May 10, 2011 7:46 pm

Weibo posts lesson in making social media pay

When Xu Zhiming opened his online bookstore in China last June, his business idea was all about speed.

Kuaishubao, which loosely translates as “speedy bookbag”, competes with Dangdang, China’s leading internet bookseller, and Amazon, the world’s biggest online retailer, with a promise to deliver books to homes and offices in selected cities within an hour of ordering.

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But Mr Xu was forced to be speedier than planned due to China’s love affair with social media – particularly microblogs, the Twitter-like platforms for short instant online messages.

Mr Xu’s goal when he set up an account on Sina Weibo, China’s leading microblog with over 100m users, was to create a marketing buzz. But last October, a user posted a message asking if he could get a book delivered to the coffee shop where he was right at that moment.

“We did it, and that was how we started taking orders via microblog,” says Mr Xu. Now, Sina Weibo drives 40 per cent of the bookstore’s traffic.

The online bookseller is not alone. More individuals and companies in China are using social media to make money, fuelling expectations that websites such as Weibo will start making money sooner than Twitter – which is blocked in China – and other western rivals.

Sina Corp, Weibo’s parent, has developed features to make it more suitable than Twitter for commercial use. Pictures and videos can be easily posted and re-posted. Re-posted messages form a long thread in which pictures remain visible, and such a conversation makes it much easier for a commercial product or service to go “viral”.

The commercialisation of social media in China is occurring much earlier than it did in the US.

Sonia Ai, chief executive of China Focus Interactive, an advertising agency specialising in social media, says Twitter did not offer its first commercial function until four years after launch. Sina Weibo was being used commercially almost immediately after its launch in August 2009.

Advertising executives say that in 2009 Renren, the Chinese Facebook clone that listed in New York last week, became the mainstay of online marketing in China, overtaking online bulletin boards. But since its launch, Sina’s microblog has rapidly surpassed both.

In China, Sina’s microblog appears to have the edge among applications designed to help small business marketing.

That is mainly because Renren, in an effort to discourage abuse and fraud, has erected significant hurdles to commercial use. It limits the number of followers to any individual account to 2,000 – making such accounts of little value for marketing – and is asking Rmb600,000 ($92,000) a year for corporate accounts.

Despite the challenges, analysts expect social media to boost monetisation quickly. In China, primary revenue will come from “company users, such as ads or promotion fees, while in the US the revenue will be mainly from individual users”, says Dong Xu, social media expert at Analysys, a Beijing-based internet research company.

While Chinese internet users, unlike those in the US, are unused to paying for online services or content, they are more tolerant of commercialisation. “They do not care there are ads on pages,” says Mr Dong.

The enthusiastic uptake of microblogs as a commercial tool and Sina’s rapid development of Weibo have fed huge expectations.

Sina’s shares have risen more than 260 per cent over the past year. Sina has become a play on social media, “a kind of public version of Twitter”, says Bill Bishop, an internet analyst in Beijing. But Sina derives 75 per cent of income from ad sales on online portals. When the company reports first-quarter results on Wednesday in the US, investors will look closely for signs that Weibo is starting to make a meaningful contribution.

Mr Xu believes it will. He notes that Sina is experimenting with commercial tools. Its sub-microblogs allow him to push certain products or themes, he says, while book ads on the microblog lead users to his website where they can buy using Weibo login details.

Ms Ai says Sina has recently started taking a lot of ads on the microblog. “They have to. They can’t just sit there while everyone else is making money on their product.”

Additional reporting by Chen Yuanni

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