Sina: Strong Earnings for a Key China Play

Mar. 4.10 | About: Sina Corporation (SINA)

On March 3, Sina Corporation (NASDAQ:SINA) announced solid 4Q09 results and strong 1Q10 guidance for its core online advertising business. During 4Q, Sina used Sina Mini Blogs to significantly increased its "media influence." It also expanded its advertiser base, as evidenced by fast-growing rich media/video ad revenues. These two positive developments indicate Sina has made significant progress in two key areas for a media company - acquiring and monetizing content. Therefore, I believe Sina should be a key holding for investors looking to benefit from the ongoing recovery of advertising spending in China.

Sina Mini Blogs solidified Sina's leadership in acquiring unique, high-impact content from celebrities and thought-leaders. In 4Q09, Sina Mini Blogs, a service similar to Twitter, attracted over 5 million users and became the clear leader in China's micro-blogging market. Similar to its strategy on Sina Blogs, Sina has devoted lots of efforts to attracting celebrities and thought-leaders to use Sina Mini Blogs. According to my checks, more than 50% of the famous people who use Sina Blogs and Sina Mini Blogs are blogging on Sina's platform on an exclusive basis. The key value of Sina Mini Blogs and Sina Blogs is that content contributed by celebrities and thought-leaders are highly influential among Internet users. By aggregating such unique and high-impact content and providing it to Internet users, Sina has increased its own "media influence," which is the key factor that brand advertisers and ad agencies consider in their decision-making process.

Rapid growth of rich media/video ads enhanced Sina's ability to monetize its content and traffic. In 4Q09, Sina's rich media/video ads business grew rapidly: Its share in total advertising revenues increased to 15% in 4Q09 from 5%-10% in prior quarters. The underlining driver of such strong growth is that Sina has increasingly attracted traditional TV advertisers, according to CEO Charles Chao's comments during the earnings conference call. I believe such expansion of advertiser base provides Sina with new opportunities to monetize its content and traffic. For example, Sina is the most popular Chinese portal in the Sports category. Sina's Sports channel is very suitable for food and beverage companies who traditionally advertised more on TV, but are increasingly considering Internet advertising because of the availability and development of onilne video ads.

Disclosure: No positions