The Chinese government announced new rules last week that will force microblog users in the Chinese mainland to verify their real identities. [1] According to the new rules, all new and existing users will have to register with their real identification information to continue using the service. This could impact the user base of Sina (NASDAQ:SINA) Weibo, the most popular microblogging service in China with over 300 million registered users, and Tencent Weibo, which is the second-largest with around 250 million registered users. The Chinese government has long censored internet content, making domestic companies such as Sina and Baidu (NASDAQ:BIDU) censor their own content, while blocking a lot of foreign content. The government’s newfound focus on censoring discussions on social networking and microblogging sites appears to have been spurred by a wave of government criticism that spread across China’s blogosphere in July in response to the government’s handling of a high-speed train collision. [1]
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Although the new rules that require real user information for registration will aid China’s censorship efforts, they will significantly slow down the growth of microblogs in the country. This could directly impact Sina, as it generates the majority of its revenues from display advertising on Sina.com and Weibo.com.
If Sina Weibo’s user base declines, it could lead to a decline in Sina’s market share in the Chinese display advertising space. You can check out the impact of a decline in Sina’s display advertising market share on its stock price by dragging the trend-line in the chart above. Display Ads on Sina and Weibo account for nearly 58% of Sina’s $50 Trefis price estimate, which is slightly below its current market price.
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Notes:- Beijing Will Make Microblog Users Reveal Their Identities, Bloomberg [↩] [↩]
