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The fight is on: Tencent vs Sina

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currency_3 June 17, 2014 (Chinavestor) Mobile Valued Added Services (MVAS market) in China. The mobile valued added service market is about $4.8 billion in China; however the market year-on-year growth was a mere 1.5% 2013. In addition, the government regulation policy changed once again, increasing complexity within the industry. Last time government regulation of the telecom industry resulted in a significant shrink of the MVAS market. The decline in Sina Corp. (NASDAQ:SINA) MVAS revenue was significant, decreasing from $119 million 2009 to only $69 million 5 years later. MVAS used to play a significant role in Sina’s revenue boasting a hefty 52% gross margin in 2009. But that number has steadily eroded to 39% in 2013.

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Other Online Paid Services Market in China

Most online portal companies complement MVAS with paid services in order to diversify revenue sources. These include VIP email and enterprise email service, e-reading content, online gaming, and applications. These complementary paid services have started to bring in more and more revenues in recent years. In order to maintain market share, different companies focus on different segment of the market. Tencent (HKG:0700) for example is heavily investing in mobile application development; she owns the most popular social media platform QQ and the Wechat. Active monthly users of QQ are as high as 800 million. Tencent (HKG:0700) additionally dominates the online game market, harvesting over 70% of all online gaming profits. Most of these games are simple, offering light entertainment. These kinds of games have grown in popularity within teenage and other young age user groups. Tencent (HKG:0700) increasingly makes games available on social media apps such as Wechat and QQ, which proved to be great distribution channels. NetEase (NASDAQ:NTES) is also focused on online gaming, but her games are complex, comprehensive desktop games. The company has been successful in attracting a significant number of users. In contrast to Tencent and NetEase, Sina Corp. (NASDAQ:SINA) is not specialized on any other market segment. The way Sina was trying to diversify was launching Twitter like Weibo.com (NASDAQ: WB) service in 2009.

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Weibo - Social Media Service.

Sina’s Weibo.com is a micro blogging (weibo) website, providing social media services. At the time the service entered the market, almost all main web portals offered similar micro blogging services. However, Sina’s Weibo has become the number one service with more than 600 million users at the end of 2013. Weibo’s IPO in 2009 raised $285.6 million, slightly less than hoped for. More importantly, the IPO brought together Sina (NASDAQ:SINA)and Alibaba into a partnership. The latter bought a 18% of stake in Weibo for $586 million. Sina is expecting Weibo to generate $380 million revenue within the next three years. Weibo’s ability to generate revenue solely from adverting is highly questionable tough. Some reports point out that Weibo user growth has been losing steam and most users are no longer as active as they used to be. Meanwhile Weibo's biggest rival Wechat, a more private social communication tool and is operated by Tencent, has been gaining popularity and has experienced strong user growth.



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