No longer a follower

No politics please

When Sina Corp spun off its Weibo unit in New York two years ago, the share offering struggled. There was demand for only 16.8 million shares – fewer than the 20 million it was targeting. Eventually Weibo’s IPO was priced at the bottom of the expected price range, valuing the microblogging platform at just $3.8 billion, or roughly half of the company’s original fundraising target. Twitter, in contrast, was worth around $26 billion at that time.

But a look at the two social media firm’s share prices suggests that much has changed since: Twitter’s stock has plunged over 20% this year, while Weibo’s shares have almost doubled during the same period. At one point on Monday last week, albeit rather briefly, Weibo’s market value overtook Twitter’s for the first time. The symbolic moment arrived when Twitter’s market cap dipped to $11.2 billion while Weibo was valued at $11.3 billion.

Twitter has bounced back to $12.1 billion in market value this week versus Weibo’s $11.1 billion. But that hasn’t stopped Chinese media from striking a celebratory tone, with many saying that Weibo has now “defeated” Twitter despite the two never having competed directly in the same market.

“First, QQ beat MSN. And then Taobao outperforms eBay. Now Weibo. This marks another victory for Chinese innovation,” declared one blogger.

Southern Metropolis Daily, however, reckons that any comparison between the two is simply irrelevant: “Weibo is no longer a derivative of Twitter. So even if the latter is struggling, surpassing Twitter in market valuation still doesn’t explain Weibo’s success. It is like comparing apples to oranges.”

Indeed, Weibo – which was launched in 2009 – has come a long way since starting out as a copycat of Twitter. Weibo has already ditched the 140-character limit (Twitter is said to be thinking about getting rid of the restriction too). Weibo has also recently added livestreaming to its list of functions. Between April and June, Weibo users created 10 million live broadcasts – a 116-fold increase over the previous quarter, says Tech in Asia, a tech blog. Aside from the usual ‘Like’ and ‘Heart’ reaction buttons, Weibo Live also gives viewers the option to buy and send virtual gifts to the hosts of the live broadcasts, a business model similar to that of YY (see WiC175).

For years, Sina Weibo has been battling against naysayers who have been betting that its days are numbered. First there was the introduction of real-name registration, followed by government-led censorship of the platform, and the rise of Tencent’s mobile messaging application WeChat.

Nevertheless, the microblogging service has defied expectations and continued to grow its user base and revenues. By the end of the second quarter of this year, Weibo boasted 282 million monthly active users, up 33% from the year before.

One reason for the increase in user engagement is that Weibo has evolved beyond a platform for users to post their random musings to a destination where people can read about and comment on everything from the latest celebrity gossip to must-see TV series. In fact, Southern Metropolis Daily reckons that the service now thrives on celebrity scuttlebutt. Take Wang Baoqiang’s marital troubles (easily the biggest celebrity scandal of the year), which generated as many as 12 billion views for the platform (see WiC337).

“In some ways, Weibo has become an interactive entertainment-driven portal,” says the newspaper. “It has chosen to avoid politics and instead focus on just entertainment news. It is the first place netizens go whenever there is a breaking scandal. Weibo is also unique in the way that it makes the users feel like they are a part of the event as it unfolds.”

Weibo has been monetising its user traffic. In the last three fiscal years, the microblogging service went from a net loss of $47.4 million in the first quarter of 2014 to a net profit of $25.9 million in the second quarter of this year.

The turnaround is driven largely by a significant increase – up 45% from the previous year – in advertising and marketing revenue, thanks in no small part to a strategic tie-up with Alibaba. The e-commerce giant bought an 18% stake in Weibo for $3.36 billion in 2013 (valuing the company at $19 billion, which means Alibaba is still sitting on a hefty paper loss) and it has since raised its stake to 32%.

Besides the equity investment, Alibaba has also brought enormous traffic to Weibo.“Alibaba’s investment means both parties can share everything from user data, online payment to marketing, thereby making it easier and more efficient for small- and medium-sized enterprises to advertise,” Li Guangdou, a tech consultant tells CCTV.

Needless to say, the fact that Weibo faces little foreign competition is also an advantage. “Foreign players (Facebook, Instagram and Snapchat) can’t enter the Chinese market due to strict censorship and are blocked here. Therefore, Weibo caught the chance to evolve,” analyst Marie Sun tells Bloomberg.

While Weibo is riding high, nothing seems to be going right for Twitter.

Recently the company reported that 305 million users were active per month (on average) during it most recent quarter, down from 307 million in the earlier quarter.

Worse, speculation that Google and Disney could bid for the company quickly fizzled out and the final possible bidder – Salesforce.com – also walked away. And just this week, it was announced that Twitter will lay off 9% of it staff…

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