Sina optimistic of advertising recovery

Chinese Web portal operator Sina Corp, which runs the country's most popular micro-blogging service Sina Weibo, expects advertising sales to improve this year as the economic climate warms.

However, analysts said they had mixed views on the company's optimism for a successful monetization of Weibo anytime soon, amid rising competition from rivals like Tencent Holdings Ltd.

During an earnings update on Wednesday, Charles Chao, Sina's chairman and chief executive officer, said its key sectors of automobile, financial and fast-moving consumer goods will grow fast this year.

"The overall macroeconomic conditions in China are improving and we are cautiously optimistic about the general advertising market and online advertising growth for 2013," he said.

The company, like most of its counterparts that rely on advertising as their main source of revenue, saw net profits fall 74 percent in the fourth quarter to $2.4 million, compared with $9.3 million a year earlier.

Total revenue in the quarter, nearly 80 percent of which came from advertising, rose 4.3 percent to $139.1 million.

China's online advertising market increased by 46.8 percent in 2012, down from 57.6 percent in 2011, according to domestic research company iResearch.

Chao insisted that Weibo is likely to generate returns this year as it has reached "a critical mass" despite a slowdown in its growth rate.

The number of average daily users grew by 9 percent from September to December, lower than in previous quarters, and there was also a slight decrease in the average time they spent on Weibo, partly because of competition from mobile applications, such as WeChat, Chao said.

The number of Weibo's registered accounts rose 73 percent to 503 million by the end of 2012, of which about 9.2 percent were daily users in December, the company's figures showed.

WeChat, a mobile chatting tool developed by Tencent, has gathered more than 300 million users in two years since going live in January 2011, and is considered by analysts as one of the market's most promising newcomers, and a serious rival to Weibo.

Such is the growing market competition, and despite Chao's predictions of profits, Qiu Lin, an IT analyst with Guosen Securities Co in Hong Kong, said the prospects of generating revenues from Weibo were "not optimistic" in 2013.

"The fourth quarter should be a busy season for advertising, but Weibo's contribution to Sina's total advertising revenue fell to 8 percent in the quarter, which suggested its efforts to monetize Weibo over the past three quarters have been unsatisfactory," Qiu said.

Sina started generating revenue from Weibo during the second quarter of last year. The service accounted for 10 percent of Sina's advertising revenues in the second quarter of 2012, and 16 percent in the third quarter.

Qiu added that such a heavy reliance on advertising as its single most important revenue generator, and slower growth of daily users and their time spent on Weibo, seriously threatened the site's future ability to make profits.

Chao said in 2011 he hoped Weibo could have six revenue streams: targeted advertising, social games, real-time searching, value-added services, e-commerce, and data analysis.

However, Chen Zhengyu, a stock analyst with China Merchants Securities (HK) Co, said Weibo could still make better use of the huge traffic it gathers.

The service is among the top five traffic drivers to travel websites, such as Qunar.com, and e-commerce websites including Taobao.com, according to recent research by traffic tracker Alexa.com.

Chen added that the company's appointment this week of Jack Xu, the former chief technology officer of portal operator NetEase Inc, as its chief technology officer could give Weibo a technological edge over its rivals.