 64%, while operating margins grew from 4% to 14%. ^[2] This enhancement was driven by the company’s efforts to scale its core advertising business profitably and also by the increasing mix of higher margin Weibo value-added services. In 2014, Sina intends to invest in building the scale and market share of its existing businesses, as well as expanding into newer businesses.  Although this will weigh on the company’s profitability, we think that such investments are necessary to drive long-term growth

We are in the process of updating our $83 price estimate for Sina, based on the company’s fourth quarter and full year results that were announced on February 24.

See our complete analysis of Sina here

Rising Weibo Monetization Supports Advertising Business

Advertising contributes over 80% to total company revenues, and it is thus the primary business for Sina. The company posted 45% year-on-year growth in advertising revenues in the fourth quarter, topping $160 million. Revenues from Sina’s portal advertising business contributed over $104 million; however, the growth in overall advertising revenues was largely driven by the increasing scale and monetization of Weibo. Weibo advertising revenues jumped 163% to $56 million. ^[1]

Last year, Alibaba bought an 18% stake in Weibo. The collaboration is aimed at bringing the two companies closer in areas of user account connectivity, data exchange, online payment and online marketing. Sina expects the deal to rake in $380 million in advertising and other revenues for Weibo over the 2013–2015 period. The partnership generated about $24 million for Sina in Q4, registering sequential growth of 19%, as an increased number of online merchants started to spend on marketing through Alibaba. ^[1] The figure is expected to rise further over the coming quarters.

The popularity of the Weibo platform continued to increase during the fourth quarter, albeit at a slower pace. Sequential growth in the number of daily active users (61.4 million for the month of December) slowed to 4.2% from 11.2% in the previous quarter. Since Weibo’s performance is closely tied with user activity, Sina will focus on growing Weibo’s user base and user engagement in 2014. The company is already working in this direction by covering TV programs and launching innovative products. ^[1]

For instance, Weibo experimented with the Chinese New year gala that boosted user engagement by about 140% during that program. Weibo also entered into a partnership with Alipay, Alibaba’s third-party online payment platform, to offer payment services to Weibo app users. ^[1] The service is known as Weibo Payment, and it allows users to make online and offline payments through their Alipay accounts. We believe that Weibo Payment will help Sina to compete more effectively with Tencent’s WeChat,  by enticing Alibaba’s users to open Weibo accounts and by increasing online as well as offline activities by Weibo users. (Read: Sina Ties Up With Alipay To Offer Payment Services On Weibo)

Although Declining, MVAS Has An Important Role In Mobile Strategy

Sina’s Mobile Value Added Services (MVAS) allow users to receive news and information, download ring tones, mobile games and pictures, etc. The company’s ability to offer MVAS to users is highly influenced by the policies of the various operators such as China Mobile, China Unicom and China Telecom. The industry is subject to various regulations which keep changing, making it difficult for online companies to keep astride with the changes. Sina’s MVAS revenues slumped by 17% year-on-year in Q4 to $11 million, and are expected to decline further as Chinese users increasingly adopt 3G and 4G services. Despite this, Sina intends to continue operating its MVAS business as it believes that MVAS will help it leverage its existing ties in mobile for development of Weibo. ^[1]

Q1 2014 Guidance (Non-GAAP)

– net revenues: $162 million–$167 million

– revenues: $133 million – $136 million

– non-advertising revenues: $29 million – $31 million

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

1. Sina Corporation’s CEO Discusses Q4 2013 Results – Earnings Call Transcript, Seeking Alpha, February 25, 2014 [↩] [↩] [↩] [↩] [↩] [↩]
2. SINA Reports Fourth Quarter and 2013 Financial Results, Sina Investor Relations, February 24, 2014 [↩]