The June 11 kick-off of 2010 Soccer World Cup is rapidly approaching us. I believe this mega sports event provides investors with great opportunities to trade Chinese Web portal stocks including Sina (SINA), Sohu (SOHU), Tencent (OTCPK:TCTZF), and NetEase (NTES). Recent history has demonstrated mega sports events' positive financial impact on Chinese Web portals. Sina Corporation is my favorite stock to play the World Cup theme due to the fact that it has the highest exposure to online ads among major Chinese portals.
What can we learn from history? In the past, mega sports events proved very effective in stimulating advertising spending on Chinese Web portals. For example, the 2006 World Cup (June 9-July 9, 2006) was a major catalyst for Web portals' 2Q06 and 3Q06 financial results. Thanks to the event, in 2Q06, Sina, Sohu, Tencent, and NetEase grew online advertising revenue by 45%, 35%, 29%, and 150% year-over-year, respectively. In 3Q06, Sina, Sohu, Tencent, and NetEase grew online ad revenue by 42%, 27%, 14%, and 132% year-over-year, respectively. The 2008 Beijing Olympics was the major catalyst for 3Q08 results: Thanks to the event, in 3Q08, Sina, Sohu, Tencent, and NetEase grew online ad revenue by 66%, 66%, 72%, and 32% year-over-year, respectively.
Sina is the best World Cup play among Chinese Web portal stocks. In 4Q09, online advertising accounted for 64% of Sina's total revenues, 36% of Sohu's revenues, 13% of NetEase's revenues, and 8% of Tencent's revenues. These data points indicate online advertising is a more significant revenue component for Sina than for Sohu, NetEase, and Tencent. Given Sina's high exposure to online ads, the same percentage increase in online ad revenue will benefit Sina's total revenues more than its three peers.
Disclosure: No positions.