You may have heard of Sina’s Weibo before. Its been called China’s Facebook, China’s Twitter and various other things. The truth is that it is a mixture of both. If you imagine a combination of the permanent and personal nature of Facebook with the briefness and “following” feature of Twitter, you wouldn’t be far off.
Whatever it is like, what it is, is huge. Weibo has 600 million registered users and 50 million active users (as of November 2013) and the backing of Sina, one of China’s largest media companies and Alibaba, China’s largest internet company.
Sina is going to be putting Weibo up for a public offering in the United States, with an initial value of $8 billion dollars. The site has been evaluated by Bloomberg experts to be worth between $3.3 billion and $7 billion, with a midpoint of $5.1 billion.
Hopping on a Chinese technology stock seems to be the hot ticket at the moment. Alibaba is expected to offer its own U.S. IPO later this year as is its competitor Jing Dong (JD.com).
However, is Weibo a good long term buy? I don’t know. I’m not a financial guru, and I’m probably the last person you should ask for financial advice. Nevertheless, what I will say is that Weibo appears to be on a downturn at the moment.
While it is true that the company posted its first profit recently, the fact is that China’s users are leaving the service in favor of WeChat.
Weibo was once a hotbed of free speech in an otherwise oppressive Chinese country. It was the source of several high profile leaks about everything from celebrity gossip to government corruption. However, after significant complaints from Weibo users about the Chinese Government’s reaction to a train crash, the government cracked down on Weibo, forcing real names to be used, censoring it and threatening leakers with suspension.
The government has loosened its grip on the site, but the damage has been done. While it is still a good place to find technology leaks, the political aspect of the site has dropped significantly and users are turning to WeChat.
WeChat doesn’t have political overtones like Weibo once did. While every user has a “wall” similar to Facebook’s, it is only accessible to a user’s contacts, so things can’t really go viral.
However, that was never the intention of WeChat, its intention is to give users a place to chat, communicate without data costs and share photos with their friends, and it is a great app for that. Because it isn’t political, the Chinese government hasn’t touched WeChat, and that means its original intention hasn’t been tainted.
Sina probably never meant for Weibo to be political, but it was, and now that it isn’t, users are losing interest. Tencent, the creators of WeChat, have also turned WeChat into much more than China’s Whatsapp. Users can call cabs, play games and make online payments using the app.
I don’t know much about investing, but I know this: Investing on the losing side of a battle is rarely a good thing. Every indication of the last few months seems to show that Weibo is losing to WeChat. If Weibo is less like Facebook or Twitter and more like China’s MySpace in as far as the arch of its career, I want to stay far away from that.
Then again, Weibo’s total userbase is still growing, even if at a slow pace, and Goldman Sachs is rumored to be set to offer $500 million once the IPO goes live. So what the hell do I know?
[Photo Credit: jonrussell]