Chinese large brand advertisers are becoming more conservative over the macro environment into the second half of 2013. On one hand, recent concerns over China’s liquidity conditions are likely to escalate pessimism among advertisers and On the other hand, other ad categories (such as video) are likely to drive portal ad revenue growth in 2H13.
Weibo’s [Social Network Twitter + Facebook Hybrid] advertising revenue has heretofore been largely driven by display ads. We however believe cannibalization between Sina’s traditional portal ads and its Weibo’s display ads to be quite insignificant for the time being, largely due to the different marketing purposes taken into account when advertising on these two platforms. Portal advertisers are largely brand advertisers who seek to build their branding and enlarge audience reach, while Weibo based advertising is more event-driven and engagement-focused, thus more appropriate for advertisers which already have good branding and instead seek to do one-time marketing campaigns. Weibo based advertising moreover tend to offer superior targeting to portal ads, a feature common to ad offerings on social platforms.
We regard Weibo’s Social Media inventory as a major supplement to Sina’s constrained portal ads, importantly creating new exposure to long-tail SME merchants. Sina mgmt plans on launching more SME-oriented inventory on the front-end, while optimizing its advertisers’ landing pages through its new collaboration with Alibaba and Taobao on the back-end to ensure a smooth ramp in the Ali-Weibo alliance. Sina is currently limiting the number of SME advertisers, in order to better manage and protect user experience. The real-time bidding (RTB) advertising structure, which can offer precise and targeting advertising solutions, is still in a testing stage.
Sina Weibo and Alibaba Partnership
Sina Weibo secured a USD380m advertising commitment from Alibaba in the next three years, out of which we believe roughly 10-15% will flow into Weibo ads revenue in the second half of 2013. In the near term, the advertising cooperation between Ali and Weibo will primarily focus on the existing products of Weibo, such as banner ads.
The user data on the two platforms are complementary to each other. Sina Weibo’s user data are interest-based and are usually stable for a relatively long time, while Alibaba offers real-time transaction data which provide insights into the short-term needs of users. Combined together, these data can be leveraged to achieve better targeting potential of audiences in e-commerce and advertising. Alibaba boasts rich experience across the entire transaction process, including selling/purchasing, payment, fulfillment, etc. The experience should aid Sina Weibo in exploring social commerce activities going forward.