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Revenue up, but profits vanish at Sina

By He Wei (China Daily)    10:39, August 14, 2013
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Sina Corp, which runs China's largest micro blog services, hit an unexpected second-quarter loss as it looks to capitalize on its mobile offerings and fend off competitors.

The Nasdaq-listed company posted a net loss of $11.5 million compared with a profit of $33.2 million a year earlier, according to a company statement on Tuesday.

The drop in profit masked a 20 percent jump in revenue, in which advertising income grew to $120.6 million, exceeding the company's expectations.

The loss is largely attributable to a one-off charge related to a deal with e-commerce giant Alibaba Group Holding Ltd, with which Sina teamed up to challenge rival mobile messaging product WeChat, owned by Tencent Holdings Ltd.

Sina is betting on Weibo to shield its leading position in social e-commerce, according to its chairman and chief executive, Charles Chao.

"Our strategy to diversify Sina's revenue stream to beyond big-brand advertisers and to leverage Weibo's continued traffic growth to develop social and mobile advertising as well as value-added services is placing Sina in a good position for more profitable revenue growth while making a heavy investment in the future," he said in the statement.

Despite having registered users topping 530 million, Sina's Weibo is struggling to translate its busy traffic into a steady stream of revenue.

Meanwhile, the quick rise of WeChat, which recently added an online payment element, is substantially eroding Weibo's customer base.

Sina moved to address these problems earlier this year by inking a $586 million deal, giving Alibaba an 18 percent stake in Weibo. Sina also granted options to enable Alibaba to increase its ownership in Weibo to 30 percent.

The latest quarter included a charge of $27.1 million tied to the deal.

Apart from Weibo, Sina seems to have limited options for a quick turnaround, putting it in a vulnerable position, said Dong Xu, a senior Internet analyst at IT consultancy Analysys International.

Weibo is facing increasing difficulties because its micro blog service is being overwhelmed by rampant intrusive advertisements that users find tedious, Dong said.

Tencent has repeatedly sent signals that it would avoid bombarding WeChat users with advertisements, she added. For example, it shut down public accounts that had viral advertisements.

"The latest WeChat, 5.0, has successfully skirted such pitfalls by categorizing personal accounts and public accounts," she said.

The two virtual forums now have online payment systems, a move they made to try to dominate the Internet access point in the mobile Internet age, she added.

(Editor:WangLili、Gao Yinan)

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