Chinese battle for microblog supremacy

In the autumn of 2009, when the Chinese web portal Sina launched its microblog, the new platform was barely noticed in the worldwide online cacophony. People were already sending more than 20m tweets a day on Twitter.

But while China may have had a late start, homegrown services resembling Twitter are now gaining such momentum in the world’s most populous internet market that they are bound to change the local industry landscape.

“There is a real war of the microblogs going on,” says Charles Zhang, chief executive of Sohu, one of China’s largest web portals and one of Sina’s fiercest rivals.

By the end of last year, 63m people, almost 14 per cent of the country’s 457m web users, had taken to microblogs, according to China Internet Network Information Center, the state web registrar.

Analysts estimate that number has more than doubled over the past two months as Sina’s microblog, called Weibo, hit 100m users alone by the end of February.

Half a dozen other Chinese internet companies run similar products, with Tencent and Sohu being Sina’s most serious competitors. All of them are thriving because Twitter is blocked in China. But the popularity of the tool means that those internet companies that have established themselves as main ‘homes’ for Chinese web surfers in the past are at risk of losing that valuable position.

That risk is clearest for Tencent, the world’s third-largest internet company by market capitalisation, which has built itself into a formidable social networking company through QQ, its instant messaging tool with more than 630m active accounts. Baidu, the company which runs China’s leading online search engine, could be challenged for its dominant share of the country’s online advertising market.

“We see Sina’s commitment in building the platform and competition aggressively catching up on user registration as a validation that Weibo is becoming a new social ecosystem that will transform Chinese internet user behaviour in the next few years,” said Richard Ji, an analyst at Morgan Stanley, in a recent research report.

All companies in the game are aware of that. Charles Chao, Sina’s chief executive, told investors earlier this month that making money out of microblog users was not a priority because staying ahead of the competition was more important.

Mr Zhang claims that will be difficult. “The game here is completely different from the US. There, one company, like Facebook, would start a new business model and then another, like Twitter, would start something else,” he says. “But here, Sina copied Twitter first and then we all followed in copying. So there is no technological barrier.”

The Sohu chief predicts that monetisation of microblogs in China will not begin until the top three providers of such services have reached an equilibrium in market share.

“Then, everyone will sit down and say, now let’s make some money,” he says, adding that this moment will come next year at the earliest.

But analysts say this is not just a fight for numbers. Sina’s users spend much more time on average on the microblog than those of its competitors.

“I believe Sina will probably be far ahead in the Chinese market in the future because it has made the microblog its core strategy,” says Deco You, an analyst with iResearch, an internet research firm. “Tencent’s microblog is little more than a roadblock meant to check Sina.”

Sina has demonstrated that difference over the past few weeks with an aggressive roll-out of new features that continue to take its microblog beyond being just a Twitter clone.

With location-based services resembling Foursquare and an instant messaging function which directly challenges Tencent’s QQ, Sina Weibo has become almost a full-fledged social networking platform.

That development is set to continue as the company has set up a Rmb200m ($30m) fund, also backed by venture capital firms such as Sequoia, to help foster the external development of applications which can be used in the future.

Sohu is trying to keep up with features such as a matchmaking service, and by closer integration of its microblog and its news portal. Content from the microblog accounts of celebrities is being promoted through special reports on the front page, encouraging more readers to sign up to the microblog.

Despite the fierce battle, analysts say there is room for more than one big player. “China is not a winner-take-all market in microblogging or SNS,” says Bill Bishop, an independent analyst in Beijing.

He points to the fact that Sina tends to attract better-educated users with higher incomes in China’s largest cities while Tencent has its main base among younger, lower-income people in small-town China.

Once the race is decided, analysts believe there will be rich pickings. SIG Susquehanna forecasts that Sina’s microblog will generate $10m in advertising revenue this year and that this will grow tenfold by 2013.

Additional reporting by Chen Yuanni

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