Sina's CEO Discusses Q4 2012 Results - Earnings Call Transcript

 |  About: Sina Corporation (SINA)
by: SA Transcripts


Good day, ladies and gentlemen, and welcome to SINA Corporation's fourth quarter and fiscal year 2012 earnings conference call. At this time, all participants are in a listen-only mode. However, we will be facilitating a question-and-answer session towards the end of the conference.

I would now like to turn the presentation over to your host for today's conference, Ms. Cathy Peng, Investor Relations Manager. Please go ahead, ma'am.

Cathy Peng

Thank you. Good morning. Welcome to SINA's earnings release for the fourth quarter and fiscal 2012. Joining me today are our CEO and Chairman, Charles Chao, and our Chief Financial Officer, Herman Yu. This conference call is also being broadcast on the Internet and is available through the Investor Relations section of the SINA website.

Before the management presentation, I would like to read you the Safe Harbor statement in connection with today's conference call. During the course of this conference call, we may make forward-looking statements, statements that are not historical facts, including statements about our beliefs and expectations.

Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. SINA assumes no obligation to update the forward-looking statements in this conference call and elsewhere. Further information regarding these and other risks is included in SINA's Annual Report on Form 20-F for the year ended December 31, 2011, and its other filings with the Securities and Exchange Commission.

Additionally, I would like to remind you that our discussion today includes non-GAAP measures, which exclude stock-based compensation and certain other items. We use non-GAAP financial measures to gain a better understanding of the SINA comparative operating performance and future prospects.

Our non-GAAP measures exclude certain expenses, gains and losses and other items that are not expected to result in future cash payments or that are non-recurring in nature or may not be indicative of our core operating results and business outlook. Please refer to our press release for more information about our non-GAAP measures.

During the call, we may discuss costs related to, which is our best estimate of the direct cost incurred by Weibo. These numbers have not been audited and may exclude certain items including those used to derive non-GAAP measures, overhead allocations and intercompany transactions. Following management's prepared remarks, we will open the lines for a brief Q&A session.

With this, I would like to turn the call over to our CEO and Chairman, Charles Chao.

Charles Chao

Thank you, Cathy, and good morning, everyone. Welcome to SINA earnings conference call for the fourth quarter and full year 2012. The year 2012 has been challenging and yet exciting year for SINA. During the year, despite tightened operating environment and much heated competition, we continue to see strong growth in our social media platform, with total number of registered accounts increasing by 73% to reach 503 million by the end of the year, and with daily active users, or DAU, increasing by 82% to reach 46.2 million for the month of December for the year 2012. In addition, Internet portal traffic continued to grow during 2012. Of course, the traffic grow much faster on mobile terminals for both, portal and Weibo.

While all figures on annual basis comparison were impressive, we did see a slowdown in active user growth for Weibo in the fourth quarter. The average daily active user grew by 9% from the month of September to the month of December in 2012 lower than our previous quarters. Also, in the fourth quarter, we experienced a slight decrease in average time spent for our daily active user Weibo. In large part, we believe this was due to the competition from other popular mobile SMS applications such as WeChat.

As we discussed on the previous conference call that the competition for time spent on different application on mobile will be inevitable in the future. Despite a slowdown in growth rate, we believe that Weibo has reached a critical mass, and will continue to grow in user base and user activities given the network size, especially with the more adoption of mobile Internet and the formation of ecosystem surrounding Weibo platform.

For the month of December, 75% of our active users used a mobile terminal to access Weibo. During the year of 2012, we were off to a good start for Weibo monetization. Starting the second quarter of 2012, we started to monetize Weibo traffic through advertising and Weibo value added service such as gaming, revenue share and a membership fee.

For the year, total revenues generated from Weibo amounted to approximately $66 million of which 27% was from advertising and 23% from Weibo value added service.

For the fourth quarter, Weibo related advertising revenues were $21.3 million, up 10% from that of the third quarter. The sequential growth rate was not significant mainly because a significant portion of Weibo related advertising revenues were from Olympic Games campaigns in the third quarter.

One of the bright spots for Weibo monetization came from Weibo related value added service, which grew 65% fourth quarter to $7.2 million in revenues.

We also launch the Weibo payment system in the fourth quarter and tried our first social commerce deal of selling Xiaomi's mobile phone with great success. We will continue to explore the Weibo value added service and the social commerce in the year of 2013.

For the year 2012, a vast majority of Weibo related advertising revenues were from display advertising with social context, serving branding advertisers. At the end of the fourth quarter, we launched news feed advertising system for trial purpose. Fl purpose. We will not opened the system to advertisers until March 2013, as we are still testing the system for user experience. We expect that the majority of advertising revenues from Weibo will still be generated from display advertising for the first half of the year.

One important trend for Weibo advertising, though, is that mobile terminals are accounting for increasingly large part of advertising revenue and are growing much faster than that of PC. We expect that the mobile advertising revenue percentage would exceed 30% in Q1 2013 and would gradually increase throughout the year. This is in contrast to our portal advertising revenue where mobile terminal only accounted for approximately 5% of total.

This is a strong indication that Weibo is not only a killer application for mobile internet usage but also has great potential for monetization of mobile terminals. As mobile becomes increasingly important, all larger internet companies have shifted their strategic directions to mobile. We recently completed a reorganization by dividing the company into two major business units, namely portal and Weibo and adopted mobile first strategy.

Each business unit would include both mobile and PC product lines with complete functions including product developments, engineering, operation and the monetization teams. Our future product developments will no longer be from PC to mobile, instead we will consider mobile experience first for any new product development and any new business initiatives. We believe our new organization structure will allow us to become more focused and efficient in developing our major business in mobile internet stage.

In addition, we believe that this new structure will also allow us to explore the opportunity of rebuilding our portal business especially in areas of online video, blogging and key vertical panels where lot of potentials exist. We intend to invest heavily in product developments and technological capabilities in those areas to improve user experience and traffic conversation rates.

The overall macroeconomic conditions in China is improving and we are cautiously optimistic about the general advertising market and online advertising growth for 2013. On the other hand, our traditional mobile value added service revenue will probably decline further in 2013, given more people switching to smartphones. Although such decline will not have significant impact on our bottom line, as the operating margin for MVAS has been limited.

If the year 2012 was a year of investment for Sina, we will begin to generate returns in the year 2013. Even though we need to continuously invest in mobile Internet, we will be very focused upon generating revenue growth and improving productivity in the year 2013 to increase overall profitability.

With that, I am now turning to Herman, our CFO, for financial review.

Herman Yu

Thank you, Charles, and thank you all for joining our conference call today. Allow me to take you through our financial highlights for the fourth quarter and fiscal 2012.

In our SINA non-GAAP net revenues for the fourth quarter of 2012 came in at $134.4 million, which was at the midpoint of our guidance between $132 million $136 million. Non-GAAP net income attributable to SINA for the fourth quarter was $9 million $0.13 non-GAP diluted earnings per share.

Weibo related spendings totaled $28.5 million in revenues accounted for approximately $15 million in the fourth quarter and approximately $93 million and that was $66 million in revenues for the whole year. Over the last few quarters, as Weibo monetization takes shape, the net loss drag from Weibo has been steadily declining.

Let me now run through the other key financial highlights. Starting with online advertising revenues, online advertising revenues for the fourth quarter of 2012 came in at $110.7 million, which was within our guidance and represents a respectable year-over-year growth of 7%. Considering the challenging macroeconomic environment, despite the pullback from Japanese auto manufacturers, advertising from the auto sector in the fourth quarter was up on a year-over-year basis. Other sectors that contributed to the grow of advertising, included telecommunications and IT services, as well as fast-moving consumer goods.

Weibo display advertising, grew 10%, sequentially, to $21.3 million or 19% of SINA's online advertising revenues despite not having the benefit or special inventory as was the case the third quarter during the London Olympics. The growth in Weibo advertising was driven by the addition of new advertisers, particularly those who were not previous advertisers to the SINA portal. Sectors that performed well during the quarter included automobile, Internet and financial services.

Turning to non-advertising. For the fourth quarter of 2012, we generated $23.8 million in non-GAAP non-advertising revenues. Mobile value-added services business declined 38% year-over-year to $13.2 million while the rest of non-GAAP that net non-advertising revenues grew 181% to $10.6 million, mainly from Weibo value-added services.

As the market in China shifts towards mobile Internet, the company expects to further reallocate its resources away from low-margin MVAS business to Weibo value-added services.

Turning to gross margin, our gross margin for the fourth quarter of 2012 was 57%, from 54% for the same period last year. Non-GAAP Advertising gross margin for the fourth quarter was 57%, which is same as last year. MVAS gross margin for the fourth quarter of 2012 was 45%, compared to 35% from the same period last year, nearly due to a shift in product mix our MVAS relying on direct marketing.

Turning to operating expenses, non-GAAP operating expenses for the fourth quarter of 2012 were $69 million, compared to $62.3 million from the same period last year. The increase in non-GAAP operating expenses was primarily due to higher personnel cost, lease expenses and infrastructure spending. SINA's operating margin has been steadily increasing from the first quarter as we have scaled back new hires as well as the overall marketing expenditures.

Non-GAAP income from operations for the fourth quarter of 2012 was $6.4 million, compared to $6.7 million from the same period last. Non-GAAP non-operating income for the fourth quarter of 2012 was $3.7 million, compared to $7.7 million for the same period last year. Non-GAAP loss from equity investments for the fourth quarter of 2012 was $0.04 million compared to a non-GAAP income from equity investments of $4.2 million for the same period last year. Non-GAAP loss from equity investments for the fourth quarter 2012 included a loss of $1.9 million from E-House, which was reported on a one quarter lagging basis.

Turning to taxes. Provision for income taxes for the fourth quarter of 2012 was $1.4 million, compared to $0.7 million for the same period of last year.

Turning to net income. Non-GAAP net income attributable for the fourth quarter was $9 million, compared to $14 million for the same period last year. Non-GAAP diluted earnings per share for the quarter was $0.13, compared to $0.21 last year.

Turning to balance sheet and cash flow items. As of December 31, 2012, Sina's cash, cash equivalents and short-term investments totaled $713.6 million, compared to $673.5 million as of December 31, 2011. For the fourth quarter of 2012, cash provided by operating activities was $33.5 million. Capital expenditures totaled $17.9 million and depreciation expenses were $7.5 million.

Let me briefly run through the key figures of fiscal 2012. non-GAAP revenues for 2012 was $510.6 million, representing a year-over-year growth of 10% from 2011. Non-GAAP advertising revenues increased 12% year-over-year to $412.9 million. Mobile value-added services revenue declined 17% to 69 million and non-advertising other than MVAS revenues increased 142% to $28.7 million.

Again, the shift in product mix for non-advertising revenues is a reflection of reallocating resources away from low margin MVAS products to our Weibo value-added service such as revenue share from online games and Weibo membership fess. Non-GAAP net income attributed to Sina for 2012 was $10.4 million, or $0.15 non-GAAP diluted share.

Turning now to the first quarter 2013 guidance. For the first quarter of 2013 we are targeting non-GAAP net revenues between $115 million to $119 million, representing an increase of 13% to 17% growth there. For advertising revenues, we are targeting between $94 million and $96 million, representing an increase of 20% to 22% year-over-year. For non-GAAP non-advertising revenues, we are targeting between $21 million and $23 million, representing a decline of 9% to flat from the same period last year.

The non-GAAP non-advertising guidance takes into consideration that we are starting from a much lower pace than the fourth quarter of MVAS, compared to the same period of last year. Non-GAAP net revenues and non-GAAP non-advertising revenues exclude the recognition of $4.7 million in deferred license revenues related to Sina's equity investment in E-House.

This concludes the written portion of our call. We are now ready for questions. Go ahead, operator.

Question-and-Answer Session


(Operator Instructions) Your first question comes from the line of Richard Ji from Morgan Stanley. Please ask your question.

Richard Ji - Morgan Stanley

Hi, good morning, Charles, Herman, and thanks for taking my call.

Charles Chao

Hi, good morning, Richard.

Richard Ji - Morgan Stanley

Good morning. I have two questions. First of all, let me start with Weibo related advertising service. Can you give us little more granularity on the pricing on your Weibo advertising platform, especially what kind of feedback you have heard from your advertising customer regarding the effectiveness of such advertising format? Also, on a related note, I am most curious to know what is your progress on the self serving advertising platform for the small medium companies? Thanks.

Charles Chao

Okay, in terms of pricing trend, I think we are seeing what's happening is that on the PC side. I mean don't think that we are raising the price. I mean, we are maintaining our pricing for the PC display advertising, but on the mobile side I think we are seeing actually more demand on the mobile display advertising, and so I think that the pricing actually moving trend upward for the mobile advertising at this moment and I think we are not raising this quarter, maybe we are considering that starting from the second quarter. I mean that's my understanding.

In terms of feedback of advertising on Weibo, I think that, you know there is different format we have here. We have one is the display advertising weighing on PC and other is on mobile, and also you also mentioned the self supported. I mean self-serving advertising system which is mainly in the newsfeed itself.

Let's talk about display first. The display advertising I think, where we have experienced that for Weibo advertising a lot of large customer would prefer that, because it provides a lot more engagement for their advertising campaign, but in terms of exposure and coverage, I mean, they would like a combination with the portal campaign also so that Weibo element will actually provide lot of user engagements, because it will lead the traffic and campaign through the enterprise account on Weibo, right? And, but if that is supported by coverage on the portal then effectiveness of total campaign will be much better, but that's the trend we are seeing.

For the mobile side, I think, a bit different picture for the mobile. I think, first of all traffic has been increasing quite a bit and the frequency of the users using mobile application is higher than PC, so actually create a lot of exposure and frequency in terms of exposure on the mobile side and that actually is very well received by our advertisers that's we should pressure the increase of pricing here, because demand is quite high.

First start with our self-supporting advertising system, I did mention a little bit in my opening remarks that we launched a system at the end of fourth quarter and we are always allowing different customer to try that, so at this point our objective is not really get too many customers or too much revenue for this particular system rather we want to try this system for two things. One is for the accuracy of dimension and the other is for the user experienced, because we heard from our customers feedback is that it gives you a pretty good ROI in terms of the money we spend on the other hand. Sometimes they create noise on social media, because they were disturb the user experience so on so forth, so that's something that we are working on to see how to balance these two things.

One is to get good advertising results and to investment and other hand it's not going to intervene or disrupt our user experienced too much, so I think it will take a while for us to fine-tune the system and also the policies on this kind of advertising format, and so that's why I said that we were not going to open system to all advertisers until probably the May part of this quarter, and given that that will be gradual so that is why the first half of the year, we are not going to see too much revenue for SMEs, but I think this trend is going to continue in the future. It will take time to fine-tune the system, but eventually will become a very important part of advertising format.

I hope that answer your question.

Richard Ji - Morgan Stanley

Yes. That's helpful. Thanks. Second question is regarding your 1Q about the size in [automotive]. Can you give us a little color on the fee sale ratio and up for your various advertising service and particularly in which area have you seen strength, which aspect have you seen particular strength. Thanks.

Charles Chao

Well, I think, Richard, that historically Q1 is a low quarter for us and probably for all the similar companies in this market. Let's talk about the general market first. As I said in my opening remarks that overall we are seeing a more positive general market conditions in terms of macroeconomic conditions and also the general advertising market in China. However, we start this new year, 2013, and the sentiment is much better than we saw a year ago but of course, other factors are very, very different.

The segment are quite different. For example automobile, which is the largest part of our advertising base, it is getting better, but if you talk about the size of other market right now, I think the people are talking about already single digit probably about 5%, 6% increase in terms of other service this, given the size of the entire other market in China.

So I think that we expect that will our other sales advertising will go up but it will be more in line with the other market, overall basis. Because we are actually one of the largest also in advertising platform for advertising purposes in China already.

On vertical areas, we see the areas which have substantial, one is obviously the financial sector. Stock market is performing better and so I think there is a lot of more attention on investment on the stock market and our finance channels and so forth. So I would expect that the sector will perform better. It will be an interesting part for the growth of our advertising revenues this year.

For the other sectors, I think the biggest probably for us was still coming from FMCG. You should probably know that more and more of these companies, clearly have the largest budget and they are moving more budget to online. So this actually is the area we saw was another growth for Weibo advertising also, as the more FMCG customers adopting the online advertising and also the social media advertising.

So I think that that will probably grow there most this year, at least for us. When talking about the different kind of advertising platform on portal and Weibo and then talking about PC and mobile, then it becomes more interesting that, I will see that the performance from Weibo will also increase in Q1 and then I also mentioned that the mobile, that is accounting for larger percentage on the Weibo now and so likely going to be over 30% from mobile terminals for Weibo in Q1.

The trend we are seeing, especially given Chinese New Year, and you can imagine that most people go home, they don’t use PC too much, and everybody now Weibo using the mobile terminal and in that area, we see actually a tremendous growth in terms of the mobile advertising on Weibo during the Chinese New Year.

So it has become more complicated and interesting. We will see the results when we release earnings next quarter but it has become more mixed in this way. The overall sentiment, as we said, is getting better and where the revenue is coming from, from which terminal, which platform, will become more interesting and competitive. We will see how this trend goes.


Thank you for your question. Your next question come from the line of Eddie Leung from Merrill Lynch. Please ask your question.

Eddie Leung - Merrill Lynch

Hi, good morning. Thank you for taking my questions. I have got two questions. The first one is related to Weibo cost. Could you share with us the Weibo related costs for 2012? What could be the budget for 2013?

Then secondly could you also share your plans to expand your advertiser base to improve SMEs. Do you plan to set up a direct sales force with distributors or even with some of the advertising networks? Thank you.

Charles Chao

I will take the second question first and then Herman maybe answer the first question later. In terms of the sale to SMEs, I think we didn't adapt multiple channel, and that we would try to working with the distributors for other advertising network and also closely work with some of the new distributors actually, their distribution will be entirely focused on SINA Weibo on social media for example and so that would be two part of distributors we have been worked with and of course we will have our own team, but our own team probably will be working with the distributor directly more closely instead of selling to SMEs.

Herman Yu

For the first question, Eddie, so, as I mentioned on the call, our total cost for the year is closer to $160 million. We said that for the revenue 66 million and then, plus net of that is $93 million. If you look at us, sequentially, from the beginning of the year, until the fourth quarter, you actually see us having a gradual increase in our expenses, right?

Few factors that has caused this increase, number one is headcount. So, we have been increasing our headcount steadily and you also see example of wages, salary adjustments and so forth, so for salary related costs. Second as Weibo's traffic continues to grow, we will have to support it with back in infrastructure, so the depreciation, the bandwidth and so forth, so I would expect these two trends to continue.

What you also see is in the second half of 2012, as revenue takes hold, you will see sales related costs also pretty impact us such as a bad debt expense, as commissions and so forth. so, I would think that you will see these three factors continue to increase on Weibo cost into 2013.

Eddie Leung - Merrill Lynch

Got that. Thank you very much.


Thank you for your question. The next question comes from the lines of Alex Yao from Deutsche Bank. Please ask your question.

Alex Yao - Deutsche Bank

Hi. Good morning, everyone, and thank you very much for taking my questions. My first question is on the Micro-Task platform or Weirenwu pingtai. Can you share with us developments of this platform, and also related question is how do you balance the relationship between SINA's own Weibo sales team with the third-party Weibo marketing agencies. Thank you.

Charles Chao

I will take your question, Alex. I think putting this way, Micro-Task is a platform. It's not something that that we want to mean generate too much revenue or profit rather it's a platform that allow the advertisers to connect with the Weibo for accounts which will have the power of distribution disputing content and advertisement message and most people watching actually this one of the kind of way for a lot of people to generate revenue Weibo.

First is the owner of this accounts and secondly are the agencies working for these owners to have to reached the need between advertisers and those account owners and also providing service in terms of creating good results for the advertising campaigns through these and Weibo accounts and so I think the Micro-Task is something that we have launched in that regard is the common platform then we want to be introduced to our owners and to the agencies in general to this market.

Our purpose is not really to, as I said generate too much revenues or profit, rather we want to make sure this market, because 20 people participate in this market and we want to make sure this market is in order and is not going create problems for our users and it will create balance on the social media platform. In that sense, we actually welcome both agencies and owners to work with us. we are willing to share on the revenues and the profit with all these people who participate in this process.

But, as I said, we want order and we want to make sure that it is going to have a sustainable kind of model that can grow in the future instead of having too many people playing into the rules which would create a lot of troubles for the

So that is where we are you and I think in this year a lot of things we need to do in that regard and we are working on that. But first of all, I will say, we are very much willing to share the revenue and profit with other participant as long as everybody can honor our policies and orders on this platform.

Alex Yao - Deutsche Bank

Go it, that’s very helpful. Second question is, can you elaborate a little bit more on the impact on user activity or time spent from other mobile applications such the WeChat and what are the strategies to increase our call mobile activities?

Charles Chao

Well, I think this is something obviously everyone in the market can feel and that nobody can fight rapid impact. Each application will have a view on the other party in terms of positive or negative impact but I think the common sense is that when you have more and more popular mobile apps, people have their time on different kind of applications and so the competition for time spent will be inevitable.

So this is something that we have to deal with and fortunately, it does not really have too much impact at this point in terms of the time spent decrease but obviously we have to work very hard to beef up our own offering on the mobile to make sure that we become sticky and people will come back more frequently, so on and so forth.

So you are talking about the strategies and I think two things. Obviously, this competition is on the mobile terminals especially on the smartphones. So already did a re-organization and our Weibo applications and our entire organization have become more focused on the mobile applications. When we talk about Weibo, we will probably will devote more resources to the mobile application and also we will think mobile first for our any new function and development on Weibo. So we will become much more mobile focused and that’s one thing we have to do.

The other thing is that we have to stick with other strengths of Weibo which is more efficient distribution of content. So we want to make sure that efficiency will keep improving so that there is a clear advantage for our Weibo over others in terms of satisfying their product needs which is the need for the public, communication and distribution content.

So I think these two things, we have to be very focused upon in terms of keep increasing our competitiveness in this area and to increase stickiness of our own application. So that’s what we are trying to do.

Alex Yao - Deutsche Bank

Very insightful. Thank you very much.


Thanks for your question. Should I please remind as to limit yourself to one question per person. Moving on, your next comes from the line of Ming Zhao from 86Research. Please ask your question.

Ming Zhao - 86Research

Thank you very much. My question is about your mobile revenue on Weibo. So you said that 1Q, the mobile revenue is going to be over 30% on Weibo, but you also said that that's going to be the display ad. So my question is starting from second quarter when we launched your newsfeed ad, are you expecting more mobile revenue from the newsfeed ad on the mobile, so any thoughts on that money transition on mobile front on the newsfeed ad. Thank you.

Charles Chao

I think that's definitely is a right trend we are seeing and as they can now predict the exact impact, I mean, the mobile revenue will be and when we launched the newsfeed on the mobile, but I think that that's the trend we are seeing. That's for sure. I think two things we will probably see on mobile. One is the more advertisers getting newsfeed on mobile going forward will formally launch that and also that we are going to introduce the promote trend this kind of format of advertising, which can also become very popular on mobile, but that actually probably promote trend will be more for our big customers and but overall I think as I said, so we are seeing probably over 30%. We are probably going to see increase throughout the year every quarter for mobile percentage, I mean, the Weibo advertising revenue basically.

Ming Zhao - 86Research

Okay. Thanks for that. Just a follow-up to that, in your Q1 guidance, are you seeing Weibo revenue up quarter-over-quarter or also it will have this slow seasonality impact here? It's consistently down for the quarter in Q1.

Charles Chao

Well, I think, we do not breakdown Weibo for guidance at this point, but to give you a sense, I think to say at least Weibo will be much less affected by the seasonality than portal as we have seen in this quarter.

Ming Zhao - 86Research

Okay. Thank you.


Thank you for your question. Your next question comes from the line of Wallace Cheung from Credit Suisse. Please ask your question.

Wallace Cheung - Credit Suisse

Good morning, Charles, Herman and Cathy. Thanks for taking my question. Question on social newcomers. You mentioned these are new areas that you are trying to explore for more (inaudible). So, can you relate a little more like this year would you try to be more like a marketplace and/or possibly corporate with other players as such that would have seen more kind of transaction type of business going on. Also related question will be how are you going to further promote your Weibo commissions to supporting your e-commerce platform going forward. Thank you.

Charles Chao

Basically I think of social e-commerce is something a lot of people have been talking about. I mean with social networking and social media. And I think, we see actually social e-commerce is something that's very suitable for social media platform at Weibo, I mean especially those the model for the fresh sales, which actually allow a lot of user to participate, I mean in terms of predicting orders and also distributing the message and the communication of the sales message so on so forth and so we happened to right being experimental kind of deals. One is the mobile phone, the other is for our I mean, we take orders I mean, the 666 costs and orders probably coming plus 1,000 something and that's my understanding.

I think the two elements that's interesting we have seen that one is the marketing aspect. The other is the commerce aspect. Marketing aspect is that not only we actually create to the market messaging in sales, but actually we create a lot of sales lead in the process for our advertisers, customers who actually launch the campaign. That is very valuable and targeted for these advertisers, customers and that’s very important and valuable message for them which can be, some of the valuable service we can provide through the social commerce activity.

The other obviously is the commerce, is the transaction and some of the transaction can be completed on the platform, Weibo platform and those transactions can be completed offline. So I think what we intend to do is provide this kind of platform for payment, for transactions and on the Weibo platform that everybody participates. We can potentially work with our customers who have the ecommerce capability. We can also work with third party which could be the overall e-commerce solution providers in this process which provide logistics and other services for the transaction.

But this is something actually, as I said, very interesting and to explore but the fresh stuff is only one form of the social commerce and we intend to use these experiments to accumulate a lot of experience so that we can actually try a different kind of social commerce, e-commerce going forward either by our self or by working with the third-party e-commerce platform on the e-commerce providers.

But this is something just we are just beginning to experiment. We will probably give you more color when we are at a more ecommerce experience going forward.


Thank you for your question. Your next question comes from the line of Tian Hou from T.H. Capital. Please ask your question.

Tian Hou - T.H. Capital

Hi Charles, Herman, Cathy. Happy New Year. I have two questions. Its quite simple. One is how many total registered enterprise users are on Weibo now? So that’s number one question.

Number two, I saw your press release, regarding a new hire. So would you please elaborate a little bit on this new hire?

Charles Chao

The first, maybe Herman will update you later on. I think it is too advanced to 300,000 is the figure for the enterprise Weibo accounts. This new hire, actually, obviously we had announcement today and with is background, he is very, very experienced in terms of managing technology companies and very experience in terms of managed technology areas and other areas and working for some of the top companies in our sector.

To put it in this way, he is a very experienced and a valuable addition to our management team. Sina is transforming itself from a media company to a more product company supported by the innovation and technology. We need the talent with that kind of background and experience. From product and the technology and obviously Jack fits that category very well.

Obviously, I feel very fortunate to have him on board and I think he would add great value to us and hopefully that will show in our result in the future. Thank you.

Tian Hou - T.H. Capital

Thank you. That’s all my questions.


Thanks for your question. The next question comes from the line of Dick Wei from JPMorgan. Please ask your question.

Dick Wei - JPMorgan

Hello, thank you for taking my questions. First question is on the new company structure. I wonder how this is going to impact the advertising sales going forward? Meaning that how is the sales team going to be structured and also how it is going to be better for some the cannibalization between the portals and Weibo advertising for the brand advertisers. Thanks.

Charles Chao

Well, I think, Dick, the brand advertisers will still be handled by one team. I mean that means based on the customer not based on the advertising platform and so that the sales team used to work on the brand advertisers, we'll have the responsibility to I mean serve these customers on those platforms and I think the commercial team will only be separate for something specifically for either portal or for Weibo going forward, but as you are working for the same customers, they are still in the same team basically.

Dick Wei - JPMorgan

All right. Great. Maybe just quickly, just can you share some thoughts behind sharing Weibo content on the WeChat platform largely again how do you think about going forward? Thank you.

Charles Chao

WeChat platform, you mean we shared a content, or we can allow you this to share the content to WeChat?

Dick Wei - JPMorgan


Charles Chao

I think as we said before obviously there is competition in the market, but ultimately we want to provide the best service for customers and users and we said at the very beginning we started Weibo platform and we want to be open, we want to share and have open platform. Of course, open platform that's important.

But ultimately, we want to provide the most convenient best service for our users and we believe other services I mean lot of time we they should be connected. Actually that has allowed us, WeChat users also we believe vice-versa. So if we open this to WeChat so that will actually have to provide the best service for our common users that's the only stuff behind it and nothing else basically.

Dick Wei - JPMorgan

Got it. Thank you very much, Charles.


Thank you for your question. The next question comes from the line of Gene Munster from Piper Jaffray. Please ask your question.

Gene Munster -Piper Jaffray

Good morning. Could you talk about the reacceleration of portal, you mentioned kind of video blogging. How should we think about, I guess the longer term growth of the portal and then a follow-up question related, could you talk about some of the restructuring that's long been announced in terms of Weibo potentially this set up for a spend out early sort of different corporate structure around that's beyond just the streamlining of the sales organization. Thanks.

Charles Chao

I think the late part, I mean, it's too early to tell, but talking about the structure of portal and the strategy about portal and obviously I mentioned a little bit in my opening remarks especially in areas of online video, blogging and some of the key areas. I mean like even sport, finance and so on so forth.

I think over the last couple years, I mean our attention has been devoted a lot to Weibo and but some of the key areas we have been quite strong. I mean I think areas that are under invested in my opinion especially in the online media area probably area both of these has good potential for us and if we can beef up our product and investment and any these areas I think we'll see good results.

Our blogging for example still attract a lot of users and has huge traffic on daily basis, and I think the problem for us for the business in the past that, I mean it does not matter what kind of channel we are in, we probably use more news and media kind of our, say, concept and go to revenues from product that in fact, I mean there's a lot of potential. I mean, like online video and blogging requires lot of product improvement and investment and also you probably need to take a different other angle, other than used and media aspect to products. I think these areas, we see a lot of potential we can improve and to obviously to attract more users and traffic and also more importantly to get more effective traffic that can be monetized in the future. That obviously, are not only through PC but more through the mobile.

So because whether we create will be for multi-terminal and multimedia going forward. So that’s what we are talking about. So with the new team put together, there will be more focus willing to invest more in those areas and we hope that we will see some good results from there.

Gene Munster -Piper Jaffray

Is it kind of the general overall growth rate that you think about when you think about the portal business over the next year too?

Charles Chao

No, it's hard for me to predict at this point.

Gene Munster -Piper Jaffray

Okay, great. Thank you.


Thank you for your question. Your next question comes from the line Alicia Yap from Barclays. Please ask your question.

Alicia Yap - Barclays Capital

Hi, good morning, Charles and Herman. Thanks for taking my questions. I wanted to ask you relate to the cost and the margins. So given that your comment on reallocating more resources towards the mobile divisions. Would there be any additional cost that you will incur this year for mobile division in addition to the Weibo related costs?

To follow-up the comment just now, as for the video investment, will you be starting to buy more professional content or will you be considering sending into other UGC content related video player? So just wanted to get a sense on the cost side and as far as, should we expect any further margin expansion given the potential recovery of ad market and the take off of Weibo revenue? Thank you.

Charles Chao

Well, I think these are very good questions. I think on the cost side, definitely relating, in terms of investing in the mobile internet, that will increase our cost in addition to what we have already incurred. I think those areas mainly because it is like investment bubble in the market every few years we will see that. Ten years ago, it was the PC Internet and a couple of years ago it was e-commerce and now the mobile internet. Everybody is talking mobile internet, investing in mobile internet, which means that two things will go up.

The one thing is the cost of the personnel working with the mobile internet experience. It will go up. Everybody is fighting for these kind of talent. The other is the channel cost for promoting the mobile applications which you have seen that every time you have an investment bubble, you will see that.

So I think these two elements probably will add a lot of cost. But on the other hand, of course we want to reduce, we will make everything else more efficient for our own operation. So I think there will be increase but overall, as I said in my opening remarks, that we try to become more efficient and improve our productivity so that our internal investment and the cost-effectiveness will improve and our margin will also improve.

In terms of video, I think though obviously we want to invest more in video in terms of product and technology and also in terms of the video network. That will have to go up in order to have a good user experience but in terms of spending a lot of money to buy long format and content, especially in the movie and the mini series, these type of things, probably still will be more reluctant to spend too much money on that. We will probably be more focused on areas that we are very good at. At least for this year, we are not going to spend too much money for the long form, this kind of streaming content, especially in areas of movies and the mini series.

Herman Yu

Yes, and at least specifically for the first quarter you should probably expect that our cost structure is going to be similar to the fourth quarter. As you see sequential increases for the year.


Thank you for your question. Your next question comes from the line of Andy Yeung from Oppenheimer. Please ask your question.

Andy Yeung - Oppenheimer

Hi. Good morning, Charles and Herman. Thank you for taking my question. My question is about your mobile monetization. You mentioned that Weibo monetization on mobile side seems to be ramping pretty nicely. For portal, can you give us some more color on mobile versus PC traffic volume? If mobile incrementally positive for your portal monetization at this time, and how do you see it trending this year?

Charles Chao

Historically, actually we did not generate too much revenue for our mobile portal, I mean specially our WAP portal. I think that actually there were two things. One is our effort was not quite there and in terms of generating more revenues for mobile portal and the other was related to our strategy that we tried to use the mobile portal to generate more revenue for performance-based advertising, which probably is not a very good strategy. I mean, so we are switching to a more brand advertising-based format for our mobile portal, so it's still in the early stage. I mean, I really cannot tell exactly the impact the will the trend will be I mean. It's just getting started in terms of switching our strategy, but the I hope that will have a significant impact in terms of growth rate for mobile portal, but the base was very low, so I don't think either way it's going to make that much difference going forward at least for this year, I think that it will be very significant.

Andy Yeung - Oppenheimer

Okay. Just quick follow-up, so what percentage of your portal traffic is coming from mobile right now versus PC?

Charles Chao

Actually there is, I would say the PC is still slightly higher than mobile, but not that much different but the difference is that the screen for mobile is much smaller, so when you are talking about webpage mobile and PC is very different.

I mean, on the mobile, could be multiple pages and PC could be only one page, so that's the difference but our target on PC basis is not much different.

Andy Yeung - Oppenheimer

Got it. Thank you. This is helpful.


Thank you for your question. Ladies and gentleman, we have come to the end of the question-and-answer session. I would now like to hand the conference back to Ms. Cathy Peng. Please continue.

Cathy Peng

That concludes our call today. Thank for joining us. We will see you next quarter.


Ladies and gentlemen, that that does conclude our conference for today. Thank you for participating you may all disconnect.

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