Sina Tests Weibo Demand With Paid Offering 新浪试水微博增值收费服务

By newsdoug on January 20, 2012

Weibo tries out paid services A half year after spinning off its Weibo unit with an aim to earning profits from the wildly popular microblogging service, Sina (Nasdaq: SINA) is taking the first step to generating significant new revenues from the business by rolling out a new premium paid service. The strategy is certainly necessary if Sina ever wants to earn a profit from Weibo, and I even like the fact that it’s charging a very modest fee for the service, at least initially, which should help attract customers. But I’m still quite skeptical that the strategy will actually work, as it’s always hard to get people to pay for something they’ve grown accustomed to getting for free. Let’s backtrack a moment and look at the details of this latest development, which has Sina rolling out a service that will allow Weibo users to get the new premium service for the modest fee of 5 yuan a month or 50 yuan a year, translating to less than $1 per month. (English article) The new service will allow users to get SMS notifications for some of their incoming posts — an offering that doesn’t sound that interesting since many users already access Weibo over their mobile phones. In theory the new service could be a major revenue generator, since the company could generate more than 1 billion yuan in annual revenue if even just 10 percent of Weibo’s 250 million users signed up for the service. But as I said already, the bigger issue will be getting people to pay for a service that they’re used to getting for free. E-commerce leader Alibaba Group has found out that such a switch can indeed be difficult, as reflected by the lackluster performance of its Taobao online auctions service. That service made headlines 7 years ago when it ultimately drove global leader eBay (Nasdaq: EBAY) out of the China market by offering its services for free; but since then, Alibaba has had a difficult time making significant profits from the business, due in large part to the fact that users don’t want to pay for something they’ve always received for free. I suspect that Weibo will learn a similar lesson with this latest premium offering, and would advise Sina to look at other options in its drive to make the platform profitable, including developing entirely new services that can leverage Weibo’s large user base.

Bottom line: Weibo’s new premium service is likely to fail due to lack of interest from users who are accustomed to getting the service for free.

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