Tuesday, March 8, 2011

Forbes: Sina (SINA) Weibo

For those of you who are interested in China's twitter service, Sina's (SINA) Weibo, there is a huge story in Forbes on the history and vision behind it.  It is definitely an interesting read due to the hurdles and potential issues involved because of the Chinese government.  Much like Baidu in search, Weibo seems to have the government's blessing - for now - and hence a huge advantage.

As an aside, technically, this chart would have been incredibly difficult to trade the past few weeks.  It has broken support twice - then bounced back as if any resistance that the technicals created was not there.  So if you were trading respecting support and resistance you'd have been stopped out twice and losing money chasing the bounces.  Ugh.

  • Weibo, launched in August 2009, was the Internet phenomenon of China in 2010, reaching 50 million users by the end of October--and is likely fast approaching 100 million users now.   And with the help of Beijing, Sina Weibo had effective first-mover advantage: The chief competition, Fanfou, back up after the Tiananmen anniversary, had been taken offline indefinitely after the July 2009 riots in northwest China's Xinjiang region; Twitter and Facebook, too, had been blocked and have remained so since then.
  • Filling this government-manufactured void was Chao's government-trusted sandbox for cynics, celebrities, influential bloggers and media elites. It has become China's most potent incubator for subversive Internet memes, much to the consternation of bungling local officials across the country. From a deadly fire in Shanghai to a fatal hit-and-run by the son of a police official (producing the catchphrase, "Sue me if you dare, my dad is Li Gang!") to a recent online campaign to find and retrieve kidnapped child beggars, Weibo has forced authorities to reckon with popular opinion in a way unprecedented in Communist-ruled China.
  • Other big competitors joined the fray since Sina's entry: Social networking giant Tencent has the most serious challenger in its QQ microblog, with more than 100 million users but far less activity; rival portals Netease and Sohu have their versions, with far fewer users; search king Baidu has tested out a real-name service that hasn't gone far; Hong Kong's Phoenix media group has a little-used service; and the Communist Party's mouthpiece, People's Daily, also has a lightly trafficked microblog. 
  • Chao hopes his Weibo's market-topping success will one day remake Sina, already China's leading news and entertainment portal with a successful display ad business, into a dominant social networking platform like Tencent. Much as Tencent did in building on its free QQ instant messaging service in its early years, Chao has put off monetization of Weibo to draw in more users, layer on more Facebook-like functions and improve the service's user "stickiness."
  • But Weibo's market-leading position also makes it even more of a gamble, as Beijing's nervousness about information sharing and the madding online crowd has not waned. In fact, it has intensified in the wake of the so-called Jasmine unrest in the Middle East, making Weibo a critical choke point for social control.
  • Weibo is a rambunctious sandbox, yes, but with walls and adult supervision: Play with the outside world is limited (there is still no English-language interface, for example), and what goes on inside is monitored and censored rigorously. Try searching for posts related to "Egypt" in the last few weeks and Weibo would tell you that, pursuant to "relevant laws, regulations and policies, the search results have not been shown."
  • Chao is aware of the politics, and, not surprisingly, he doesn't enjoy talking about it. In the same Beijing conference room where he approved the creation of Weibo, he reluctantly told FORBES ASIA that his company has at least 100 staffers devoted to monitoring content 24 hours a day (many believe the figure is much higher).
  • China's business mantra, though, has always been less "too big to fail" than "too government to fail." A huge market presence does make it more difficult for the government to shut a service down, but for an Internet site purveying content, close, trusted relations with top leaders and regulators are always vital. In that respect Chao and Sina have an interesting trump card: He is close friends with President Hu Jintao's son-in-law, Mao Daolin, who, before marrying into China's First Family in 2003, was CEO of Sina.
  • How much is Weibo worth, then, compared to Twitter's estimated valuation in the $4 billion neighborhood? ($4B? The social media bubble has pushed the value up to nearly $10B already!) Investors, unable to buy into privately held Twitter, had seemed to bet on Weibo hopes instead, running up Sina's stock 170% from early July to mid-February, over a period when the company's revenue streams and projections remained largely unchanged. But the stock has taken a hit since then, as Goldman Sachs and Deutsche Bank showed skepticism, the latter's note emphasizing the political risks facing the Weibo platform.
  • "The likelihood of the government shutting down Weibo is zero," says Zhao Chunming, senior analyst at SIG. "I think if they do shut it down, then China will become Egypt. So that's actually a risk the government can't afford." Zhao says the government will instead keep a tight leash on Weibo, which he understands has "hundreds" of censors, not just 100, and will need to update its technology to scale up censorship.
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