Social Media in China; Sina Weibo and Tencent’s WeChat dominate social media in China. But the landscape is shifting—and this week they will offer investors a glimpse of how well they are keeping their footing

November 11, 2013 Leave a comment

Social Media in China: Sina, Tencent to Report Results

PAUL MOZUR

Nov. 10, 2013 12:58 p.m. ET

BEIJING—Two companies dominate social media in China. But the landscape is shifting—and this week they will offer investors a glimpse of how well they are keeping their footing. Beijing-based Sina Corp. SINA -2.64% runs the country’s most popular public microblogging service, the Twitter-like Sina Weibo, which for the past three years has served as the closest thing China has for a national forum. It is facing increasing pressure from Tencent Holdings Ltd. TCEHY +0.56% ‘s WeChat, a mobile app similar to WhatsApp and Line that allows users to post status updates, share photos and even strike up quick romantic encounters.When Sina reports its third-quarter financial results after the market closes on Tuesday in New York, investors will watch closely for indications that Weibo is losing eyeballs to WeChat. Last quarter, concerns about a potential decline in use were allayed when Sina executives reported that time spent on the Weibo mobile application went up 15% from the previous quarter, with daily active users growing 8.3% to 54 million.

But Sina faces another challenge, this time from the government. Beijing in recent months has put pressure on some widely followed Weibo users for the sake of—in the words of one official—”the purification of the online environment.”

Sina didn’t respond to a request for comment.

On the positive side, Sina could get a boost from an agreement it struck earlier this year with Chinese e-commerce company Alibaba Group Holding Ltd., which took a stake in Weibo and formed a partnership that the companies have said will generate $380 million in advertising revenue for Sina over the next three years. Even so, investors will be watching to see whether piping in new services, like games, will help it become more profitable.

Sina is expected to post profit of 32 cents a share, up from 17 cents a share a year earlier, according to analysts surveyed by Thomson Reuters. Analysts say Sina has to be careful with the number of ads it places into Weibo, with some worrying that too many ads could turn off users.

There is less anxiety over Tencent’s WeChat, which as of August boasted 236 million monthly active users. Tencent will post third-quarter earnings on Wednesday in Hong Kong. Because of its less-public nature, WeChat has also skirted most of the attention of authorities, who worry more about Weibo’s ability to make complaints about corruption or pollution go viral—though authorities still censor the service and use it to track dissidents. More encouraging, several new mobile games on WeChat have strong download figures, helping Tencent’s case that it can eventually make money from virtual products and games fees through the app.

But over the past two weeks Tencent’s stock has fallen, in part because of concerns about competition from a new entrant into the messaging world: Alibaba. Cash-rich Alibaba has responded to concerns about its lack of popular apps by revving up efforts to draw users to its own messaging app, Laiwang.

Alibaba is running a promotion through which it will pay for mobile data consumed by users on its applications. Alibaba founder Jack Ma issued a letter to the company’s more than 20,000 employees saying they won’t get bonuses if they don’t add 100 friends on Laiwang. Alibaba is also running a new campaign that opens the profiles of more than 30,000 young female models who it says will chat with users.

Tencent’s earnings are expected to be 2.09 yuan (34 cents) a share, up from 1.73 yuan a year earlier, according to a Thomson Reuters survey of analysts. Analysts have been less worried about the pressure from Alibaba than the weight on margins caused by a new $200 million ad campaign with FC Barcelona soccer player Lionel Messi to advertise WeChat outside of China.

They also will be watching to see whether the big download numbers of mobile games through WeChat translates into revenue. Tencent said it doesn’t comment on earnings during its quiet period.

Filed under TMT Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment