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
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.
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