The Economist Sina Weibo's end of the road

(This article is selected from The Economist 20200926)

Background:

In 2006, Jack Dorsey launched a micro-blog site in the United States, Twitter, which became popular as soon as it was launched. Three years later, Sina Weibo, known as the Chinese version of Twitter, came out. Over the next decade or so, Sina Weibo has beaten many of its competitors in succession, but it seems to be falling.

Can Weibo do better than Twitter?

China’s microblogging giant faces ever stiffer competition for advertising revenue

The Chinese micro-blogging giant faces increasing competition over advertising revenue

Three years after Twitter launched in 2006, Chinese techies created a similar microblogging service in China. Weibo (literally “microblog” in Chinese) boasted an average of 241m daily active users in March, more than Twitter.

Three years after Twitter came out in 2006, Chinese technicians launched a similar microblogging service in China. In March, Weibo (Chinese literally) claimed to have 241 million daily active users, surpassing Twitter.

Like its American cousin, Weibo allows users to follow other users, tweet, retweet and browse a real-time list of trending topics (though it steers clear of politics, out of bounds in its communist homeland). And like Twitter, it relies heavily on advertising revenue.

Like its sister site in the U.S., Twitter, on Sina Weibo, people can follow other users, post blog posts, retweet, and browse live hot topics (and, of course, avoid politically sensitive content). Weibo, like Twitter, relies heavily on ad revenue.

So as coronavirus-induced uncertainty led advertisers to slash budgets, Weibo saw advertising revenue, which accounts for nearly 90% of sales, plunge. In the first quarter it fell by a fifth year on year, to $275m. Operating profit plummeted by more than half, to $58m. Delayed second-quarter results, due on September 28th, may be less terrible. China was the first to be hit by covid-19 but began to recover just as the West went into lockdown.

Advertisers slashed their budgets in the face of uncertainty over the outbreak, sending Weibo's advertising revenue, which accounts for 90 percent of total revenue, down sharply. In the first quarter of this year, Weibo's advertising revenue fell 20 per cent year-on-year to $275m. Operating profit plunged more than half to $58m. But the second-quarter results, which were delayed until September 28th, may not be so bad. China was one of the first countries affected by the outbreak, but even as the West entered a blockade, it was beginning to recover.

But Weibo also confronts a longer-term challenge. Yujun Shao of Westwin, a Shanghai-based digital-marketing firm, notes that for much of the past decade two firms—Weibo and Tencent (which owns WeChat, a messaging service)—sucked in the vast majority of advertising spending on Chinese social media.

But microblogging also faces a long-term challenge. For most of the past decade, the vast majority of advertising spending on China's social media platforms has been pocketed by both Weibo and Tencent, which owns the instant messaging app WeChat, according to Yujun Yujun of West Window Technologies, a Shanghai-based digital marketing company.

Today the “big two” are competing for ad yuan with another behemoth, ByteDance, which operates Douyin, an addictive short-video app (as well as TikTok, its global version). Other rising internet stars, such as Pinduoduo, which offers bargain shopping, are also muscling in on the advertising market.

Today, the "big two" are competing with another giant (byte beat) for advertising market share. Byte Beats operates short video app Jitter (and Jitter Global TikTok) that people can't stop at the start of their hands. Other rising Internet stars, such as Dodo through special-price shopping services, are also entering the advertising market.

Weibo already boasts more than half a billion registered users in China. But user growth has slowed. To keep advertisers on board, Weibo must therefore boost user engagement. The company understands this. It already sports a richer array of functions than Twitter, for example a popular question-and-answer service in the mould of Quora.

Weibo already has more than 500 million registered users in China, but user growth has slowed. In order to retain advertisers, microblogging must increase user engagement. Weibo understands this, it already has more features than Twitter, such as a popular Quora-like question-and-answer feature, and microblogging continues to add new features.

It is constantly adding new ones. In 2018 it acquired Yizhibo, in which people live-stream stand-up comedy, moonwalks and other acts for tips. Last year it launched a photo-sharing service akin to Instagram called Oasis.

In 2018, Weibo acquired a live stream (people can get a viewer's appreciation by streaming a single crosstalk, moonwalk or other performance on a live stream). Last year, Weibo also launched an Instagram-like photo-sharing app called Oasis.

Still, Weibo’s revenues per user have been declining since 2018, and its share price with them. That is one more feature it has in common with Twitter—but is the opposite of what you would expect from a platform with strong network effects, such as Facebook.

Despite this, Weibo's single-user revenue has been falling since 2018, and its share price has fallen. This is another commonality between microblogging and Twitter, but it is contrary to expectations of platforms with powerful web effects, such as Facebook.

(Red label words are difficult words)

Translation of this article: Vinnie

Proofreading: Vinnie

Editing by Vinnie

The editor-in-chief said

Sina Weibo, which launched in 2009 and went public in the U.S. in 2014, has emerged as a giant in China's social media industry, beating a number of competitors, including Tencent Weibo. However, with the slowdown in weibo user growth and the rise of some of the internet's rising stars, such as byte beats and dodos, microblogs, which rely heavily on advertising revenue, are falling.

Difficult words:

literally (ˈlɪtərəli) adv. Literally; word for word; not exaggerated

plunge (plʌndʒ) v. Make a sudden underground fall; plunge; fall into an n. sudden fall; sudden fall; a sudden drop

plummet (ˈplʌmɪt) v. Steep drop; sudden drop n. plunge; lead drop

behemoth (bɪˈhiːməθ) n. Monster; hippo adj. huge; tall

muscle in Hard squeeze in; intrusion; strong grab

akin to similar; approximately