Social media

Weibo smashes Q2 estimates with 516pc jump in profit

China’s Twitter sees monthly active users swell 33pc to a new high of 282 million, as total revenues soar 36pc to US$146.9 million

PUBLISHED : Tuesday, 09 August, 2016, 12:33pm
UPDATED : Tuesday, 09 August, 2016, 10:58pm

Social media giant Weibo Corp is looking at more vigorous expansion after its second-quarter earnings roared past market estimates on the back of hefty advertising growth and adoption by mobile users and small businesses.

“User growth continues to be robust, especially coming from mobile, where we are seeing short video and live video taking off,” Weibo chief executive Wang Gaofei said in a conference call on Tuesday. “You’re seeing a lot of our growth [come] from second, third and fourth-tier [Chinese] cities. We’re trying to aggregate more video-related content from various industries to help us acquire more user growth from tier-1 cities and from the younger generation.”

Beijing-based Weibo, the microblogging service considered as China’s Twitter, reported a 516 per cent jump in net income for the second quarter to US$25.9 million, up from US$4.2 million in the same period last year, as advertising and marketing revenue increased 45 per cent year on year to US$127.2 million.

That marked the company’s highest year on year net profit increase for a quarter since it was listed on the Nasdaq stock market in April 2014.

Revenue rose 36 per cent to US$146.9 million from US$107.8 million a year earlier.

Weibo’s share price rose 3.65 per cent to 37.17 at the close of trading on Monday in the United States.

Net profit beat [consensus estimates] by 51 per cent and our estimate by 43 per cent
Karen Chan, Jefferies equity analyst

“Net profit beat [consensus estimates] by 51 per cent and our estimate by 43 per cent, benefiting from continued operating leverage,” Jefferies equity analyst Karen Chan said.

“Revenue came in 2.4 per cent ahead of street [estimates] and 2.9 per cent ahead of our estimate.”

Chan said the solid results were “driven by strong adoption of social advertising among both key accounts and small- and medium-sized enterprise customers”.

Weibo’s operating margin, a measurement of a company’s pricing strategy and operating efficiency, was up 14.9 per cent year on year, which Chan noted was also above market estimates.

Herman Yu, Weibo’s chief financial officer, said the second half of this year is expected to show the company having continued operating leverage.

“Our biggest differentiation  is that our content are all user-generated. There’s not much associated costs with it,” Yu said. “You should see our operating margin for this year and next year to continue to increase as revenue grows.”

Weibo's monthly active users as of June 30 swelled 33 per cent year on year to a new high of 282 million, 89 per cent of which were mobile users. Its average daily active users in the same period grew 36 per cent to a record 126 million.

Chan pointed out that 88 per cent of Weibo users are aged under 33.

“We believe their higher engagement with social media in associating with brands, sharing opinions with friends and preference for visual imagery will continue to drive user engagement on Weibo,” she said.

In addition, Chan said Weibo’s small and medium-sized enterprise (SME) advertisers -- which reached 906,000 in the second quarter -- will continue to grow in the categories of e-commerce, online-to-offline and app downloads.

Yu said combined second-quarter  revenue from SMEs and key accounts was US$114.3 million, up 92 per cent year on year. 

The strong performance of Weibo also boosted Nasdaq-traded parent Sina Corp’s own earnings in the three months ended June 30.

The Shanghai-based internet media company posted a 270 per cent increase in second-quarter net profit to US$43.3 million, up from US$11.7 million in the same period last year, on advertising revenue that grew 16 per cent year on year to US$205 million.

Its revenue advanced 14 per cent to US$244 million from US$213 million the previous year.

Charles Chao Guowei, the chairman and chief executive at Sina, said Weibo’s momentum was helped by “the effective channels we have built for user penetration and the optimised user experience we have cultivated in short video and live contents consumption”.

Sina is the largest shareholder of Weibo, with a 54.5 per cent stake as of March 31.

Weibo’s next biggest shareholder is e-commerce giant Alibaba Group, with a 30.5 per cent stake in the same period. New York-traded Alibaba owns the South China Morning Post.

For the third quarter, Weibo has forecast revenue to be between US$168 million and US$173 million.

Jefferies’ Chan said the mid-point of that guidance is “2.2 per cent above our current estimates of US$167 million, and 3.4 per cent above current consensus estimates of US$165 million for the third quarter, respectively”.