China Internet group Sina.com yesterday reported its first quarter-to-quarter revenue decline and blamed a fall in online advertising. Revenue dropped 19.9 per cent to US$6.1 million in the three months to March 31. The company also warned of a further 10 per cent fall in the current quarter. However, savings on non-cash charges meant total net loss narrowed 10 per cent to US$9 million quarter to quarter. Excluding non-cash charges such as amortisation of intangible assets, its loss widened 4.8 per cent to US$5.6 million. China's Internet portal sector remains highly competitive and analysts have expressed concerns that advertising revenues might not be robust enough to allow existing players to operate profitably. Wang Zhidong, chairman of the portals operator which focuses on global Chinese speakers, said the first revenue fall in its two-year operating history was due to spending cuts by online advertisers, especially dotcom firms. He blamed the cuts on the economic slowdown in the United States and the seasonally slower quarter in the mainland. 'The US market was particularly weak and in the technology sector slowdown ethnic marketing expenditure was one of the first to be cut,' chief financial officer Charles Chao said. Total advertising revenues fell 19.2 per cent to US$5.4 million quarter on quarter, and accounted for 88.5 per cent of total revenues. Revenues from mainland, US, Taiwan and Hong Kong advertisers fell 9.2 per cent, 38.9 per cent, 20 per cent and 51.4 per cent respectively. Mr Chao warned of further weakness in the US market and forecast a 10 per cent drop in total revenues in the three months to June 30. But Sina executives were optimistic the firm would be able to meet analysts' earlier expectations that it would break even in 2004, saying non-advertising revenues were expected to pick up in the second half. Chief operating officer Daniel Mao said the firm was planning to augment non-advertising revenues by introducing user charges and corporate marketing services, but offered no details. No major lay-offs have been planned as the firm plans to keep its staff at about 600, compared with 632 now. Credit Suisse First Boston Internet analyst Matt Adams said the results were 'disappointing but not a surprise', given they matched executives' previous indications of a 10 per cent to 20 per cent revenue drop. He said they suggested advertisers were still 'looking for more evidence that online advertising is effective' before they would commit long-term. A decline in Sina's advertiser numbers and average contract duration to 397 and 95 days respectively last quarter, from 458 and 105 days in the preceding quarter, supported this view. Analysts also said portal operators would face resistance when charging user fees, as customers had been used to free online content and services. Mr Wang said Sina had maintained its 'open attitude' in merging with or taking over other portal operators and traditional firms - both domestic and foreign - and had been in constant talks. But analysts said likely buyers of mainland portals, such as Yahoo! and AOL Time Warner, have been less enthusiastic now that they face operating difficulties themselves. Mergers among the mainland portals were another way to shorten the break-even horizon, but they would mean lay-offs and scaling down of operations.
