Sina Corporation (SINA) reports Q2 results on August 15th. The Street expects:
- Revenue: $127 million
- EPS: $0.02 loss per share
- Q3 revenue guide: $148 million
Heading into the earnings, investors need to look for initial results from Weibo's ad system because the management expects Weibo monetization to take off during the second half of the year.
In April, Weibo launched an ad system that features a recommendation engine that delivers ads to brand followers and non-followers based on their social graph. The platform allows advertisers to create ad contents, which include recommended accounts to follow, most recommended, and display ads.
The ads are then classified into two types of inventories. The first type is ads at the top and bottom sections of the Weibo page. The second type is ads on the right side of the page in the recommendation section, where ads appear based on user's activities. The revenue model is similar to other websites with cost per impression, or CPM, paid to read, cost per engagement, and cost per time.
Like Facebook (FB), Sina will also provide analytical tools for advertisers so they can get have measurable ROI and a better sense of marketing impact. Management has indicated that advertisers have shown strong interest in the ad system.
While Sina certainly has wide reach with its 325 million users, the long-term effectiveness of Weibo's social interest model in delivering relevant ads is still unproven. Unlike Facebook that utilizes a user's social graph to deliver ads, Weibo only utilizes a user's interests, or social interest graph, to deliver the relevant ads. Social interest graphs could be less effective than social graphs because the user's interest is only a small component of his or her online identity, and is not a decisive factor in determining whether the ad will be relevant to the user. On the other hand, Facebook's social graph has a more comprehensive database of the user's interest, demographics, and activities to give advertisers a better sense of an ad's relevancy.
Nonetheless, I am encouraged to see advertisers give Weibo positive feedback. That said, it would be helpful for management to disclose Weibo ad revenue separately from brand ads so investors can get a better sense of its performance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.