RedTech Advisors, a Shanghai-based independent research and advisory firm, takes a deep look at Sina Weibo, its usage, positioning, competitive environment and valuation.
The Inspirational Story of Julio Herrera Velutini - Global Finance Leader
Way of the weibo
1. THE CHINA TECH LETTER
Way of the Weibo
Sina’s Microblog-driven Stock: A Bubble Ready To Burst Or A Blimp Floating Higher?
Research by …
2. Table of Contents
1. Summary
2. China Microblogs: Market & Drivers
3. Threat: Watch Out SNS
4. Sina Weibo: Building Defensible Leadership Position
5. Monetization: The South Park Model & Others
6. Competition: Attack of the Clones
7. Key Takeaways: Bubble Or Blimp?
Analysts: Michael Clendenin, Joe Landgrebe, Autumn Zhu. Thanks to Bill Bishop and Dan Brody for advice. 2
6. Microblogs: Penetration & Clarification
China has >460mn Net users Weibo and Twitter Users
300 mn Weibo Twitter
• Penetration: About one-quarter use
microblogs, with Sina’s Weibo the 250
clear leader. Users up from 10mn in 200
April 2010 to >100mn in March 2011. 150
We estimate >190mn by year end. 100
50
• Clarification: Weibo is not just a 0
“Twitter clone.” It’s more like a Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411
Frankenclone – an oddly compelling Source: RedTech Advisors estimates
mixture of Twitter, Facebook, QQ,
Groupon, Foursquare & YouTube. And
we’re sure more apps will be grafted
on in future. This wider platform will
make monetization easier.
• Innovation: Sina is a portal in the Web
1.0 style. Weibo is simply a larger
portal in Web 2.0 style, i.e. it
incorporates the best aspects of
various social networking platforms
and applications and layers on its own
unique innovations.
6
7. Microblogs New To Most China Chinese
• We regularly conduct in- How long have you used a microblog?
depth interviews with 60 6-12 Months 18%
Chinese families to track the
evolution of their online 3-6 Months 27%
habits. The goal is early
discovery of new ideas and 1-3 Months 45%
potential trends for further
analysis in research reports. Less than a month 9%
0% 10% 20% 30% 40% 50%
• Our latest quarterly review
in March showed most
Source: RedTech ConWeb Household Tracker
microblog users only How did you learn about microblogging?
recently came to the Others
platform – more than 70% in 5%
last six months. Friends,
classmates,
colleagues
68%
• Generally, they were turned News
18%
onto microblogging from
friends or colleagues.
Search
engine 9% 7
Source: RedTech ConWeb Household Tracker
8. Sina Dominates In User Quantity & Quality
Biggest Base: We expect Sina Weibo Active Users: Sina weibo user
users to hit about 130mn by early base more affluent and willing to
summer and about 190mn by year end, spend more time on the site.
making it on par with Twitter, which will
have more than 250mn global users.
Netease Sohu Netease
Sohu Baidu
3% 1% 1%
6% 2%
Tencent
9%
Baidu
13%
Sina
57%
Tencent
21%
Source: iResearch
Sina Source: iResearch
87%
8
9. The Network Effect Builds Up Defense
Question: Why did you choose a particular microblog?
Discovery 1: Functionality matters Discovery 2: Celebrities may have
way less than the number of been the original marketing hook
friends or users on a blogging for microblogs but they are
platform, which clearly favors Sina. declining in importance.
My friends are registered to the microblog 60%
More people are using the microblog 40%
Already have an email account with the
35%
website
The website has stars/celebrities that I admire 15%
Used the website for a long time 5%
The microblog has more functions 5%
0% 10% 20% 30% 40% 50% 60% 70%
Source: RedTech ConWeb Household Tracker
9
10. Microblog Users: Active & Opinionated
How often do you use a microblog? • Many microblogs users
Once per week or longer 23%
check in at least once a
day.
Once every 4-5 days 9% • China's microbloggers
use this platform to
Once every 2-3 days 9%
express personal
opinions much more
Once a day 27%
actively than their
Two or more times per day 32%
western counterparts.
• Chinese love this
microblog service partly
0% 5% 10% 15% 20% 25% 30% 35%
for the reason that
Source: RedTech ConWeb Household Tracker
Why do you use it?
their opinions will
Express personal opinions 80% spread quickly and gain
Learn more about hot topics 60%
attention.
Follow the action/opinions of others 55%
• Thus, Sina employs at
least 500 censors to
Join the discussion of hot topics with others 20% manage content and
Put forward questions and get suggestions from
15%
make sure opinions
others
don’t run afoul of
See comments to myself or others 5% Beijing’s sensitivities.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 10
Source: RedTech ConWeb Household Tracker
11. Why Some People Stay Away
Why don’t you use microblogs?
Boring, do not want to
26%
use
Not familiar with
23%
• Discovery 3: microblogs
Don't have any friends
21%
Though microblog on microblogs
Don't have time 13%
usage has grown Microblogs don't have
13%
rapidly, barriers any useful information
No interesting topics 5%
to further growth 0% 5% 10% 15% 20% 25% 30%
aren’t significant. Source: RedTech ConWeb Household Tracker
New users will be Will you microblog in future?
drawn in by better Yes, I
definitely will,
content and more
3% No, I am not
interested in it,
13%
friends that use
the platform.
If have content
I'm interested
in, 54%
If friends
around all use
microblogs,
31%
11
Source: RedTech ConWeb Household Tracker
12. Marketing Messenger Is Key For Credibility
• Discovery 4: Marketing Do You Believe Marketing Info On Blogs?
info on microblogs might Yes, I may
try, 9%
not have an advantage,
unless it comes from a No, 36%
friend or peer.
• Marketers still have a long
way to go to determine
what really works in
Chinese microblog Yes, but will
communities.
not try, 55%
What’s your impression of product recommendations of friends or people you follow on microblogs?
35% 32%
30%
25% 23%
20% 18% 18%
15%
9%
10%
5%
0%
Will increase my interest Will consider the product The product shared or It has no impact on my I don't like product
in the product or brand shared or recommended recommended will purchase recommendation on
in priority become one of my microblogs
choices
12
Source: RedTech ConWeb Household Tracker
14. Microblogs Threaten Pure-play SNS Model
• Microblogs offer a one-stop shopping opportunity by combining the best
of blogs, SNS, instant message, online video and more. Much more
powerful and wider impact than SNS.
Microblog vs SNS Habits
• Simple way of Micro Blog
linking, no 60%
52%
Social Network Site
approved 50%
54%
connections, which 40%
38%
34%
can limit SNS use. 30%
28%
• Weibo lets ordinary 20% 20%
21% 20%
people become 10%
"friends/fans" of 0%
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Source: DCCI
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• Microblog and SNS user base overlap, so more time on weibo hurts SNS
players.
14
15. Microblogs Threaten Pure-play SNS Model (2)
• Keyword searches for Sina’s Weibo vs SNS sites RenRen and Kaixin.
Kaixin Weibo
RenRen
Source: Baidu Index
15
16. More Microblogging = Less Time For SNS
• Discovery 5: A series of conversations and questions about
microblogs versus SNS reinforced the potential risk of consumers
moving away from SNS over the long run because of the bundled
approach that microblog platforms use in China.
Question: I don't use Yes, I spent
How does SNS, 27% less time on
microblogging SNS, 41%
impact your
SNS usage?
Has no impact,
32%
Source: RedTech ConWeb Household Tracker
16
17. Sina’s Weibo
Building Defensible Leadership Position
17
18. Weibo Drives Sina To Best Performance
• Market Cap: US$7.3bn as of April 15, 2011. Priced at $123.68.
• Substantial additional gains require Sina to show progress on monetization.
Source: Reuters
18
19. Weibo Net Stats
Weibo rolled out
on sina.com
Famous users Recent posts
(weibo)
Most popular Users
People Online
(weibo)
(weibo)
Wap Portal
19
Source: Alexa
20. Weibo Key Indicators & Features
Sina Weibo
• Launched: Aug. 2009 Registered Users (mn) QoQ Growth
250 200%
• Reg. Users: ~115mn 200
• Active Users: ~92mn 150
129% 150% 150%
100%
• Market Share: ~85% 100 65%
100%
• User Experience 50
45%
39% 27%
21%
50%
◦ Easy to register 0
Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411
0%
Provide email, password and name and you’re in
◦ Clean page, User Friendly, Easy to navigate Source: RedTech Advisors
• Daily Use: 25-30mn msgs.
• Employees: At least 600 of Sina’s 3500 by end 2010. At least 500
are censors. Sina expects to hire another 1000 people in 2011.
• Features: IM, SNS, Groupbuy, LBS, Online Video, Search
• Financials: Cost of running weibo significantly increasing, with
combined expenses growth likely outpacing overall Sina sales
growth this year as the company sees 2011 as a “year of
significant investment.” R&D likely to pop up 15-20% in 2011 and
SG&A up ~30%. As a % of sales, R&D will remain about flat at 9%
but SG&A will increase to about 30% from 24% in 2010.
20
21. Sina Weibo SWOT Analysis
Strengths Weaknesses
More than just a Twitter clone Users may reject “social marketing”
First-mover advantage/network effect campaigns
Censorship: Weibo is very politically
Partnerships (i.e. Youku, 360buy, Meituan)
sensitive. It’s popularity is partly because
Sina is China’s top portal. Strong balance people can disseminate messages or events not
sheet. ~$880mn in cash. always reported by traditional media, i.e.
Demographic: Urban, young, affluent corrupt officials, suicides and other socially
sensational stories.
Focus is on expansion rather than quick
monetization. Self-censorship may dull long-term interest
Opportunities Threats
The next QQ: Huge user base provides good Regulatory risk – low b/c gov and Sina will
platform for advertisers and rich resource to agree on some level of censorship.
enhance direct communication with users.
Competition – not significant yet. But
Cross selling platform, i.e. ads, e-commerce, Tencent spending heavily.
mobile payments
User fickleness: Weibo users care less about
Killer mobile app. (~about 30-40% of msgs service’s brand and more about the magnitude
come from mobile devices.) and activity of the users. If a competitor can
Corporate portal (5000 firms already use it. match this, then users will jump.
2700 media organizations) Cannibalization of Sina portal ad revenues.
21
22. Partnerships Make Platform Sticky & Tricky
• Sticky: Multiple partnerships
help Sina expand the one-
stop shopping allure. Inline
videos with partners like
Youku make Weibo more
dynamic.
• Tricky: However, Sina is
encroaching on some of its
“partners,” i.e. by allowing
users to directly upload
videos to Sina video site
thru the weibo interface, it Partnerships
competes with Youku and
Tudou on user-generated
content. Weibo is likely just
getting started.
22
23. Stars Seeded Weibo, But Friends Drive It
Applications Messages Friends Search
Mobile App
Followers
Bonus
Scheme
Message forwarded 54
times, 55 comments
23
24. Applications Expand The Ecosystem
Applications
Notice Pizza Hut Ad
Recommended Applications
Application Scoreboard Latest Application List
Open API: 3rd party developers 568, 079 Users
can submit apps online for one app
24
25. Most Popular Apps In Weibo
• Micro Music
Users can listen to broadcasting stations of stars and friends
as well as music, and send a song as a gift to another user.
• Star Appearance
Upload a profile picture and you’ll know which famous star
you most look like.
• Micro Mr. Doctor V
Show the most faithful fans of microblogs, tracking how many times
he/she posts, reposts and replies to other microbloggers.
• Cartoon ID
User discovers his/her cartoon identity by inputting name
25
26. Games Create Stickiness
Games
84 Games 2,638,287 people have connected their Weibo to this
gaming platform
Rating
Open API: 3rd party developers
can submit apps online
26
27. Popular Microblog Games
• Sina Wanwan Developer: Sina Wanwan
• Game platform with a variety of web games.
Sina Wanwan
A large game platform with a variety of small web games.
• Beg to Be Adopted Developer: Qi Meng
Through the game, the user can be “adopted” by other
microbloggers and the value of the user measured by virtual
golden coins will increase when more microbloggers click to
adopt him/her.
• What were you in your last life? Developer: Ci123
Predicts the career of the user using birthdate.
• Microblog Marriage Certificate Developer: MicroWorld
Create an Internet marriage certificate.
27
28. Sina Keeps Building Up Feature Set
The past few months …
• Group buy function
• LBS (Location Based Services) “Wei Lingdi”
• Instant Messaging “Microblog Air”
• Voice-based microblog
• Groups
• Video uploads/sharing
• Voting or Polling (like Facebook)
• Trend spotting
28
29. Group Buy Social Platform
• Subscription based
• Allows users to receive group buy messages that meet their
selected criteria (i.e. location, product category, price, etc.)
• Participating group sites:
◦ 58tuan, Groupon.cn, Meituan.com, 24Quan.com, etc.
• Social Features
◦ Friends Activity:
Share group purchases, bookmarks, custom subscriptions, etc.
◦ Group Buy communities:
Forums for sharing about discounts, purchased items, complaints, etc.
◦ Wish List:
Rank and organize group purchases
◦ Reward Point System:
Rewards sharing, invitations, comments, purchases, etc.
Points can be used to purchase products and coupons
Risk: People spamming friends and other followers to build up free coupons.
29
30. Sample Group Buy Page
Group Buy Price
Original Price Discount Savings
Already Purchased
Time Remaining
Days Hours Minutes Seconds
30
31. Location-based Services Platform
How Do You Visit Microblog Sites?
• 40% of Weibo users access
through mobile device
Both PC
and Mobile
• Available for iPhone, Phone
27%
Android, Symbian (pending) PC
64%
Mobile
Phone
9%
• Help users find stores, ATM,
friends, stars, etc.
◦ Like Foursquare, can check-
in and get badges
When Do You Use Handset To Visit Microblog?
◦ See where friends are 60%
checked-in 50% 48%
LBS feature will try to
◦ Use “Star News” to follow 40%
connect consumers to
merchants 32%
favorite stars’ footsteps 30%
20%
12%
• Weibo will potentially 10% 8%
receive revenue from shops 0%
In transportation Shopping or Waiting Working or Having
for advertising and data Having fun classes
analysis Source: RedTech ConWeb Household Tracker
31
32. Weibo Going Mobile With LBS
Follow favorite star here Find out where friend
is to meet for coffee
Check-in for lunch here
Earn badges
32
Download to smartphone function
33. Instant Messaging Platform
• “Microblog Air”
competes with Simple design and interface Real time chat
Tencent’s QQ
• Sina (and others)
have tried fielding
IM QQ killers
before. Didn’t work.
But Weibo
popularity may
allow for better Built-in music player
traction.
• Client can tailor
make the
application to meet Support for video Graffiti board for drawing
their individual
preferences
• Supports an
integrated
multimedia player
33
34. Clubbing: Ability To Join Groups
• Social Clubs
• Divided into 8 major categories and 100
subcategories:
◦ Celebrities, industry, interests, culture, lifestyle,
housing, old friends, cities
• Users allowed to create their own unique groups
according to their interests
• Each group is limited to 500 users and each user is
limited to 10 groups
34
35. Social Networking on Steroids
Groups
Hot Politics Stars Industry Interests Science Lifestyle Cities Friends
Create a Group
Most Active Last 24hrs
Suggested Groups
Join
35
38. Biz Models
• South Park Dysfunction
• Traditional Advertising
• Product & Event Search
• Cross-selling, Third Party, e-Commerce
• Corporate Digital Strategy
• Open Platform: Apps & Gaming
• Scenario Analysis
38
39. South Park Model: Underpants Gnomes
• Gnomes steal underwear, await divine inspiration and big profits.
• Investors worry Sina is doing the same. Weibo has generated minimal revenue to date, and
effectiveness of microblog in marketing is still unproven. Sina now moving to test ways of
monetization, but not the focus in 2011. Expansion is. We expect Weibo to add
18mn/70mn/142mn to Sina’s top line from 2011-2013.
Season 2, Episode 17. URL: http://www.viddler.com/explore/loopytube/videos/644/
Script …
Gnome: This is where all our work is done.
Cartman: So what are you gonna do with all
these underpants that you steal?
Gnome: Collecting underpants is just phase 1.
Phase 1: collect underpants.
Kyle: Sooo, what's phase 2?
Gnome: (has no response. Looks around, then
calls out to the other gnomes sifting
through mound of underpants) Hey,
what's phase 2?
Gnome 2: Phase 1: we collect underpants.
Gnome: Yeah yeah yeah, but … What about
phase 2?
Gnome 2: (says nothing, then) Well, phase 3
is profit. Get it?
Stan: I don't get it.
Gnome 2: (walks up to a large chart) You see,
Phase 1: collect underpants. Phase 2: …
Phase 3: Profit.
39
40. Advertising Model
Upside Potential China Online Ads Market
Online Ads Revenue (bn yuan) YoY C hange
• Tried-and-true revenue model. 100 60%
Market for online ads is surging. 51%
Exceeded $4bn in 2010, will 80 46% 46%
close in on $6.5bn this year and 40%
continue growing by at least 40%
30% to 40% a year through 60
2013.
• Leverages Sina’s sales force to 40
22% 20%
cross-sell and bundle.
20
• Target ads based on user
preferences and behavior. No
wasted ads. 0 0%
2009 2010e 2011e 2012e 2013e
Downside Risk Source: iResearch, RedTech estimates
• Effect of marketing on this platform is hard to measure and value.
• Users may grow sensitive to data mining of personal info (assuming they are willing to
share it.)
• Weibo may soon approach Twitter in size, but it doesn’t have same access to global
online ad dollars (est. at $65bn in 2010). Only China (~$4bn).
• Potentially cannibalizes Sina portal ad revenue. Though it’s better for Sina to eat into
this business than someone else, which is inevitable as portals succumb to Web 2.0.
• Currently, many stars already endorse products, but cut Sina out by directly working
with the advertiser or agency. It’s not yet clear how Sina will control this. 40
41. Advertising Model
Additional Concerns
• Promoted “tweets” run the
risk of seeming like spam if Display ad for
victims of the
they are written by PR hacks earthquake in
rather than the user of the Japan.
weibo account, i.e. a
celebrity. Chinese are tolerant
of display and text ads, often
seeing them as the price to pay
for “free” content, i.e. online
video, but the weibo platform
is more personal.
• Verifying quality of followers • Commercializing personalization key
of a particular user can be to social ads. Traditional media can’t
difficult. There is already a make the one-on-one connections of
cottage business in building up microblogs, so Sina needs to draft
weibo accounts (min of 200k clear guidelines for commercially
users) with good content and
then selling them on. These engaging users so the platform
users may soon turn into maintains its personality and doesn’t
zombie followers if the devolve into an online mirror of the
account personality changes. spammy stuff found elsewhere. 41
42. Product & Events Search Model
• Relevant: User
has interest in
the particular
product or
Connect to company’s website
service
• Search results
can include Product descriptions,
feedback from reviews, comments, etc.
peers, friends or
celebrities
• Monetization:
Sina takes cut of
each transaction
(pay-for-
performance)
42
43. Cross-selling, 3rd-Party Model, e-Commerce
• Utilize Sina’s large Sina’s online clothes retailer Mecox Lane
ecosystem (i.e.
online video, online Company URL
games, online
shopping mall) to
help facilitate e-
commerce
• Vertical integration
with Mecox Lane
• Mecox Lane
provides platform
for Weibo to
transform users
into revenue
• Link to existing online shopping malls (i.e. 360buy.com, Taobao)
• Encourage third-party development within Weibo ecosystem
• Monetization opportunity: provide click-through to the merchant and
receive cut of revenue
43
44. Corporate Digital Strategy
• Tap into the 5000 companies that use Weibo to
help them promote, recruit, and do PR
◦ Verified accounts
Customers know they are talking to the actual business
◦ Testing tool for companies doing research
See how market will respond to a particular ad campaign
• Monetization opportunity: packaging Weibo into
Sina’s main advertising package or clients pay
separately for a verified account
44
45. Edelman Pitch To Corporate Clients
• Agencies, PR outfits
have long been pushing
for microblog as part of
comprehensive,
interactive digital
strategy.
For full presentation, go to Slideshare …
http://www.slideshare.net/liblog/digtial-
engagement-sinaweiboby-
liblogedelman-compatibility-
mode?from=ss_embed
45
46. Provides Platform for Dialogue with Customers
PR Promotion for
Earth Hour
Indicates site is verified
Channel for PR, recruitment,
product promotion, etc.
46
47. Open Platform Model
• Work with developers to expand ecosystem
◦ Develop apps, Games
◦ About 2000 developers attended Weibo’s first
developer conference in November.
◦ Sina and VCs set up 200mn yuan fund to invest in app
developers.
• Leverages third parties expertise into Sina’s R&D
base
◦ Tencent and Baidu have stronger R&D base
• Monetization opportunity: Consumers pay for app
or game and Weibo shares the profits: 30% to
Sina/70% to developer
47
48. Scenario Analysis: Weibo Arrests Sina Decline
◦ Sina and Weibo is not 1+1=2, but in our scenario we factor in 5%/15%/25% incremental
growth in ad sales from 2011-2013 as Sina moves to monetize Weibo. This will add $231mn to
Sina sales.
◦ Sina will invest significantly to expand Weibo’s reach. This will push up sales and marketing
as a percentage of total revenue by ~10-15ppts between 2011-2013, but we believe this
aggressive investment and expansion of headcount will help Sina keep weibo the top
microblog for users and advertisers and help fend off new competition in the sector. R&D
expense will also grow, but should still hover around 8-9% of overall sales.
Online Ad Revenue (Ex. MVAS, Other)
Sina Sina + Weibo
800 USD mn
712
600 570
537
467
366 384
400
200
0
2011 2012 2013
Source: RedTech estimates
48
50. Sina Remains the Industry Leader
• User’s home page
• Competitors have
only cloned this
140 character entry
design; offer very
little in terms of
differentiation.
50
51. Move To Weibo.com Boosts Branding
Sina launches
nationwide contest
to inspire people to
advertise the weibo
name in clever
ways.
For more examples,
see
http://t.sina.com.c
n/z/paijingpin/51
52. Attack of the Clones: Tencent
Look familiar? t.qq.com.
• Sina’s most viable competitor
• Strengths
◦ Microblog has large user base
(100mn). Since April 2010.
◦ Supports many similar
features
◦ QQ ecosystem (630mn users)
QQ (IM), Gaopeng.com (group
buying), QZone (SNS), TenPay (third
party payment system), Gaming
• Weaknesses
◦ Branding: Started as Taotao
and re-branded as Tencent
Microblog
◦ Big numbers but weak
demographics
Rural+Teen = No Money
◦ Product Differentiation 52
53. Attack of the Clones: More on Tencent
• Tencent has some of the best
product design teams in China.
• We believe they are making a
bigger push into microblog than
many people realize.
• Already seeing a huge ad
campaign with stars launched
during last few months to woo
new users.
• Currently building out platform
with apps and features, then will
shift focus to improving user
interactivity, likely by linking
with QQ. This will be key because
currently retweets on Tencent
platform are low.
• The Sina-Tencent microblog
battle will be one of the key
Internet battles in 2011.
53
Olympian Liu Xiang (top); HK Actress Karen Mok
54. Attack of the Clones: Part II (Sohu)
t.sohu.com “Sina copied Twitter first and then we all followed in copying.
So there is no technological barrier.” -- Charles Zhang, CEO Sohu
• Strengths
◦ Second largest Chinese news
portal
◦ Strong gaming presence
◦ Partnership with Hunan
Satellite TV
Engages audiences via TV,
internet, and mobile
◦ Supports many similar
features as Weibo
• Weaknesses
◦ Stability
Experienced outage in February
◦ Product Differentiation
◦ Overall, just not nearly at the
same level as Tencent in
terms of being viable
competitor
54
55. Attack of the Clones: Part III (Netease)
t.163.com
• Strengths
◦ Focusing on Mobile Internet
Strategy, which aligns with 163 character entry
growth in microblog user
base.
◦ Gaming
◦ Supports similar features as
Sina
◦ Strong email user base
• Weaknesses
◦ Product Differentiation
Get some small credit for
extending character limit from
140 to 163.
◦ Overall, just not nearly at
the same level as Tencent in
terms of being viable
competitor
55
56. Attack of the Clones: Part IV (Baidu)
Shuoba
• Strengths
◦ #1 search in China
◦ Box Microblogging
Post directly from Baidu search box
Ability to post to every major
microblogging site
◦ Supports many of the same
features as Sina
• Weaknesses
◦ Invades Privacy
Requests too much information to
register (i.e. Baidu queries gov’t
database to check if ID card # valid)
But this may change soon.
◦ Product Differentiation
◦ Not really a credible competitor
at this point, but might be
depending on whether they team
with Facebook
56
58. Sector Thoughts
• Microblogs are especially popular in China for two reasons.
◦ Chinese have shown a much stronger interest in expressing themselves
on the Internet than what we see in many other countries.
◦ As traditional media has too much control in China, weibo offers a
new, relatively free way to efficiently keep up on social trends,
products, events, business and even some political gossip. It is
gradually becoming a primary way for people to get information in the
social networking universe.
• The commercial potential is hard to gauge.
◦ As with SNS companies, the real effect of marketing on these platforms is
difficult to measure and therefore hard to predict. But we like microblog
more than SNS because of the ease of viral communication and reduction
of barriers to forming relationships.
58
59. More Sector Thoughts
• Big threat to SNS, i.e. RenRen, Kaixin001 (pending US IPO).
◦ We have talked to several people in SNS companies who can never illustrate
clearly the value of their business in just a few sentences, which makes us
wonder if they can’t define the value of the business in a simple way, the
future prospect of this business will be fuzzy as well.
◦ As stated earlier, microblog connections are easy to make and the value to the
user is more compelling, i.e. they can disseminate opinions to wider audience
and interact with a huge base of users.
◦ SNS concepts like “friends” or “classmates” can be exclusionary. Microblog
provides a way to gather people together regardless of previous relationships.
As long as you are interested in knowing someone or something, you can
become a fan.
• Regulatory risk not significant but worrisome.
◦ Major concern is not that it will be shut down by gov’t but that it will be
neutered to such an extent that many lose interest. For instance, during
“jasmine fever” Sina asked users with high numbers of followers to “behave”
and not write anything sensitive.
◦ Gives people an angst outlet against bungling local officials that Beijing wants
to keep an eye on.
◦ Conveniently gathers potential “troublemakers” in one spot, making them
easier to watch.
59
60. Outlook for Sina’s Weibo
• Maintains dominance
◦ Sina management is totally focused on
Weibo, so unlikely to lose first-mover Valuation: $7bn and counting
advantage anytime soon.
◦ ~190mn users by end of 2011.
◦ 25-30mn messages per day. You can
say a lot in 140 characters.
◦ Growth strategy
Improve quality and user experience
Sacrifice short-term profit for long-term
growth. Optimistically est. $18mn in 2011
weibo sales, with as little as $5-$10mn.
Sina wants to use Weibo like Tencent used QQ.
• Needs to further expand its moat
◦ Add features that increase user loyalty and stickiness
Doing so with recent addition of LBS and IM services.
◦ Further develop its ecosystem
Expanding Gaming & App Channels
60
61. Outlook for Sina’s Weibo (2)
• Competition Growing
◦ In basic features, microblog services not that different from one another. This is a threat to
Sina as other deep-pocketed companies try for a piece of the market.
◦ Already many celebrities launch the same microblog on Sina, Sohu, Netease, etc.
• Weibo Advantage & Disadvantage
◦ But microblog has one difference from blog, as its attractiveness largely depends on who
you connect with, so that is an advantage for Sina as it has a more sophisticated user base.
◦ Bundling sales with Sina portal must be carefully managed. Very unlikely that it will be
1+1=2 in sales. Sina portal revenue will be cannibalized to some extent.
• Management guanxi good; savvy excellent
◦ Sina CEO Charles Chao is cautious, closer to government. Former Sina CEO, Mao Daolin, is
now Hu Jintao’s son-in-law. Sina Weibo management team well regarded for negotiating and
implementation skills, while product design team is also strong.
◦ As portal popularity wanes, Chao manages to convince the Street that Sina is a concept
stock again. Clever.
◦ Sina needs to invest heavily to reinvent itself. Weibo, online video, etc. are all ways of
doing that, but it means more spending on servers, data centers, people and partnerships.
This means some margin squeeze in the short-term, which Sina will gloss over with visions of
Weibo – the best thing to hit China tech since fireworks, paper and porcelain.
• Potential Weibo IPO spinoff
◦ Just moved to new URL last week: www.weibo.com
• It’s a Blimp
61
62. THE CHINA TECH LETTER
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Research by …
