China’s Internet Titans Fend Off Mobile Challenge With Microblog Growth

Two of China’s largest internet companies have reported contrasting Q3 financial fortunes – but each’s mobile fortunes have been hit by new China Mobile rules.

  • Twitter rival and portal operator Sina made a big swing in to the red despite growing sales, after writing off millions from its mobile business and against its investments.
  • But IM operator Tencent saw 13.6 percent higher profit after promoting its QQ service inside its games portfolio pushed the messaging platform to an eye-popping 711.7 million users.

Sina (NSDQ: SINA) highlights

Sina revenue grew by a fifth to $130.3 million thanks to a quarter higher advertising sales. But net income swung from last year’s $31.3 million Q3 profit to a $336.3 million loss this year.

Sina blamed $350.1 million in impairments, including $68.9 million against its mobile services division, whose projected earnings have been hit by Sina having to give higher revenue shares to its mobile partners. Sina also cited “decreases in revenues and earnings multiples of peer mobile value-added services companies”.

Sina also wrote off a combined $281.2 million against its investments in China Real Estate Information Corporation and the internet retailer Mecox Lane, which floated on Wall Street 12 months ago.

The company overhauled its Weibo microblog service in September. Both Sina and Tecent are striving to integrate their respective IM and other services around their fast-growing microblog services, pushing their spending higher. “Our focus now turns to adding more social networking features to Weibo to increase user stickiness,” Sina CEO Charles Chao says.


Tencent highlights

Tencent’s Q3 profit rose almost 21 percent from last year to RMB2,769.1 million ($435.7 million) on 43.4 percent higher revenue of RMB7,496.2 million ($1,179.6 million).

It, too, cites the same mobile detriment as Sina but says: “While the ‘cancellation before verification’ policy introduced by China Mobile in early 2011 has dampened the growth of our mobile value-added services business, mitigating measures that we have implemented are cushioning the impact of fraudulent users and improving our collection rate.”

But its online advertising sales grew by 84 percent to RMB600 million ($94.6 million).

Tencent warned: “Our community VAS revenue growth has slowed because of the decelerating growth of China’s Internet user base, plus the maturity of the QQ Farm and QQ Ranch social game.”