Quick Thoughts Ahead Of Sina Earnings

• Posted by bbishop
• on February 27th, 2012

Sina ($SINA) announces earnings after the close today.

I expect Q4 results and Q1 guidance will likely be as disappointing as Sohu’s ($SOHU).

At least as important as fundamentals will be Sina’s discussion of Weibo activity, monetization progress and details of the government-mandated real-name registration system.

Investors and/or analysts should push management to detail exactly how the real-name registration system will work, including disclosing all associated costs. I wrote a few weeks ago (New Registrations For Sina Weibo Appear To Have Fallen Off A Cliff) that according to Chinese press reports Sina had seen a dramatic slowdown in new Weibo registrations since January 1. The company subsequently told some investors and analysts that those reports were not true.

Sina needs to disclose the number of new registrations since January 1 as well as clarify whether or not they have forced new registrants to use their real names and ID numbers that the company then verified. There is some ambiguity over that point; I have heard from a few people that they were able to register a new account on Sina Weibo after January 1 without a real-name requirement.

Users who do not want to register with their real names will still be able to read posts but will not be allowed to write posts, comment, or forward posts. For those “watchers” Weibo may become more like a Web 1.5 product, and depending on how many users decline to give their real names much of the assumed engagement value (the Facebook+Twitter of china hype) may evaporate.

As for Weibo monetization, Sina has apparently been working on a Facebook-like ad targeting system and is hosting an industry event in March. Investors should hope the company announces this new system and an impressive roster of advertisers. The Weibo Android and iOS apps now carry banner advertising, and ThinkEquity’s Henry Guo analyst and Sina bull wrote in a recent note that:

The monetization potential is significant if these banner ads gain tractions. For iOS, RMB 2.8M/month for 25% of time => $21M annual revenue. For Android, RMB 2.3M/month for 25% of time => $18M annual revenue.

We believe pricing for banner inventory on desktop Weibo should be much higher than that on mobile app.

Sina has recently launched a food channel (http://food.weibo.com/) on Weibo to aggregate restaurants and give them a home to promote discounts, events etc. I believe this is free for now but should eventually be monetizable (and Dianping should be worried).

Sina needs to start delivering revenue and profit in Weibo. The stock trades at less than half of its 2011 high but is up 40% or so in just over month. The smart money has moved beyond the hype.

You can follow me @Niubi on Twitter, @Niubi on Stocktwits and @Billbishop on Sina Weibo.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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