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PUBLISHED : Tuesday, 11 June, 2013, 11:20am
UPDATED : Tuesday, 11 June, 2013, 11:20am

Sina weighs down Weibo with video

Sina needs to be careful as it chooses partners to commercialise Weibo, or risk alienating users who enjoy the platform as a tool for communication

BIO

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young’s China Business Blog (www.youngchinabiz.com), commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, “The Party Line: How the Media Dictates Public Opinion in Modern China.”
 

Sina's (Nasdaq: SINA) Weibo microblogging platform is moving in many different directions these days, this time adding a major video component through a new tie-up with online video leader Youku Tudou (NYSE: YOKU). This new tie-up looks smart in some ways, as it pairs two leaders in online entertainment spaces that look complementary. But at the same time, Sina needs to be careful in its zealous campaign to commercialise Weibo, or risk alienating its millions of users and eventually driving them away to a growing array of rival products entering the market.

Sina's latest alliance with Youku Tudou looks like an extension of a tie-up it formed with Tudou early last year before Tudou later merged with Youku to form the industry's largest online video company. Under this latest agreement, Sina will promote Youku Tudou's video library to its more than 500 million registered Weibo users starting next month. The announcement doesn't give financial details, but I suspect that Sina will probably share any revenue that Youku Tudou can make by selling new advertising under this new alliance.

This new tie-up comes just over a month after Sina announced a similar alliance with Alibaba. That deal saw Sina sell 18 per cent of Weibo to Alibaba for US$586 million to form a tie-up that would allow Alibaba to market its e-commerce services to Weibo's large user base. 

Almost immediately after the Alibaba deal was announced, I and many other Weibo users noticed a sudden explosion in advertisements on Weibo for products from Alibaba's various e-commerce platforms. Sina must have quickly realised it was trying to do too much too soon, as it seems to have sharply scaled back the number of e-commerce links since then and placed them at the bottom of its web page for desktop PC users. I suspect we'll see a return of more e-commerce links in the months ahead as these two sides try to figure out less obtrusive ways to promote Alibaba's services without alienating Weibo users.

This new tie-up will face similar risks, and Sina will need to be careful not to alienate users by blasting them with links to videos throughout its main Weibo desktop and mobile pages. The quick retrenchment on Weibo after the initial Alibaba advertising blitz seems to indicate that Sina realises that Weibo users are interested in mainly one thing, namely swapping information. Some Weibo users like to chatter about their lives and pass on interesting news, while others simply like to read postings by others. But in general, most people enjoy using Weibo as a vehicle for receiving and disseminating information.

I expect we'll probably see limited demand by some Weibo users for the new e-commerce and video services, though that could be offset by a defection of other users to other rival products that focus exclusively on communication. Tencent's (0700.HK) WeChat is one of the top rivals for such users right now, but other names like Kaixin and Renren (NYSE: RENN) are also vying for similar users. In addition, other companies may soon enter the huge market, with China Mobile (0941.HK; NYSE: CHL) and the developer of Japan's popular Line app both likely to launch new products in China soon.

Sina's selection of Alibaba and Youku Tudou as its two main Weibo partners does seem like a prudent move, since both companies are leaders in their respective spaces. But only time will tell if Weibo users are really interested in buying e-commerce products and watching video over the platform. At the end of the day, I do expect Sina will gain some revenue from these two new alliances, though perhaps not as many had hoped for.

Bottom line: Sina needs to be careful as it chooses partners to commercialise Weibo, or risk alienating users who enjoy the platform as a tool for communication.

To read more commentaries from Doug Young, visit youngchinabiz.com

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