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Executives

Cathy Peng – IR Manager

Charles Chao – Chairman and CEO

Herman Yu – CFO

Analysts

Eddie Leung – Bank of America Merrill Lynch

Tian Hou – T.H. Capital

Ming Zhao – 86Research

Jiong Shao – Macquarie Research

Alicia Yap – Barclays

Cynthia Meng – Jefferies

Yu-Heng Fan – China Renaissance

Chi Tsang – HSBC

Andy Yeung – Oppenheimer

SINA Corporation (SINA) Q1 2013 Earnings Conference Call May 16, 2013 9:00 PM ET

Operator

Good day, ladies and gentlemen, and welcome to Sina Corporation's First Quarter 2013 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 first quarter 2013. Joining me today are our Chairman and CEO, 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 statement.

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, 2012 and its other filings with the Securities and Exchange Commission.

Additionally, I'd 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 also discuss costs related to Weibo.com, which is our best estimate of the direct costs incurred by Weibo. These numbers have not been audited and exclude certain items including those used to derive non-GAAP measures, overhead allocation and inter-company transaction.

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 President -- to our Chairman and CEO, Charles Chao.

Charles Chao

Thank you, Cathy, and good morning everyone. Welcome to SINA earnings conference call for the first quarter of 2013.

We [inaudible] encouraging results. Our total non-GAAP revenues grew by 19% and our total non-GAAP advertising revenues grew by 20% from the same period of last year. The user base for Weibo continued its healthy growth with total [registered] accounts reaching 536 million by the end of March, representing an increase of 6.6% from three months ago. The daily active user or DAU for Weibo increased by 7.8% to reach 49.8 million from the month of December last year to the month of March this year.

Also during the first quarter we experienced a rebound in average time spent for our daily active user on Weibo, which is encouraging in light of intensified competition. As we discussed on the previous conference call, the competition in time spent on different mobile applications will be inevitable.

For the month of March, 76.5% of our daily active user used the mobile terminals to access Weibo, up from 75.3% in the month of December last year. As mobile becomes increasingly important, all the large internet companies have shifted their strategic direction to mobile. At the beginning of this year we adopted Mobile First strategy, our future product development will no longer be from PC to mobile. Instead we will consider mobile experience first for new product and initiatives.

Under the Mobile First strategy we're devoting more efforts in improving user experience on mobile applications for our existing products. For Weibo mobile applications we recently renovated the messaging system to a more efficient one-to-many communication on Weibo. We also launched Page System on mobile Weibo to allow users to follow an interest or an object or a location so that we can expand the content and user activities on Weibo. For our news portal, we recently relaunched SINA News mobile app. All of these new initiatives have been well-received by our users.

During the first quarter we've continued to experiment various means for mobile -- for Weibo monetization. In the middle of March we opened our promoted [seat] advertising system to certain selective SME advertising agencies and have begun tests in SME market in larger scale. Although the dollar amount for such advertising has been insignificant, we have seen continued improvement in effective CPM loads and daily spending since the open beta testing.

For the first quarter, total advertising revenues grew by 20% year over year but declined by 15% on a sequential basis due to the traditional seasonality. The sequential decline was in almost all-industry categories with the exception of FMCG. The advertising revenues from Weibo also declined on a sequential basis due to the fact that the vast majority of advertising revenues on Weibo was also from branding advertisers whose spending was affected the most by the low season first quarter.

An encouraging trend in the first quarter for Weibo advertising was the continued growth in interest for Weibo mobile advertising on mobile. In fact, revenues for Weibo advertising on mobile increased sequentially in the first quarter and accounted for 34% of total Weibo advertising for the first quarter. This compared to 25% for the previous quarter. We believe that mobile will become increasingly important for our revenue growth in the coming quarters and we are devoting more efforts in developing product and sales channels for mobile monetization.

Lastly, I'm going to talk about our strategic alliance with Alibaba Group, the e-commerce giant in China. We recently announced our strategic agreement with Alibaba. Alibaba invested approximately 486 million and acquired 18% preferred common shares in our subsidiary Weibo Corporation on a fully diluted basis. Alibaba has an option to increase its holdings in Weibo to 30% on a fully diluted basis in the future. And under such scenario, SINA will still have control over Weibo entity.

In addition to investment agreement, the two companies formed a strategic alliance and will work closely in account connectivity, data exchange, online payment, as well as online marketing for merchants. This strategic alliance is very important and significant to SINA and to Weibo. In the short term it will help connect the millions of merchants on Alibaba platforms to the hundreds of millions of Weibo users, creating monetization opportunities for the Weibo ecosystem. Over the longer term it will create opportunities in social commerce and mobile commerce which both companies believe are of great potential as internet will increasingly move towards mobile and social.

In addition, this strategic alliance will allow us to better control the pace of Weibo monetization and to do a better job in balancing monetization with user experience on Weibo.

As we discussed on the prior quarter's conference call, we hope we can begin to generate returns in the year 2013 given that SINA needs to continue to invest in mobile internet. We'll be very focused on growing revenues and controlling costs and improving productivity this year to increase overall profitability.

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

Herman Yu

Thank you, Charles. Thank you all for joining our conference call today. Let me take through our financial highlights for the first quarter of 2013.

SINA non-GAAP net revenues for the first quarter of 2013 came at $121.3 million, which exceeded our guidance between $115 million and $119 million. Non-GAAP net income attributed to SINA for the first quarter was $1.5 million [inaudible] in non-GAAP diluted earnings per share. Non-GAAP net income in the first quarter included Weibo-related net spending of $15.4 million which was net of $25.9 million on Weibo-related revenues.

Let me now run through the key -- other key financial highlights. Starting with online advertising revenues, online advertising revenues for the first quarter of 2013 came in at $94.3 million which was within our guidance and represented a year-over-year growth of 20%. During the quarter we saw [annual growth] on fast-moving consumer goods, telecommunication services and automobile [sales].

For the first quarter of 2013, Weibo advertising came in at $18.8 million with approximately a third of the revenues coming from mobile advertising. Automobile, fast-moving consumer goods and internet continued to be the largest advertising sectors on Weibo, accounting for approximately 70% of the total revenues.

Turning to non-advertising, for the first quarter of 2013 we generated $27 million of non-GAAP non-advertising revenues. Mobile value-added services business declined 17% year over year to $15.9 million while the rest of non-GAAP non-advertising revenues grew 180% to $11.1 million, mainly from Weibo value-added services which include revenue share from Weibo games and membership fees.

Turning to gross margin, our gross margin for the first quarter of 2013 was 51%, up from 46% for the same period last year. Non-GAAP advertising gross margin for the first quarter was 50%, up from 45% for the same period last year, reflecting the scalability of our advertising model. MVAS gross margin for the first quarter of 2013 was 30% compared to 39% for the same period last year, mainly due to the shift in product mix as [we relied] less on direct marketing.

Turning to operating expenses, non-GAAP operating expenses for the first quarter of 2013 was $69.8 million compared to $64.1 million for the same period last year. The increase in non-GAAP operating expenses was primarily due to higher personnel costs, professional services and bad debt expenses which were partially offset by lower marketing expenditures.

Non-GAAP loss from operations for the first quarter of 2013 was $9.3 million compared to $18.9 million for the same period last year. Non-operating losses for the first quarter of 2013 was $4.5 million compared to $2.7 million income for the same period last year. As a result of E-House issuing new shares to its management at $3.52 per share on March 25, 2013, SINA incurred a non-cash $10.2 million loss on the dilution of equity interest in E-House from 25% to 22%.

Non-operating loss in the first quarter of 2013 also included $1.5 million or $4.8 million on a non-GAAP basis in earnings from equity investments which were accounted for under the equity method accounting. Our earnings from equity investments are reported on a one-quarter lag basis. Consequently, we expect earnings from equity investments in the second quarter which picked up the operating results of our investment companies in the first quarter to be seasonally weaker.

Turning to taxes, provision for income taxes for the first quarter of 2013 was $200,000 compared to an income credit of $1.3 million for the same period last year.

Turning to net income, non-GAAP net income attributable to SINA for the first quarter was $1.5 million compared to a net loss of $14 million for the same period last year. Non-GAAP diluted earnings per share for the first quarter is $0.02 compared to a loss of $0.21 per share last year.

Turning to balance sheet and cash flow items, as of March 31, 2013, we had cash, cash equivalents and short-term investments totaled $681.9 million compared to $713.6 million as of December 31, 2012. For the first quarter of 2013, cash used in operating activities was $5.9 million, capital expenditures totaled $25.4 million, and depreciation costs were $8.1 million.

Turning now to the second quarter guidance, for the second quarter of 2013 we are targeting non-GAAP net revenues between $143 million and $147 million, representing an increase of 13% to 16% year over year. For advertising revenues we're targeting between $117 million and $119 million, representing an increase of 13% to 15% year over year. For non-GAAP non-advertising revenues we're targeting between $26 million and $28 million. 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/CRIC.

Before I turn the call over to the operator, let me briefly summarize the key terms of this strategic alliance with Alibaba Group. On April 29, Weibo signed a business cooperation agreement with Taobao, Tmall and other subsidiaries of Alibaba to explore social commerce offerings in China.

As part of the arrangement, Weibo will work with Alibaba in the areas of connectivity, data sharing, online payment and online marketing to explore ways for our users to experience social commerce, particularly mobile commerce. In addition, Alibaba will subscribe to approximately $380 million in advertising services over the next three years on a graduated basis.

Concurrently, Alibaba invested $586 million to purchase approximately 18% of Weibo on a fully diluted basis. Approximately 15.5% of the interest came from the issuance of Weibo preferred shares. Subsequent to the transaction, SINA owns approximately 71% on a fully diluted basis. The deal was based on a post-money valuation of approximately $3.6 billion minus the $250 million loan to Weibo by SINA which was used to fund Weibo's development. Subsequent to the transaction, Weibo will carry the $250 million loan to SINA and related interest charges. As part of the investment, Alibaba has an option to purchase up to 30% of Weibo on a fully diluted basis and will hold certain preferred and minority interest rights.

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

Question-and-Answer Session

Operator

[Operator Instructions].

Your first question today comes from the line of Eddie Leung from Merrill Lynch. Eddie, please go ahead.

Eddie Leung – Bank of America Merrill Lynch

Hey, good morning. Thank you for taking my questions. I have two questions. The first one is related to the cooperation with Alibaba. Just wondering if we should expect any extra costs in, for example, making connection, that infrastructure with Alibaba, so on and so forth?

And then secondly, we have seen a pretty good uptick in non-advertising revenues. I suppose quite some of that will be related to Weibo. So just wondering, could you give us the breakdown between let's say membership as well as web games? Thanks.

Charles Chao

Maybe Herman can take the second question. First question regarding Alibaba cooperation, I think there will be some extra costs but they will not be significant in terms of the additional fixed costs that are going to be involved. I think it's going to be -- some of the headcounts will increase to work very closely, thoroughly for this particular project. But I can't state, I really don't foresee there will be significant additional extra costs related to this particular deal basically.

Herman Yu

Okay. Eddie, I guess for the second question, my understanding is you're asking for the uptake, the increase in other non-advertising revenues. So as I mentioned on the call earlier, the increase is mostly related to Weibo value-added services which include Weibo games and Weibo membership fees. For the first quarter of 2013, Weibo membership fees was approximately $2 million. You can imagine the rest of that came from Weibo revenue share games.

Eddie Leung – Bank of America Merrill Lynch

Thank you.

Operator

Your next question today comes from the line of Tian Hou from T.H. Capital. Tian, please go ahead.

Tian Hou – T.H. Capital

Hi, Charles and Herman. So I had a couple of questions. One is regarding your [e-stream] advertising [Sutong]. So I wonder, you know, how many agencies do we have right now and approximately how many small and medium business have spent up? And what's the user initial reaction to it? And recently you launched a new feature called Page, so how is that going to help this [e-stream] advertising? So that's the first question.

And the second would be regarding the $380 million, you know, revenue commitment from arrangement with Alibaba, how that's going to allocate in the next three years. Thank you.

Charles Chao

Okay. Regarding the new advertising system [inaudible] in English maybe the best would translate right now, translate into -- the [Promote Fee] advertising system. Yeah.

Tian Hou – T.H. Capital

Okay.

Charles Chao

And I think we launched that system, actually we have close, you know, at the end of last year and we began the beta testing actually in the middle of March. And we opened that I think to three to four agencies. I mean in like in [Xujiang] and Jiangsu province and Shanghai areas, and I think the idea is to test the market and also in the meanwhile we allow more customers to come in to test the accuracy of the system, to fine-tune the engine so that we can match the advertising to the content and to the users better.

I mean it's an ongoing process as I mentioned in the opening remarks that, you know, right now the amount has not been significant. I think there's over 1,000 customers right now and they're attracting the -- or 1,000 thousand customers have deposit money into this advertising system. And so the data consumption, the data consumed increasing everyday almost, and so is the effective [CPM] rate. So that means we keep improving the efficiency and accuracy of the advertising engine for this particular system.

And so this is going to be going for a while. I think part of our dilemma is that, you know, that particular system is more challenging for SMEs and in dollar amount it might be better to use that for the brand advertising, but I think over the longer term we need the assistance for SME, so we're going to continue to track that. And I think by the end of second half -- by the second half of the year, we'll probably see more meaningful contribution from that system, especially for mobile area. And that's regarding [Sutong].

And regarding the Page, I also mentioned that briefly on the opening remarks, that we launched that Page system. I mean I think that's in the middle of the first quarter, and first on the mobile only. So it allows the user on Weibo to follow, as I said, an interest, for example, a book, a movie, a music, a song, so on and so forth, and maybe an object, or maybe a location, maybe a building, maybe a stall, an object. So it allows in a one way kind of I mean just following our users I mean to a particular object. So this is in addition to what we have, to follow different kind of Weibo users on the Weibo platform. And we believe this will add a lot of interest and content to Weibo platform and also create a lot of user activity and user interactions and user participation which could lead to future monetization and on Weibo especially for the mobile terminal.

And I think that probably is the first two questions. Regarding your question on Alibaba, I mean the advertising, marketing commitment, I think it's going to be over three years. And as we said, it's going to be on gradual basis. So there is some kind of understanding, but I think it really depends on how we're going to carry out our cooperation because on the one hand we want to increase the monetization and increase efficiency of the commercialization on the Weibo platform. On the other hand we want to balance I mean the monetization with user experience.

So I think it's going to be ongoing process and also we are committed [inaudible] commit to develop certain new products and new, I mean, monetization models on Weibo. And this will take some time. And so although we have understanding, it's going to be gradual process. But I think the actual spending to a certain degree will be dependent on the progress of some of the projects we're working on together here. So I think we're going to keep update the investors on these details.

Tian Hou – T.H. Capital

Okay. That's very helpful. I've got a question for Herman that will be my last question. So regarding the equity income from your investments, actually [inaudible] every quarter I feel confused about it, so I really don't know how to model it. So, Herman, I need some clarification.

Herman Yu

Well, you know, this is -- I think it's going to be hard to model because it doesn’t represent income pickup from one company. It actually represents all of the income pickup from investment -- equity method investments. So it's basically consolidation of all of our investments in which we use equity method. And we basically put this on a one quarter lagging basis. So that means that in the first quarter we usually pick up the fourth quarter. And when we get into the second quarter, because Q1 is seasonally weak for many of our investees, you should expect the second quarter equity pickup to be less than the first quarter for us.

Tian Hou – T.H. Capital

Okay. Thank you. That's all my questions.

Charles Chao

Thank you.

Operator

Your next question today comes from the line of Ming Zhao from 86Research. Ming, please go ahead.

Ming Zhao – 86Research

Thank you very much. I have a follow-up question on the $380 million of commitment from Alibaba. So in terms of the format of the advertising, does that come from, you know, from tailored products for them or that's mainly in the commodities and [inaudible]? So that's the first question.

The second question is on the balance sheet, if I look at the short-term deferred revenue, it's up by $2 million quarter over quarter. Is that mainly from the Weibo games or is that from commodity as customers deposit money? Thank you.

Charles Chao

I'll leave the second question to Herman. The first question, I think actually, Ming, it's coming from both. There will be some dedicated products and also dedicated inventory for this strategic cooperation with Alibaba Group, and which means that certain inventory space belongs to that particular advertising arrangement. But they will also utilize our existing advertising product systems like [Sutong], like promoted I mean topics, and so on and so forth, and to promote, you know, their merchants or their own platform or maybe even their brand. And so it's a combination of both basically.

Herman Yu

Yeah. Ming, for the program use, basically that includes two items. Number one, the bigger part of that has to do with CRIC where we deferred about $180 million when we did the transaction. And on an annual basis we will reclassify the portion that we think will be recognized over the next [inaudible]. To a smaller extend, the deferred revenues reflect the prepayments of our services. We have Weibo currency where people then charge, and then as they consume it, then we release it into revenues. So those are kind of the two drivers of deferred revenues.

I'll take a look into this and we can talk about it offline more on this, Ming, if you have further questions.

Charles Chao

Yeah, go ahead, Ming.

Ming Zhao – 86Research

Okay. Just to follow up to Charles' response, so I really want to find out, so if Alibaba puts in $380 million, does that negate your monetization of [inaudible]?

Charles Chao

No, I didn't get the question, I'm sorry.

Ming Zhao – 86Research

I mean, so if Alibaba represents [the dollars on the] advertising on your platform, would that reduce your monetization opportunity with [inaudible]?

Charles Chao

Hold on a second, Ming.

Are you talking about, Ming, if they will cannibalize the opportunity from the direct advertising from the merchants?

Ming Zhao – 86Research

Yes.

Charles Chao

Okay. I think [inaudible] and merchants still can use their own I think I would say channels to place advertising if they want to, like on [Sutong], [inaudible] all this kind of, you know, opportunities. And actually these are being utilized by some of the merchants on Alibaba platform also. But with Alibaba's cooperation, we're going to be able to have a much better connection into those systems so that we can have much more targeted advertising and much more effective advertising on Weibo. And so on an overall basis it will be more efficient and then, you know, the merchants, if they want to place ads themselves on the other channels.

I understand your question, but at this point we're starting, but I don’t think there will be too much cannibalization here because usually that represents some kind of channels, different kind of pricing, and also different kind of demand for advertising. And with our cooperation, we're also able to provide much better in advertising formats and also the data for advertisers to improve their placements. So this is very different from if the merchants are coming to the Weibo doing advertising themselves. They are not going to get that kind of support.

Ming Zhao – 86Research

Thank you.

Charles Chao

Thank you.

Operator

Your next question today comes from the line of Jiong Shao from Macquarie. Jiong, please go ahead.

Jiong Shao – Macquarie Research

Good morning. Thank you for taking my questions. First I just want to follow up on what Herman mentioned earlier. In the other revenue, you mentioned a couple of million dollars from the subscription. Does that mean the Weibo gaming revenue was around $9 million in Q1?

Herman Yu

Hold on a second.

Jiong Shao – Macquarie Research

Okay.

Herman Yu

So, Jiong, Weibo game revenue actually was about $5 million in Q1. You have membership about $2 million and game about $5 million, so the two is about $7 million.

Jiong Shao – Macquarie Research

Okay. Thanks, Herman, for the clarification.

My first question is back on to the Alibaba relationship, as well you mentioned that part of the objective is to increase connectivity between the two platforms. I was just wondering, will there be a scenario that the Taobao sellers or the Tmall merchants are going to have a separate store front on Weibo? So, SINA, in fact Weibo will have sort of a stronger and better control of the transaction and of the merchant and the customer's data. And in relation to that, will Weibo consider having a search function basically all sourced from eTao to increase the search capability within the Weibo e-commerce ecosystem?

Charles Chao

I think these are two very good questions. I think these two questions, first one regarding will the merchants, Taobao or Tmall, will open the official stores on Weibo, I think we don't call that official store, but they will open their official account or maybe official page on Weibo. That's part of the arrangement, so they can, you know, Taobao and Alibaba will facilitate this kind of arrangement to allow their so-called excellent merchants based on the high rating credit system on Taobao. So they will facilitate these merchants to open official account on Weibo.

And so these official accounts will include their stores. But I think that would definitely increase the content and also the activities and the offerings on Weibo platform, allow users to have more access to different kind of stores.

But in terms of the [money] transaction, I mean the completion of the transaction of the e-commerce activity [inaudible] and that's the arrangement. But in the future, I mean we believe that this kind of activities will help to increase -- to build this kind of commercial ecosystem on Weibo and also create demand for advertising, I mean for marketing activities. I would say that we've got internal demand for market on Weibo platform in the future. And that's something we'll be working very closely with Alibaba to make that happen.

And second question, what was the second question?

Jiong Shao – Macquarie Research

The search in eTao.

Charles Chao

Search in eTao, yeah. I think this is a very complex [issue] because eTao has their own algorithm and they will -- I mean they have their own ecosystem that -- and Weibo is just part of it for that system. But having said that, I mean we are going to work very closely with Alibaba to enhance the capability of searching for merchandise, searching for business activities on Weibo going forward. And we believe this is going to be very important initiatives and opportunity for longer term. And we always believe that, you know, although social is very, very important, mobile, in the future, but also enhanced search capability on mobile will help the monetization in large scale in the future. And we are going to invest quite heavily in this area to increase our capability in the search area.

Jiong Shao – Macquarie Research

Okay. Thanks, Charles.

I just want to follow up on your comment on the social element on mobile. You're gaining a lot of traction on the web game area on the TV side on Weibo. Could you sort of talk about your plan to expand your -- the mobile version of Weibo as to incorporate or set up a platform for third party web games to monetize further your mobile footprint? Thank you.

Charles Chao

Yeah. I think this is another area that we are devoting a lot of effort in because I mean as you can see, a lot of growth in user and user activities Weibo is from mobile. And so it's only natural that, you know, in terms of monetization, mobile, I mean gaming is very natural way to monetize it. And so this is area that we are also paying attention, devoting a lot of effort here, in terms of working with different kind of game developers, and try to create the platform on Weibo mobile terminals so that we can incorporate a lot of third parties mobile games on Weibo for our user. And I think this is going to be a very important initiative for us too this year.

Jiong Shao – Macquarie Research

Okay. Thank you for the very helpful comments.

Charles Chao

Thank you.

Operator

Your next question today comes from the line of Alicia Yap from Barclays. Alicia, please go ahead.

Alicia Yap – Barclays

Hi, thank you. Good morning, Charles and Herman. Thanks for taking my questions. My first question is also related to the Alibaba Group transaction. And to follow up on some of the previous questions, I guess, wanted to know regarding the inventory currently available on Weibo. So I understand, I think Charles mentioned earlier that there will be some dedicated inventory to this alliance. So just wonder, will that mean you may have a little bit less inventory for some of your bigger brand advertising customer?

And then related to that is that, will there be any revenue sharing portion for any marketing dollars that you generate from those customers from Taobao, would you have to share that to Alibaba? Thank you.

Charles Chao

The first question regarding inventory, I mean actually we'll not dedicate. The inventory we create exclusive of Taobao, meaning that these are not inventories currently being used by advertisers or other advertisers. And so it's not going to create competition in terms of the inventory we have, I mean existing, currently, existing for our current customers.

And the second question regarding -- what's the second question? Revenue share.

Yeah, we're going to have a revenue with Taobao on a lot of advertising if they use their eTao system to place ads on our platform basically.

Alicia Yap – Barclays

I see. Okay. And then the $380 million commitment, is that also taking into consideration the eTao partnership as well, right?

Charles Chao

Yes.

Herman Yu

The $380 million --

Charles Chao

Only count the ones we have -- only count the ones that we get from the revenue share. It's not like we count the gross, we count the net basically.

Alicia Yap – Barclays

Sure. That means your opportunity is much bigger than the $380 million?

Charles Chao

Yeah, that's only what [inaudible] SINA share.

Alicia Yap – Barclays

Sure, sure. And then just very quickly, last question is, since Alibaba also make strategic investment in [Auto Navy], so will Ali and SINA have any intentions to maybe incorporate [A Net] data into Weibo to help Weibo to go a little bit deeper to the local services?

Charles Chao

Already we formed the strategic alliance with [Auto Navy] earlier and so it's already in our third parties strategic alliance list. And so these two companies, meaning SINA, Weibo and [Auto Navy] are working very closely in terms of location data exchange. And we also use [Auto Navy] for mapping service and we also have connectivities with [Auto Navy]. And I think that this is going to be a very important strategic relation for us also in the mobile internet space.

But in terms of location service, I think the mapping is one of the important elements but it's not only one we need. We probably need more partners, ecosystem to build the circle especially for [O-to-O] businesses on the mobile.

Alicia Yap – Barclays

Great. Thank you.

Operator

Your next question today comes from the line of Cynthia Meng from Jefferies. Cynthia, please go ahead.

Cynthia Meng – Jefferies

Thank you, management. I have two questions. Number one is on the advertising you've given for second quarter. Does it factor in any incremental revenue contribution from the Alibaba deal? And if not, can you please give us some color on how much of the revenue growth we will be expecting for the rest of the year on top of your organic growth?

Second question is related to, again, to the SINA-Alibaba deal. Obviously both Weibo and Alibaba have massive user and customer base. What would be the optimal way of synergizing the data you're going to exchange between the two platforms? And what does management see as the biggest challenge there? Thank you.

Charles Chao

Herman, you want to take the first question?

Herman Yu

Yeah. With regards to the advertising guidance for second quarter, we actually include all the advertising that we expect to meet. And Alibaba's contribution in the second quarter will be minimal. As Charles mentioned earlier, none of revenue that we can generate with Alibaba really depends on our cooperation to come up with very innovative new products, personalized and directly to Ali's merchants. So I think as we work closer together, as we come up with new feature [sense] and so forth, we should be able to see more revenue [inaudible].

Charles Chao

Regarding the second question in terms of data exchange, I don’t think we're going to be able to elaborate too much detail on this conference call because a lot of data exchange will be worked by both parties. And if you're talking about challenges, I mean obviously I think the account, you know, systems for both platforms I mean has its own nature and I think Alibaba has multiple accounts I think we need to work with. And they're in the process of doing the unified account system. And so that process will also impact our cooperation because a lot of progress will be depending on their process -- progress. But in general, I think the account connectivity will be a very important part of our cooperation [that's the base] for a lot of, you know, our cooperation in this agreement going forward.

Cynthia Meng – Jefferies

Thank you, Charles. Just one last follow-up. With this objective to develop social commerce model, what does mean for your mobile payment and monetization initiative? Would you foresee that in the future you would use Alipay?

Charles Chao

Well, Alipay will be most important third-party payment system we work with on Weibo, and there will be in certain areas we can use Alipay directly on Weibo, in certain areas where we can use our own mobile payment system. We already launched our Weibo [Chembal], Weibo Wallet on the mobile. It's on testing right now.

And I think part of it is because I mean mobile payment is an inherent part of the mobile ecosystem for monetization, and so we have to work very closely with the mobile payment system in order to monetize on the mobile terminals going forward. So we'll try to get more control over the payment and system, but to expand, we can use Alipay, I mean to expand our service, to make our payment more efficient for mobile and for PC, we will use Alipay. And so it's an ongoing process but there's no question Alipay will be a close partner and also they will be our -- the most important preferred payment partner on Weibo platform going forward.

Cynthia Meng – Jefferies

Thank you.

Operator

Your next question today comes from the line of Yu-Heng Fan from China Renaissance. Yu-Heng, please go ahead.

Yu-Heng Fan – China Renaissance

Hi, good morning. Thank you very much for taking my question. I wonder if management can provide some color regarding Weibo [inaudible] current customer adoption. Thank you.

Charles Chao

Weibo what?

Yu-Heng Fan – China Renaissance

[Chinese language spoken]

Charles Chao

[Chinese language spoken]

I don’t know what you're talking about. What is that for?

Yu-Heng Fan – China Renaissance

I think one of the [inaudible] service you launched on SINA Weibo.

Charles Chao

I am not familiar with that. Let me check and get back to you I mean offline maybe.

Yu-Heng Fan – China Renaissance

Okay. And also follow-up question regarding the advertising pricing model related to Alibaba alliance. Will it be mostly based on [CPP] or cost per sales?

Charles Chao

Actually we have both. Some of these will be based on the CPS model, some of this will be based on the coverage and the reach of the advertising. And so it's a combination of both [inaudible] purpose of advertising.

Yu-Heng Fan – China Renaissance

Thank you. That's very helpful.

Charles Chao

Thank you.

Operator

Your next question comes from the line of Chi Tsang from HSBC. Chi, please go ahead.

Chi Tsang – HSBC

Good morning. Thank you for taking my question. Just a few questions. A, can you give us a sense of what you're seeing from the advertisers in terms of budget growth or allocation now and how that might change in the second half?

Charles Chao

Well, I think in general, I mean we say that I think at the beginning of the first quarter with the -- on overall basis, we saw some good trend. And then at the end of first quarter we saw a slowdown. And April is okay, but when we entered into May, we saw a little more slowdown again.

But it's not that obvious, not significant, just the sentiment itself I mean is not strong. And when we get into the second half -- the second quarter or when we get into the second half of the year, I mean that's our feeling, overall basis, is sentiment is not that optimistic but it's not that bad either. And so what we'll say it's going to be having reasonable growth, but don't expect overall market is going to be too good for the second half of the year.

And in terms of categories, we don't see any particularly industry that will be particularly better or worse than any other. But I don’t -- for SINA in particular, I think we probably will see more growth in the FMCG areas probably because our help from Weibo and also to let extend our effort in increasing -- in improving our video offering on portal will also help us to gain more market share for FMCG clients. But other than that, we don't see anything particularly that tells you the trend of the market.

Chi Tsang – HSBC

Great. And you mentioned earlier in your prepared remarks about improving engagements on Weibo. Can you give us a little bit more sort of color or details about that, how that's moving on? Is it sort of sustainable?

Charles Chao

I'm sorry, what's the first sentence you said?

Chi Tsang – HSBC

Since earlier in your prepared remarks you talked about improving engagement levels on Weibo -- Q-on-Q, so I was wondering if you can just give us some more color behind that please.

Charles Chao

Well, I think what's happening is that we're seeing more user increase and user activity increase, the time spent on the mobile terminals at the end of the quarter, in the month of March. And if you recall, in the previous quarters we saw some decline in the time spent and user activity for Weibo and also on both PC and mobile, like in the fourth quarter of last year. And that was partly because the competition in the market for different mobile apps, especially in the social area.

But I think we were worried about whether this trend is going to continue or we're going to be able to rebound in terms of user activities. But we're very happy to see that in the month of March we saw that rebound, and especially, I think mainly I think on the mobile apps basically, we see more user growth on the mobile apps. I mean the growth rate is higher than the average rate and also the time spent increase were also mainly on the mobile terminals, special promo by apps.

And I think that has to do with our effort in, you know, in improving the user experience on the mobile terminals. I mean during the first quarter, most of our efforts in terms of our product improvements and -- are devoted to mobile terminals, and these will be our effort -- ongoing effort I mean throughout the year, this year. And so I think that's the major causes.

Chi Tsang – HSBC

And how much time were people spending on Weibo on mobile [inaudible] at this point?

Charles Chao

Still approximately one hour I mean on a daily basis for active users. It's just like up and down like a couple of minutes basically.

Chi Tsang – HSBC

Great. Thank you very much.

Charles Chao

Thank you.

Operator

Your next question today comes from the line of Andy Yeung from Oppenheimer. Andy, please go ahead.

Andy Yeung – Oppenheimer

Hi, good morning. Thank you for taking my question. My question is actually about other mobile initiatives outside of Weibo, what they are and what do you plan -- what are your plans for the rest of the year.

Charles Chao

Sorry, what was the question?

Andy Yeung – Oppenheimer

Yes. So what are your other initiatives in the mobile outside Weibo, for example, like [inaudible] maybe app download, what other initiatives on the mobile side outside of Weibo?

Charles Chao

In the mobile areas, I think that Weibo obviously is our major effort here, and also that we have beefed up our efforts in other product lines for mobile. So like in the portal business, we have invested very heavily for our mobile app for news and also for finance, for sports, and so on and so forth. These are particular areas that we were very strong in the PC area and we want to maintain our leadership in the mobile stage. And so we have devoted a lot of effort there.

And also in the video area, we are putting another effort there on both PC and on mobile. And we are also developing some of the mobile apps for radio, I mean, which will help grow our overall presence in the mobile internet.

And on top of that, we're also working on some social apps on mobile also like our social reading apps and also general apps for mobile like the weather app which is very, very popular. I think our weather app, I mean the [Chinese language spoken] that's the app for weather forecast on daily basis. The DAU already passed, I don’t know, 7 million. I mean that's a very large mobile app.

And so these are the areas we're working on. Obviously we also have been devoting some other resource to mobile search and which we think is going to be very important for future also. So this is the general picture, and we'll be able to update you guys in the future when we make progress there.

Andy Yeung – Oppenheimer

Great. And just quick follow-up on the video side, you mention that you probably will invest more in video and also including infrastructure and content. Can you help us quantify, you know, like what kind of investment or how big investment you're looking at this year for the video side?

Charles Chao

Well, I think it's difficult to quantify in terms of exactly where can we invest because obviously content is one area. Historically we have been investing a lot of content in [sport] area and we'll continue to do that. And in the news area, we'll also continue to do that, and for short videos.

And in the long-form videos, I mean we are, I mean probably more leaning towards working with partners to provide long-form video service in China, without including too much cost. So in that sense we're going to more like in -- on revenue-sharing basis versus we try to do a huge, you know, platform or [CDM] for long-form video and [buy] a lot of content in the long-form video area. That probably is not our strategy for this year. But we're also putting more effort on mobile. So that I mean we can get more share in terms of video on the mobile terminals basically.

Andy Yeung – Oppenheimer

Got it. Thanks. Very helpful.

Charles Chao

Thank you.

Operator

Ladies and gentlemen, that concludes today's question-and-answer session. I would now like to hand the conference back to your presenters for closing remarks.

Cathy Peng

Okay. That concludes our call for today. Thanks everyone for joining us today. We'll see you next quarter.

Charles Chao

Thank you.

Operator

Ladies and gentlemen, that does conclude the conference for today. Thank you all for your participation. You may all disconnect.

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