I was surprised when I came across a pop-up bar featuring a piece of news at the bottom of my Weibo homepage the other day. That’s what Chinese online news sites have been doing. Tencent uses pop-up windows to push news and other notifications to the users of its flagship application QQ IM. Sina, without a user base like QQ’s years back, would push breaking news through a pop-up bar at the bottom of an article page. So, Weibo simply took the old-fashioned way.
Two months ago Weibo joined a US$100 million round of investment in personalized news app Toutiao. A recent chat with a mid-level exec at Sina proved me right that Sina saw traffic growth slow and needed Toutiao to direct traffic, otherwise they couldn’t raise ad rates, which the company has been doing in order to grow revenue.
Sina’s major revenue sources are display advertising on the news portal and 2G mobile services, with the latter keeping declining in the past years. The company counts on traffic growth to increase ad revenue. The portal ad revenue only increased 5.9% year-over-year in Q2 2014 and non-ad revenues declined 11%.
Toutiao is the largest news app on Weibo in terms of shared posts, according to Sina management. What’s surprising is it isn’t Sina that built such an app and leveraged Weibo to become the largest news service on the platform. It was believed Weibo is an ideal medium to have readers stick with Sina as the company controls all the ad placements and can manipulate content such as search rankings.
When Toutiao was launched in the same month two years ago, Weibo had already had 368 million registered users and 36.5 million daily active users by the previous quarter. This round of funding in Toutiao values the app at US$500 million, 1/8 of Weibo’s market cap and 1/7 of that of Sina, Weibo’s former parent, as of this writing.
Yes, Weibo isn’t only about news. A variety of services for users and for monetization have been added in the past couple of years. But its revenue structure is still similar to the Sina’s. In Q2 2014, 77% was from advertising and the rest from value-added services.
The major revenue sources for most successful Chinese social services such as Tencent’s QQ and YY, however, are gaming and virtual sales. It’s also true when it comes to mobile. WeChat and Momo, two chatting apps, are making revenues through the two sources. WeChat are also adding e-commerce and online-to-offline services in order to have users make purchases without leaving the app. Weibo has those offerings too, but so far it’s still pretty much a display advertising business — The e-commerce ad by Alibaba’s contextual ad program that is shown on users’ homepage is display ads too. Also it’s based on user behaviors on Alibaba instead of Weibo.
Speaking of WeChat, many people I know who don’t visit Weibo regularly anymore now are checking the sharing service on WeChat several times a day. Weibo for many people like me has become a place to search for certain news.
Weibo reported a 105% year-over-year increase in total revenue in the quarter, but still recorded a net loss of US$15.4 million. — Twitter has been reporting Non-GAAP operating profits since it went public in 2013.