A leading online media company and mobile value-added services provider in China, SINA Corp. (SINA) recently announced its intent to launch an English version of its microblog, Weibo, by the end of 2011 for international users.
Recently, technology blog TechWeb reported that SINA is expected to launch an English microblog in the United States within a few months to compete with Twitter. However, SINA commented that the service will be launched globally by the end of this year.
China is very sensitive regarding the Internet and imposes significant restrictions on online search. The Chinese government has blocked Twitter as well as Google’s YouTube and social-networking website FaceBook.
SINA’s microblog has attained tremendous popularity with registered users totaling more than 140 million as of March, 2011. Sina expects to add more than 200 million users by the end of calendar year 2011.
In early April 2011, SINA moved to a new domain at weibo.com, which fueled possible spin-off rumors. Both the new (weibo.com) and the old (t.sina.com.cn) domains will coexist and users will be able to log on using either. It will eventually be unified into a single domain — weibo.com — once the migration completes.
In late April, SINA introduced an English version of its iPhone App. The Sina Weibo app is available for free at iTunes app stores. The company also said that it is planning to commercialize their microblogging service going forward.
However, the competition within the Chinese advertising market is fierce, as popular Internet search companies such as Baidu Inc. (BIDU), AirMedia Group, Microsoft Corp. (MSFT) and Google Inc. (GOOG) have attracted a lot of advertising clients. Sina is a relatively small company compared to its peers and hence, encounters numerous hurdles in the advertising market.
SINA believes that microblogging will be one of the key factors in the development of mobile Internet and 3G in China, as more than 50% of users access the Weibo microblogging platform via mobile, with approximately 50 million messages being posted daily.
SINA also noted that more than 10% of weibo users are from overseas. With an imminent English version launch of the miniblog, we believe SINA will gain strong market share in international markets, which will drive revenue growth going forward.
According to CNNIC, China’s total Internet users reached 457 million in 2010, up 19.1% compared with 2009. However, Internet penetration rate of 34.3% is low compared to 70.0% in the United States, thus reflecting the potential for growth in the market.
We believe Sina is well positioned to take advantage of this potential, based on strong growth in the education and Internet e-commerce market. Moreover, SINA is well positioned to take advantage of the growing trends in the wireless service field in China, as it can attract more users to its wireless services than its competitors through its popular website and the miniblog service.
Our Take
SINA remains a premier company based on its strong product pipeline, continuous investment in product development and marketing and a robust user base for its e-commerce and Weibo offerings.
Despite the significant competition, SINA’s online advertising business has a competitive edge on account of the site’s popularity in China, superior brand recognition and persistent marketing innovations.
However, weak non-advertising revenue growth is expected to hamper top-line growth going forward. Moreover, increasing competition from Baidu, Sohu.Com Inc. (SOHU), Tencent and Alibaba will hurt profitability over the long term.
We maintain our Neutral recommendation over the long term. Currently, SINA has a Zacks #5 Rank, which implies a Strong Sell rating over the short term.
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