Sina Results: Not So Diversified After All 新浪仍依赖广告,突围遇阻

By newsdoug on November 9, 2011

Sina: a one note story? After frequently praising Sina (Nasdaq: SINA) for being one of China’s few success stories at building a diversified Internet business, I’m suddenly not so sure anymore after seeing its latest quarterly results. China’s leading web portal surprised me by posting a massive $336 million loss for the quarter, largely due to write-downs related to 3 areas outside its core portal business that previously looked like smart diversification bets in online real estate, retail and multimedia value added services (MVAS). (company announcement) I had previously pegged such assets, which were all looking quite successful earlier this year, as future growth engines to help protect Sina from downturns in the cyclical advertising market, which accounted for nearly 80 percent of its $130 million in third-quarter revenue. Making the situation even more worrisome, Sina made barely any mention in its earnings announcement about Weibo, its wildly popular microblogging site that has been likened to Twitter and which Sina hopes to eventually spin off into a separate publicly listed company. The only mentions of Weibo in the announcement said that Sina continues to invest in the service by adding more social networking services, and that its user base continues to grow. That’s certainly good news, though I would be surprised and even alarmed if Sina said that Weibo’s user base was shrinking. The announcement contains no information about revenue or profits for Weibo, which can only lead one to guess that there’s no good story to tell on either of those fronts, at least not yet. Considering strong competition in the social networking space already from Kaixin and Renren (NYSE: RENN), Sina is most likely finding that building up a broader social networking platform off Weibo is proving more difficult than it previously imagined when it launched its Boke Qing social networking site a few months ago. (previous post) Regardless of the situation, Sina is suddenly looking like a much shakier bet, lacking the ability to develop new businesses with good growth and profit potential over the longer term.

Bottom line: Sina’s latest results reveal a company that is having difficulty broadening beyond its core portal business, making it highly vulnerable to a looming downturn in China’s ad market.

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