Sina sees name rule hurting Weibo, plans more investments

Tue Feb 28, 2012 11:08am IST

The logo of Sina Corp's Chinese microblog website ''Weibo'' is seen on a screen in this photo illustration taken in Beijing September 13, 2011. REUTERS/Stringer/Files

The logo of Sina Corp's Chinese microblog website ''Weibo'' is seen on a screen in this photo illustration taken in Beijing September 13, 2011.

Credit: Reuters/Stringer/Files

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REUTERS - China's Sina Corp (SINA.O) said government regulations forcing users of its Weibo microblogging platform to register their real names, coupled with new investments for the popular site, will hurt its profits for this year.

Sina posted a quarterly profit on Monday in line with analyst estimates, but forecast a disappointing first quarter, sending its shares down 4 percent in after-market trade.

Weibo, like Twitter in the United States, is a platform that allows users to post messages of up to 140 characters. Investors have been bullish on the platform's prospects, but the government requirement forcing new and existing users to register their real identities has dampened the outlook.

Sina aims to monetise Weibo this year by selling ads and employing other fee-based services, but the new regulations could result in fewer users and thus a less attractive venue for ad sales.

"We believe the requirement to convert existing users into verified users...will have a negative impact on user activity in the short term," Charles Chao, chief executive of Sina, said on an earnings call with reporters and analysts.

Chao said the regulations had already affected potential new users. Of the total attempting to pass the verification process since December, only 55-60 percent succeeded. He did not disclose the specific numbers involved. The platform currently has about 200 million users, according to company figures.

"These people will still be users, but in a very dramatic scenario, they will not be able to speak, meaning they won't be able to post messages," Chao said.

In 2011, Weibo emerged as a social media force to be reckoned with, providing an outlet for Chinese Internet users to vent on a wide range of topics, including some that Beijing deems sensitive such as official corruption and the status of Taiwan.

The new rules were issued in December and have a three-month implementation timeframe, after which users that are not verified will not be allowed to post messages.

"We cannot rule out any new tightening policies that may be introduced in the future which may further impact the user growth and activities in a negative way," Chao said.


The company also said it would also continue to invest in the platform. Sina invested $110 million to $120 million in the Weibo platform in 2011. The firm hopes that by the second half of the year, Weibo will be able to generate meaningful revenue, although investments may offset those gains.

"For the whole year, as we continue to invest in our Weibo platform, our operating results may continue to suffer as incremental costs for Weibo investments may still be significant on a year-over-year basis," Chao said.

Sina estimated first-quarter revenue in the range of $101 million to $104 million. Analysts were expecting revenue of $113.7 million for the period, according to Thomson Reuters I/B/E/S.

Fourth-quarter net profit was $9.3 million, or 14 cents a share, compared with a loss of $100 million, or $1.51 a share, a year ago. Excluding one-off items, the company, which competes with Inc (BIDU.O) and Inc (SOHU.O), earned 21 cents a share. Revenue rose 21 percent to $133.4 million.

Analysts on average expected earnings of 21 cents a share on revenue of $129.3 million. Shares of the Shanghai-based company closed at $62.95 on Monday on the Nasdaq.

(Chandni Doulatramani in Bangalore; Editing by Jacqueline Wong and Matt Driskill)

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