Decline In Sina’s Q3 Advertising Revenue Isn’t A Cause For Concern Yet

by Trefis Team
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Chinese technology giant Sina (NASDAQ:SINA) has seen its share price tank nearly 75% from a high of over $120 in early 2018 to around $33 now. Headwinds to the primary driver of Sina’s Revenues – its advertising revenues – appears to have upset investors and triggered the steady sell-off over the months. Notably, the company’s advertising revenues shrunk 5% in the third quarter to $461 million. While a decline in portal advertising was a key factor behind this, the figure sass also hurt by forex headwinds. The decline in advertising revenues erased the impact of a 37% jump of non-advertising revenues (led by fintech and streaming to over $100 million) on the top line.

As we detail in our interactive dashboard about Sina’s Revenues, we expect the company to report an increase in revenues for both its reporting segments for full-year 2019 and 2020.

An Overview of Sina’s Business Model

What Need Does It Serve?
  • Microblogging-based advertising services allow targeted advertising based on user interests and the feedback generated can also be quickly analyzed (through text analytics).
  • Moreover, user engagement is better, as users are able to communicate almost in the same way people chat. The key difference is that intimate conversations are viewable publicly.
  • It is a known fact that users tend to disclose a lot more to a screen.
  • Microblogging services are able to tie together these psychological aspects to deliver extremely engaging content.

What Are The Alternatives?

  • Weibo is also known as the Twitter of China. While there are options such as social networking and gaming, for microblogging based social advertising, Weibo is China’s leading player (Twitter is not available in China).
  • Other online advertising options include Baidu and Tencent.

What Are The Operating Segments?

  • Display Advertising (revenue of $1.8 billion in 2018, 85% of total revenue): Segment revenue is derived from mobile and web advertising. Weibo, a microblogging site, has been the major contributor of the company’s growth.
  • Others (revenue of $319 million in 2019, 15% of total revenue): Segment revenue is derived from online payments and loan facilitation services.

 

Understanding Trends In Sina’s Revenues

Sina’s revenues have more than doubled over 2016-18 to $2.1 billion and is likely to increase 20% to $2.6 billion by 2020

Display Advertising Revenue growth of about $415 million over the next two years will be be driven by Weibo, a microblogging site (also called the Twitter of China)

  • Display advertising revenue increased by almost $1 billion over the last couple of years, driven by Weibo advertising and marketing revenues.
  • Over the next couple of years, Weibo advertising and marketing revenues are likely to continue to help revenues grow.

Other Revenues to grow by about $74 million over the next two years due to fintech offerings, including online payments and loan facilitation services

  • Over the last couple of years, the $160 million increase in Other revenue has been driven by small acquisitions and fintech services.
  • Over the next couple of years, the incremental $74 million is likely to be derived from fintech offerings to Weibo and consolidation of segment asset operations.
 
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