What is Weibo? (and is the Twitter of China a good investment opportunity?)
Mention social media and people in the United States and most other western nations will immediately think Facebook, Instagram, Twitter and TikTok. But across Asia, and particularly in China, some lesser-known social media networks have hundreds of millions of users and are growing rapidly.
One of those is Weibo.
What is Weibo?
According to the latest data from Statista, Weibo is the world’s 10th largest social media network and the second-largest network in China. It is best described at the Twitter of China and mirrors many of Twitter’s most successful features. While Chinese is the predominant language on Weibo, many Western companies, celebrities, and users choose this site to connect with Chinese consumers and broaden their reach.
Weibo provides a Chinese-friendly platform where users can create profiles, make posts, follow friends or celebrities, and gather cultural information.
History of Weibo
In the wake of Northwestern China’s Ürümqi riots in July of 2009, the Chinese government blocked popular social media sites like Facebook and Twitter to curb the spread of misinformation. In response to this need for public communication, a tech company called Sina Corporation created Sina Weibo in August of 2009, one month after Twitter was banned.
Even the name of this site offers a glimpse into its far-reaching success. Derived from the Chinese term “microblog,” Sina Weibo has won universal recognition for this generic term, even as similar companies have tried to use the same term with short-lived success.
Weibo success on launching in 2009 was rapid. In only 2.5 years from its creation, Weibo reached around 100 million posts per day.
The same benchmark took Twitter 5 years, or double that time, to accomplish.
The strong user growth has since continued. In recent years, Weibo has seen consistent growth in both daily (DAU) and monthly (MAU) users. In 2018, Weibo boasted 462 million MAUs. Now with at least 573 million users per month as of January 2022, this platform proves that it is still a force to be reckoned with.
Weibo features and revenue generation
According to Weibo’s 2020 annual report, the company primarily generates revenue from advertising and marketing services. These monetized posts diverge into “Customers,” or brands, and “Platform Partners,” or copyrighted organizations.
A small percentage of Weibo’s revenue comes from fee-based user memberships. However, most of Weibo’s services are free and accessible to the public and include the following:
- Discovery Products
- Self-Expression Products
- Social Products
Discovery Products
One crucial ingredient to Weibo’s lasting success is the ability to spread viral content. The unique collection of discovery features on this platform makes it easy for users to find new posts, connect with new people, and learn new information.
Weibo’s information feed is composed of both relationship-based and interest-based information. On the home page, users will find new posts from those they choose to follow plus relevant interests gathered from a user’s history, trending topics, or related topics.
The search feature allows users to find profiles, articles, posts, pictures, and videos related to any given search term. Similarly, Weibo offers channels to gather users with related interests, or locations to view and interact with posts on any topic. To find current hot topics, users can use the “Trends” function to browse the most popular subjects on Weibo. Users can find all of these features in the Discovery Zone and connect with others who share their views.
Self-Expression Products
Weibo provides many outlets for users to share their thoughts and ideas. This provides the basis for all interaction on the platform, as connections arise from organic posts.
Users may create posts containing stories, opinions, and thoughts in the form of text, photos, videos, and more. Posts can be found and shared through the discovery features above.
Individuals, companies, celebrities, and government leaders can create an individual page to share their identity and thoughts with followers. VIP members can subscribe to have access to added profile features. Additionally, organizations and notable personalities can verify their identity to obtain a “V” status on their profile.
All users have the option to post stories from their smartphones in the form of pictures or videos with stickers and filters. Alternatively, users can broadcast and view live streams by individuals and organizations on Weibo.
Social Products
As a way to maximize engagement, Weibo offers social features including asymmetrical follows, reposts, comments, favorites, likes, and mentions. With these tools, users can have discussions, share opinions, and contribute to a large network of knowledge.
Recent controversies
With differing opinions as profuse as the millions of users on Weibo, it is no surprise that there have been many high-profile controversies involving information and users on the site.
Buried train crash
When 40 people were killed and 200 injured in a high-speed train collision in 2011, Chinese officials did their best to hush the news. With parts of wrecked cars even being buried at the crash site to quickly diffuse the situation, the truth about this event might have been lost if Weibo users had not been among the survivors. Many Weibo users expressed outrage at the handling of this situation, demonstrating that the Chinese public will fight for their values and opinions.
Hushed Liberal activism
Before mid-2013, there were vocal Chinese businessmen with verified accounts who amassed large followings due to their strong opinions on policies. These opinions were short-lived when many were reprimanded by Chinese officials, being told to tell the truth and protect state interests. Through persuasion and even questionable arrests of similar voices, the budding seeds of change were squashed by censorship measures.
Ukraine Crisis
On February 22 of 2022, the official account for the Embassy of Ukraine in China condemned Russian aggression toward nearby people groups. This post made it to the top of Weibo’s trending list, getting 12,000 comments within the first four hours. Meanwhile, a Chinese news outlet inadvertently posted instructions to censor all anti-Russian content. This post was quickly deleted.
Weibo shares: an investment opportunity?
Weibo shares are listed as ADR’s on the NASDAQ under the ticker ‘WB’. They are also listed in Hong Kong under the stock code ‘9898’.
Read Asia Markets’ guide to buying Chinese stocks to find out more about how to invest in stocks like Weibo.
Like so many Chinese technology and internet business, Weibo’s share price has fallen substantially in recent years. Over the past year, on the NASDAQ Weibo shares have tumbled 48%.
Most of this fall can be attributed to investors’ concerns about a crack-down on big technology companies by the Chinese Government and also intensifying scrutiny on Chinese ADRs by regulators in the United States.
Despite the falling share price Weibo has reported no material changes in its core business. In fact, ince since its creation as a China-friendly platform, Weibo has demonstrated remarkable resilience and adaptability. The app’s vast user engagement shows that its handling public and Government relations have been successful.
The company has moved to take advantage of its low share price and also to demonstrate confidence in the underlying business, by recently announcing it will undertake a US$500 million buyback of its NASDAQ listed shares.
The buyback will be conducted over the next 12 months, ending on March 31, 2023.
This announcement came after the release of its Fiscal Year 2021 results. Key highlights for investors were:
- Net revenues of $2.26 billion, up 34% year-over-year.
- Advertising and marketing revenues of $1.98 billion, up 33% year-over-year.
- Value-added-services revenues of $276.3 million, up 36% year-over-year.
- Operating margin of 31%.
- Total monthly active users in December 2021 of 573 million, a net addition of approximately 52 million users on a year-over-year basis.
- Average daily active users in December 2021 of 249 million, a net addition of approximately 25 million daily users on year-over-year basis.
Weibo compared to Facebook and Twitter
Weibo currently trades on a forward P/E of 9.25 and an enterprise value/EBITDA of 8.03. How does this stack up against more well-known social media networks in western economies?
Meta Platforms (NASDAQ: FB) (owner of Facebook and Instagram) trades on a forward P/E of 17.70 and an enterprise value/EDITDA of 10.81.
Twitter (NYSE: TWTR) trades on a forward P/E of 45.25 and an enterprise value/EDITDA of 171.59.
So, you can see that on paper, Weibo currently represents good value, but its lower valuation is a reflection of a perceived higher level of operational risk by investors and possibly fewer growth opportunities.
For the astute investors, who has conviction in the Weibo business and its continued growth, today’s prices could however represent an exceptional buying opportunity.
We hope we provided valuable insight for all who have asked “what is Weibo?”. Read more articles about Chinese stocks here. Remember to subscribe to Asia Markets for exclusive subscriber-only content.