Sina reports fourth quarter and fiscal year 2012 financial results. From the top line numbers, it’s hard to tell the company, apart from the existing news portal, runs a social product with 500 million registered users, as the company claims, and a handful of advertising services. Its total revenue saw a mere 4% increase year-on-year in Q4 2012. That for the whole year only increased 10% year-over-year — 21% for the previous year even though Weibo didn’t make any money then.
Sina Weibo made USD 66 million, or 13% of the total revenues, in 2012. About two thirds was generated in the second half of the year after advertising products were launched and starting taking revenue cuts with its gaming platform. 77% of Weibo revenue is from advertising and 23% from value-added services such as membership fees and gaming revenue cuts.
The promoted-story advertising system, released in Q4 2012, is under testing and won’t be open to everyone until Q2 2013. The Micro-task ad system, a platform for advertisers to pay verified Weibo accounts to promote their content, isn’t meant to make much money, as its CEO Charles Chao put it on the latest earnings conference call. It’s no wonder that Weibo advertising revenue is mainly from brand advertisers, customers of Sina news portal’s, in the form of display ads.
According to the management, Weibo ad orders are handled by third-party distributors in the same way they sold news portal ads to brand advertisers. Hence, so long as the model isn’t changed or the promoted-story advertising takes traction, we cannot expect Weibo advertising to grow any faster. Mr. Chao said the major format of advertising would still be display ads in the first half of 2013. Good news is the company didn’t see any seasonality effect on Weibo.
Non-ad Weibo revenue was 7.2million in Q412. As Charles Chao put it, this is a surprise which means he didn’t expect much revenue to be generated from membership sales and games other than advertising. It’s a natural decision that the company to “reallocate its resources away from the low-margin MVAS business to Weibo VAS”. Wang Gaofei, the former head of the company’s mobile business was assigned the new head of Sina Weibo at the end of 2012.
Subtracting the Weibo revenue, the rest, generated from 2G mobile services and the news portal, actually decreased by 4%. It’s no secret the 2G value-added mobile business has been declining, with a 38% decrease in Q4 2012; however, it also must be true the growth of advertising on Sina’s news portal decelerated. It’s unclear whether it’s that existing brand advertisers just split budget between Weibo and news portal, or they really think Weibo a more effective channel and started placing less budget on the news portal.
The news portals ran by Tencent and Sohu grew much faster than Sina’s when it comes to revenue, for the video services the former built started to generate advertising revenues. Charles Chao mentioned on the earnings conference call that they’d invest in video content but wouldn’t spend too much on purchasing content in this year.
The mobile end is a big problem for portal advertising. As a majority of users access online news and Weibo through mobile devices, Sina saw only 5% of portal advertising would be from the mobile end in Q1 2013 while 30% with Weibo. The mobile advertising rates will be raised in the second quarter this year when the promoted-story ad system is open to everyone, according to Chao.
Charles Chao expects 2013 to be the year of returns.
Is it still an early stage for Weibo monetization? You may mind me that Charles Chao also mentioned that 75% of active users access Weibo with mobile terminals and more and more promoted-story ads would be featured there, or the company tried out flash sales for Xiaomi phone and vehicles that would generate sales cuts in the future. Yes, those are the potential of Sina Weibo in terms of monetization. But I kept hearing people say that they didn’t spend that much time on Weibo than before.
As disclosed, the daily active users are 46million, 9% of the registered accounts, and the average time spent decreased. Charles Chao blames WeChat, or Weixin in Chinese, and others for stealing users’ time. While I don’t believe users spend less time on Weibo is because of that, what’s true is advertisers like Nike said that they’d spend time, or marketing budget, on exploring marketing potential of WeChat.