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WeChat Bests Weibo in Monetizing Social Media

12-04 14:09 Caijing
WeChat may not replace Weibo as a social media platform, but for the past two years it has been diminishing Sina's chances of becoming the new dominant platform in cyberspace.

By staff reporters Liu Qilin and Song Wei

WeChat resumed verifying "public accounts" Nov. 22 to attract verified accounts from Sina Weibo (Weibo), China's Twitter, and Tencent Weibo. Industry insiders think the move boosts the opening-up and commercialization of WeChat and casts doubt on Weibo's commercial future as a social media platform.

Tencent launched WeChat, an acquaintance-based mobile social networking platform, in January 2011. With access to users' address books and Tencent QQ's massive user base, the text and voice messaging service's registered users exceeded 200 million by Sept. 2012.

WeChat's user base is less than half of Weibo's. However, by joining forces with Tencent's e-commerce and e-payment services, WeChat is trying to create a mobile Internet environment and work out a unique business model featuring two dimensional codes + user accounts + location-based services + payment + relationships, in order to grab a huge share of the market.

Rapid commercialization allowed WeChat to quickly outshine Weibo, even with Weibo's first-mover advantage and greater social influence.

The emerging WeChat is eating into Weibo's user time, admitted Sina Chairman and CEO Charles Cao during a Q3 earnings conference call Nov. 16.

Sina's earnings report shows that as of Sept. 30, Weibo attracted 424 million users, with daily active users averaging 42.3 million. Meanwhile, Weibo's ad sales over the third quarter of 2012 reached about US$ 20 million, accounting for 16 percent of Sina's total ad sales. This represents a substantial increase from last quarter's US$ 10 million; but it is not enough given Sina's investment in Weibo.

Cao predicted at the end of 2011 that Sina would invest US$ 160 million in Weibo in 2012, compared to US$ 110-120 million invested over 2011.

After going online in Aug. 2009, Weibo fast became Sina's most imaginative business platform. Major portals including Tencent soon launched their own microblogging products, but they proved to be no match for Sina's version.

Sina once hoped that Weibo could grow into an ecosystem based on social networking and interest-sharing (including e-commerce) and compete head-to-head with Tencent, Baidu, and Alibaba. However, this has not been possible as Weibo lacks both the product design capabilities and a solid business model.

Weibo's three main sources of revenue are ad sales, commissions from its game business, and membership fees. The microblog service earns most of its income through its PC version; as for its mobile version, it has yet to come up with any business ideas other than display ads.

As a late comer, WeChat is Tencent's innovative product. By virtue of its outstanding product development ability and Tencent's massive user base, WeChat is in effect building the mobile platform ecosystem Sina envisions for Weibo. WeChat is eroding Weibo's user time and ad sales, driving the latter further away from its dream.

WeChat may not replace Weibo as a social media platform, but for the past two years it has been diminishing Sina's chances of becoming the new dominant platform in cyberspace. As a result, despite being a first-mover, Weibo faces many uncertainties in future development.

Unless there is a major turnaround, Sina is more likely to end up a simple social media platform while Tencent and Alibaba, which is rumored to be purchasing a stake in Weibo, will compete to create the dominant ecosystem in cyberspace. Both Tencent and Alibaba maintain high degrees of liquidity, and can afford to develop new products through trial and error.

Full article in Chinese: http://magazine.caijing.com.cn/2012-12-02/112328147.html

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