New Rule Hits Sina, Instant Messaging to Benefit? 微博实名重创新浪即时信息服务有望受益

By newsdoug on December 19, 2011

Beijing clamps down on microblogs The Internet world has been buzzing over the weekend about a new rule announced by the Beijing municipal government late last week requiring all microbloggers to use their real names. First off, I should applaud regulators for at least flagging this issue before making the actual move, as a high-ranking official said back in October that such a rule was being considered. (previous post) But that said, the new rule itself has left lots of people scratching their heads over what it all means. Clearly the big loser is Sina’s (Nasdaq: SINA) Weibo service, which stands to lose many of its more than 200 million users when the new rule is fully implemented. At least a few of my friends say they won’t keep using Weibo if they have to register with their real names, and I wouldn’t be surprised to see the service lose up to half of its active users by the time things settled down. Sina, which is already struggling after taking massive write-downs for its real estate and e-commerce investments (previous post), said it is still studying the new rules to figure out their impact. (company announcement) The news marks a major setback for Weibo, often called the Chinese equivalent of Twitter, which Sina was in the process of trying to monetize though progress was slow. This new rule may make Sina think twice about putting too much emphasis on Weibo, potentially killing plans for a separate IPO for this formerly promising business. In the meantime, one of my sources tells me the move by the Beijing city government is likely to be followed by other cities, meaning rival services from companies like NetEase (Nasdaq: NTES) will also be affected, though the impact should be limited since most of those have far fewer users than Weibo. What’s far less clear is how, if at all, instant messaging services, which have many microblogging-type characteristics, will be affected. I wrote about one of those in the mobile space last week, the Weixin service being developed by Tencent (HKEx: 700) (previous post), and many other companies are developing similar services, especially for use on mobile phones. I suspect these instant messaging services will escape regulation for now under this new rule, and could even potentially benefit when droves of microbloggers start to defect from Weibo and other services in the months ahead.

Bottom line: Sina’s Weibo is the clear loser in Beijing’s new campaign to clamp down on microblogging, while instant messaging firms like Tencent could emerge as possible beneficiaries.

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