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Here’s the entire text of the Q&A from Sina’s (ticker: SINA) Q3 2005 conference call. The prepared remarks are here. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.

Question-and-Answer Session

Operator

Operator Instructions And our first question comes from the line of Lu Sun of Lehman Brothers. Please proceed.

Q - Lu Sun

Hi, good morning. I actually has a, several questions. First question is on your online advertising business. Can you actually tell us, were would you see the highest growth going into 2006 and I think on last call you actually guided for about 30% year-on-year growth for 2006, and it seems like the run rate in this quarter has slow down a bit, just 24% year-on-year. Do you think that would pickup in the fourth quarter and also going into this 2006 as you raise your rate? And second question is on your wireless product service business. Do you have, do you think that your return on investment for the SMS product is going to be especially the subscription product is going to be higher than some of the other new applications such as a WAP or JAVA game, especially going to the next year? And how would you want to position yourself going to 2006? Thank you.

A - Charles Chao

Okay let me, this is Charles. I am going to talk about the second question first. And yes and we had about 24% growth year-on-year on the pricing, this quarter and I think we talked about that before that this quarter year-to-year comparisons, but not in, I think 30% just because we have higher rate into, towards that quarter or to forth, so because of that 15 in that quarter. And so, we have offered very high rates for that comparison and we recall also that in the first quarter of last year, we had a flat quarter from the third quarter actually with the flat decline in current quarter just for the same reason. And so, I think that’s really in about 15 value, where we did not get 30% for the third quarter and for the first quarter, and we did expect that, we’ve been in a range, I mean, but not necessarily, I think that something radically will be very close to hit that range in our guidance between 24 million to 25 million, for the first quarter where we can go into higher units. And as I mentioned in my press, in my presentation, we think we might, now that we are meeting our rate counts for some of our prime inventories. And so far, that has been treated well in the, on all our customers. And we did not see too much negative impact that tells us again that we will still have the potential, I mean, to increase the pricing going forward. And so, with the, comp, we are comfortable with the hiring been in general, I think, its demand is good and hoping about 2006, I think the growth will come from federal, obviously is the price up, so there we have impact, of course we always help people, that the price increase on rate count is not necessary transfer into, leading to increase because the compact structure for our pricing model. And the way we feel advertising in China, but it does have, in general, for the revenues. And some of the areas where we believe will, will drive the growth next year, when we actually be, that real estate will be still increasing, pretty nicely next year. Especially, for SINA it tends now, we’re regarded that is, we’re not the best product for real estate advertising, for its effectiveness. And, we give up the potential data and in transformation in the discussion just not meant, internet in-taking market share away from the traditional media especially newspaper and one of the important area is for that is been actually traditionally a lot, few asset enterprises spend, and a lot of money on newspapers for advertisement and the market account, the market, as you’re aware of that, and the net loss was shift recently and the profit margin for these industry also got decreased significantly, and they become much more cautious, cautious in terms of their return on investment, for their net pricing and increasingly more and more these in of a kind to discover that internet actually is a very big media for these kinds of pipelines, especially it will tend to the target, that generated target entirely on our website. And so, basically we did see advertising, pickup in advertising probably next year. And another area of course, despite the internet company, that into the industry and website and, we will be having another investment in this sector in China or with the Russia or two. And that could broad new companies, excuse me, which will demand these advertising on our website and of course you have seen that, at eBay and the top of the larger auction site, spend a lot of money on advertising and as we have got pretty much, which would, we expect there was been pretty good turn over in our auction joint venture Yahoo! in near future, so we’ll be receiving advantages on this e-Commerce sector advertising in China next year. And this area of course, we spoke about and which media advertising before, especially for FMCG prospects going forward. And we still have, we have increased our investment in confident areas for we go and come again and the work is going to continue to prevent according to 2006, in so that will bring in a, I think a more advertising dollars from FMCG product with the presentation of, which maybe a comment. So, I think, overall, I think, I think the 30% unit growth, on unit growth was for next year, will be bit note of information we have, we believe at SINA Corp., frankly saying. So, and that’s so far to advertising, and, the wireless business, I’m sorry, can you, if you repeat that question again, again, I think, I’ll talk to on that advertising profit.

Q - Lu Sun

Yeah, sure. So for wireless, I was just wondering whether the return on investment on that is going to be better than some of the more advanced application such as WAP, JAVA game. Since for these 2 areas are growing financially for you, that would you consider investing more in these new applications going to 2006 and what would be your overall product positioning going to next year?

A - Charles Chao

Okay. And so that to bring that settlement to WAP and JAVA the new products rate. And, I think SMS, I mean, is a product in general, and generate quick profit margin. But it’s also a product service that SINA is depending on a distribution channel. On cost of our promotion basically, I think on the content side, its not a big problem and but on distribution side, and promotion side and you have to be very careful in terms of, how you spend your money and what’s when exchanging cash. So it’s the various I mean, I mean it depends on channel-wise, moves to your website with promotion, than they’re basically use cost but if we use TV, that which we just talked about, then the cost there significantly and that can generate very high returns when you spend $1, you get the $3, $4 back but, some of the TV, in general, if you say that you spend $1, you get $1.2, $1.3 back. So, basically it depends on the promotions and the distribution channels. And, on the domain key side, and I think there’s cost involved and because inflationary was providing a content on the mobile platform, and, then not much promotion involved in this particular limit and that also within the thing that we can take advantage, leverage our total strength to extend on other internet offering to mobile platforms. So, I think, that there is definitely domain id you would generate higher margins by going forward, if we can successfully penetrate this. As far as to expand our portal offering to wireless space and so that we think it happen. And, as you take another game is another area that we got cost cuts to core NOI, excuse me, in fact, mobile worlds, in the future are now found upon very small base right now, US$800,000 for the quarter. But the basic thing, at final stage we do some JAVA game and other large scale. But most of games would also have the platform with some, with the games that we like this for 100, 110 providers. And so, when you got to pay the content fee a revenue share for that matter. So, these revenue was in the nature we tend to have very high cost. But in JAVA game from other service offerings from wider service and all these revenues fit within some bright future. And, we will continue to invest in each of the areas, but the margins are very important and you think in this front, it was very reigning, even China was in promotion effort so on so forth. And, I hope that answers your question.

Q - Lu Sun

Okay yes thank you, thank you very much.

A - Charles Chao

Thanks.

Operator

And our next question comes from the line of Richard Ji of Morgan Stanley. Please proceed.

Q - Richard Ji

Well hi, Yan, Charles and Hurst. I have 2 questions, number 1 given your heavy marketing expense for the TV campaign, and we should reasonably expect the revenue benefit should’ve come from 4Q onward on your mobile value-added service side. And yet you only guide modest sequential gross for your mobile WAP in fourth quarter, and why is that?

A - Charles Chao

Okay, let me just talk about this question, a little bit here. I think, we do, in general, stop we’re going to decrease revenues funding campaign we had in Q3. And in fact, we continued on the campaign into Q4. And, also apart the decision in terms of how much we spend, how long we continue to generate depending on the mutual investment, for these in present campaigns at any point, if you think. And so, if we don’t increase the expenses, and because we have a very good monitory system, or we can probably campaign very quickly, and so, hoping about that we will be going to carry revenues for sure, above these inventory we made. And but, on the other hand, we’ve talked about that newest pattern, actually, I thought it was a initial pattern was not generating on these TV campaigns, actually we are, we had income, a decline in these business, because there are some of our partners have a timing, having therefore a long-time. And, we have to really, spend a lot of efforts and to, produce in about new partners, hence there is, in order to grow in present again and for the product and we’re still to our west and websites want our plan in distribution channels so on so forth. That impacts all these, we are talking those areas, and towards the outside of course by the revenue swing according to the TV campaign. And so, its our major picture and of course in the none-SMS revenue side, we also saw main picture that MMS in outgoing, but WAP is growing and JAVA is growing and IVR may growing to. But, the intense of the, ring-back tone, we’re not seeing too much growth in the first quarter. So, overall, the revenue picture and TV campaign is only part of our voice business and if, we have just mentioned about the new rate of rotating, we are generating about 5.5 million revenues in the third quarter. So, the majority of these revenues from mobile, the others were actually from other sources, not from TV campaign though, overall, lays a big picture here. And of course, we are going to continue to explore new area, on new product. And, as we have already said that’s just a competitive kind of market.

Q - Richard Ji

Thanks, and I am next question is regarding online advertising. And at this quarter you saw around 13% of sequential growth which primarily came from the volume growth of, for your new advertiser base. And can you comments on which sector, you see the strongest, goals for new customer acquisition and which sector you’re expressing some difficultly?

A - Charles Chao

Well, I think, overall, we are not risking more apparent diversified picture of Chinese a customer base and as the present revenues and in previous question it was said that, overall, we feel that the company categories in fact we have the Auto and IT industry, are being the major contributors. For advertising revenues and did not seems too much, decreased 50% up to the revenues to 47% up to the revenues. I think, the only the thing that came down little bit was auto industry, just because we had a very big auto show in China. In Q2, there was traditionally high season for auto, high demand in China, and so there is just a price there. And so basically, we are not seeing very much in the cost category but in terms of the new categories of course, I mean, I mentioned FMCG and also in webhost, website areas and some of the new important contributors for the revenue growth in the third quarter and if you remember in time, then multiple year contract with so many channel for the, on the recruiting and also with eLong, but at the end of Q2 and we’ve done it for penetrate, to contract and in the third quarter and the FMCG of course. Given that some more times at the drinking industry, Coco-Cola, top of world, I think, has invested more money than in the previous half, I mean, in it’s area. So, I think that, of course these areas are depending as the total amount in, in total invested dollar amount spent but they contribute, meaning for a, in terms of growth, I mean for the revenues and I think basically, we’re through more diversified pictures and we’ll have growth from a lot of different sectors, in the market basically.

Q - Richard Ji

Thanks.

A - Charles Chao

Thank you.

Operator

And our next question comes from the line of Frank Shi of CLSA. Please proceed.

Q - Frank Shi

Good morning guys. Two questions, one is, if you were to capitalize your TV ad percentages, how long would you amortize it for? And then, my second questions is, in your 4Q guidance, do you factor in increase in your TV ads or decrease? Thank you.

A - Charles Chao

In terms of amortization really the literature acquired in amortized expense is about so called, at the expected benefit, here in a picture which one would appears to be realized revenue, and in the future quarters. And so the great affect on how much revenue generated in that area that your base recognize proportionately expanded, associated with this revenues, well that’s a rule here. And, so basically, South Korea, I mean, we had big kind of progress and of course as far as new product while we have 3 fall to establish panel. And typically it takes at least 6 months to capture about 18% of the revenues based on historical experience. And so we cant describe that, it will be amortized over a 6 months or more and but that of course that amortizing was a little bit more well noted because either you have a higher user base in the beginning of the period and before than the high cost subscription basically. And in Q4 guidance basically, I mean, we are not accepting a slowing down, in to the pricing, the advertising for subscription base, for subscription base and this is probably in the quarter, and probably because I mean, the new Pod have been, is used for the prime core for lances. And so there is another, there is already we need a lot of attention for these products. So you imagine that the pricing has to come down little bit, I mean in the first quarters. So we had better impact ahead of it. In the first quarter, and so we’re not expected to generate, to spend much on advertising for SMS in fourth quarter than to third quarter.

Q - Frank Shi

Okay Thank you.

A - Charles Chao

Thank you.

Operator

And our next question comes from the line of Jason Tsai of Think Equity Partners. Please proceed.

Q - Jason Tsai

Hi guys. A few questions here. First of all, when do you expect to see MMS coming back, I mean nearly we’ve seen three sequential quarters of decline in that business do you expect that to rebound here in the December quarter?

A - Charles Chao

We’ll as I’ve said just at a beginning of that. We’re not seeing a time that MMS is coming back in near future. And, they’re probably because that the usage and adoption for MMS is not really kicking off, that significantly in the recent fronts in China. And so, we’re currently seeing that MMS could be more traditional theory, you can generate revenues in the future. But I mean, we’re not pretty sure how much gross we can have. I mean for this particular product going forward at least the way it don’t have a visibility at this point. To know exactly, either the Russian going for MMS.

Q - Jason Tsai

Okay. That’s fair enough. And then how much of the subscription SMS revenue you generated in the September quarter? Do you expect this is going to be recurring here in the December quarter? And how much of, I guess, this expense do you expect to be recurring again in the December quarter?

A - Charles Chao

Well, I think that these product just have question I mean revenue recurring basically was totally about revenue generated these users who are acquired in Q3, that will continue in Q4 right?

Q - Jason Tsai

Right.

A - Charles Chao

And, I think I said, I mean, there’s no specific number I can give up. But in general, that was of entering the other question, but previous quarter basically we have historical and experienced and our current experience to take 6 months to, to catch about 80% of total revenues of the life time of a subscription. And formally users and so we think than we can capture precaution of the revenues in the first quarter. But I don’t have exact number I mean, that I can tell you but in the ballpark, I think what I said in probable will give you intense in this, and how much revenue we can generate. In this recurring cost, recurring cost, I think the new cost we’ve been recurred really is supposed to deploy on new users so that will be the kind of, the users, newly those and then probably just subscribers and they will have the deferred revenue going forward that in content. And, so that how much was spent in on a new campaign and it really became, the effectiveness of the advertising and we are planning back for the advertising we’re currently doing in Q4. And so, if we feel that on those camping’s we will continue to spend as we have, have spent in Q3. But if we’re not seeing good returns as we can monitor for our system, almost spontaneously, that, we can stop or we are going shift into another product going forward. So, there is a degree on such statement and how much we’ve been spending in Q4 depending on those attractive events especially when it is for that campaign.

Q - Jason Tsai

Okay. Fair enough. And then last question here. On your other advertise other revenue line, that was, if you exit out 0.5 million, you generated from hotel bookings last quarter as a result of the feel of the business. That was fairly flat. Can you talk about whether search grew in that business or whether that was pretty flat and can you talk a little bit more about that?

A - Wang Yan

Yeah on the search site, Jason, on the search site, we focus more on the, on the product developments and less on the revenue generation. So we saw a modest increase probably in the neighborhood of about 5%. And so what happens is that, as we wrapping up our new iask product, we’re now, we chosen not to put advertise on the iask platform. So, that’s the reason why the revenue hasn’t gone down as much. But right now, we are kind of, going for try and to get up the unique users in page view. So trying to get the adoptions of people who are involved our iask platform.

Q - Jason Tsai

Okay. And when do you expect to, really start targeting growth in this business?

A - Charles Chao

Well, I think, as you guys probably know we’re not, in the, we’re not in the dominant positions in the search area so, I think for the time being focused on product its still going to be first and foremost upfront in front of us rather than trying to get some short-term gains in sense of our search revenue. It’s right now related to our brand advertising searches still, I’m used to these smaller, much, much smaller than our branded advertising so, I think its really a judgment, I think when we feel that our radio type is ready we will then begin come more heavily to the advertisers to get their, to get their revenue.

Q - Jason Tsai

Okay. All right, well, thanks a lot guys.

A - Charles Chao

Thanks Jason.

Operator

And our next question comes from the line of Safa Rashtchy of Piper Jaffray. Please proceed.

Q - Safa Rashtchy

Good morning. I have two questions. First and you may have answered this but, we seem to have a fairly poor connection that was difficult to understand some of your comments. But, could you explain the, the marketing spending that you’re doing on the SMS? Why it is so large and why was it so concentrated because as I recall, this is somewhat unprecedented for you to spend such a large share amount in the short period for a single product? And then I have a couple of follow-ups, thanks.

A - Charles Chao

Well, I think we didn’t talked about it of course any deeper already and basically I think, yes, this amount was much higher than we have spent in previous quarters and much high of operating cost, so, higher than we have originally up, projected a decrease. And I was caring that the comment basically has, in mid-half of the quarter, I mean we were beating present competition because of, on one hand we see, positive returns on these advertising, and over the long-term of the subscription theory and nor distribution theories of the, as we intended to acquire product campaign and we have a very sophisticated system to monitor that, now we’re having to spend money but we have the criteria, as we need subsequent numbers where we’re going to spend. And, but the number basically was that, if we keep spending a lot more than we’re going to have alternate quarters profit because if you can imagine that, the revenue patterns are really, it was of course several months, but then the cost will incur in the current quarter, and in the current quarter if we do this in this way, than we will probably increase some of these, I mean from certain campaign. And, so we’ve spent 6.7 million and we generated about US $5.5 million on these campaigns. And obviously, it doesn’t make sense on current quarters but obviously we anticipate we will get a lot more revenues in the future, trying to follow the campaigns. And so, it is quick decision, because we didn’t think that we may, basically to get the channel whether with simpler products short-term costs and for long-term benefits, while we hear the more about that certain profit. Of course, we plan to have to stop the campaign with feel fact are not on our campaign, being ordered to really show much higher costs for current quarter. But I, we believe that it was rather sounding that we naturally feel, in fact it’s the go forward with more campaigns, in order to generate more revenues coming over the longer term. Well, basically that, duration will be high and it was in competition.

Q - Safa Rashtchy

Okay. I have a follow-up question on search. If I understood you’re right, you were saying that you are not concentrating in monetizing yet. Could you say us, that kind of, difficult becomes there? How you’re doing compared to others in the search space? But, do you have a sense of world market share of search queries in China, has yet the Chinese margin improved, or was it by the same as last quarter?

A - Wang Yan

They’re various reports out there, and I read every one of them and I think the, I think the, I think the rankings varies wildly from report-to-report, depending on, the perspective of the people who actually created the reports, I think the general sense that we have is, most of all traffic, file search is coming from, the users have SINA portal and when they’re using our SINA portal, they, when they’re thinking of searching something, they search directly on our sites. So in that sense, I think we’re, we have market share given our positions in the quarter, while our market share probably is in the top, probably top there or four, in terms of the total traffic coming, total traffic coming to our search. In terms of, as I was talking about before, in terms of our monetization, I think we have to get our search traffic higher than adjusting the, what we have right now, in order for us to monetize because it doesn’t make any sense, given that the amount of revenue that we’re generating right now on our service is not all that material relative to our primary advertising. So we think that, instead of trying to get that extra $0.5 million in terms of advertising revenue, it probably makes more sense for us to get up the traffic first.

Q - Safa Rashtchy

Okay thank you.

Wang Yan

Okay.

Chen Fu, IR Manager

Operator? I think we’ll take one more question now.

Operator

Okay, great. And our last question comes from the line of Dick Wei of JP Morgan. Please proceed.

Q - Dick Wei

Hi good morning. My question is on the wireless side again. Just want to understand that you mentioned that from the TV advertising additional revenue from SMS is about 5.5 million. And, could you take that out from your third quarter SMS revenue, making price about $0.24 sequentially down on SMS revenue? I wonder, what is the reason for that? Is that the end-market is declining? Or, is that feel owed on acquisition, cost from acquisition channel us, does not defective anymore? Just comment on that please.

A - Charles Chao

Well, I think, I mean that, that the effort that will grow our revenue strong at, TV campaign and the non accessories other than this I mean with declining actually said, that normal and I think this is TV campaign just right in I will get promotion we’re not taking the past, we’re not taking the past. I was just for, SMS in this actually most of our revenues will from this descriptions but that before I think the large will not from TV campaign will from our website from our conformation from either sources. And I think the natural chain end I think for all these subscriptions every month and every quarterly retrieve. So naturally you will have meet the client every quarter and every month revenues particularly into that new rate familiar product so it require new users I think to offset that. So I think that it is the load really, the company has basically the TV which is currently, revenue expect where to do that actually is little more. And that does not mean the necessary in the near trend where other than this I mean if other than this to what is the current churn rate, churn rate increase but not nearly anything that would cause significantly I mean, so that I think hope that answer your question.

Q - Dick Wei

Yeah, my last question is up, so how many unique to mobile phone users, do you have in that first quarter?

A - Charles Chao

That is 12.9 million in September and that compared to 13.5 million in June.

Q - Dick Wei

Okay, can you repeat the number again?

A - Charles Chao

12.9 million.

Q - Dick Wei

Okay, thank you.

A -Charles Chao

That compared to 13.5 million in June.

Operator

Gentlemen, this thus concludes the question and answer session.

Charles Chao, President and Chief Financial Officer

Okay, I think that the end of this conference call, and thanks for all your participation and I will see you in next quarter.

Operator

Ladies and gentlemen thank you for your participation in today’s conference call. This does concludes your presentation and you may now disconnect. Have a great day.

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