What is Weibo? (and is China’s Twitter a good investment opportunity?)

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Mention social media and people in the US and most other Western countries will immediately think of 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 them is Weibo.

What is Weibo?

According to the latest data from Statista, Weibo is the 10th largest social media network in the world and the second largest network in China. It is best described on China’s Twitter and mirrors many of Twitter’s most successful features. While Chinese is the predominant language on Weibo, many businesses, celebrities, and Western users choose this site to connect with Chinese consumers and expand their reach.

Weibo provides a Chinese-friendly platform where users can create profiles, post messages, follow friends or celebrities, and collect cultural information.

Weibo history

Following the Ürümqi riots in northwest China in July 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 technology company called Sina Corporation created Sina Weibo in August 2009, a month after Twitter was banned.

Even the name of this site offers a glimpse of its considerable success. Derived from the Chinese term “microblog”, Sina Weibo gained universal recognition for this generic term, even though similar companies tried to use the same term with short-lived success.

The success of Weibo when it launched in 2009 was rapid. In just 2.5 years after its inception, Weibo has reached around 100 million posts per day.

The same benchmark took Twitter 5 years, double that time, to complete.

Strong user growth has continued ever since. In recent years, Weibo has seen steady growth in the number of daily (DAU) and monthly (MAU) users. In 2018, Weibo had 462 million MAUs. Now with at least 573 million monthly users as of January 2022, this platform proves that it remains 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 publications are divided into “Clients”, or brands, and “Platform Partners”, or organizations protected by copyright.

A small percentage of Weibo’s revenue comes from users’ paid memberships. However, most Weibo services are free and publicly available and include the following:

  • Discovery Products
  • Self-expression products
  • Social products

Discovery Products

A crucial ingredient to Weibo’s enduring success is its ability to deliver 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 news feed is made up of both relationship-based and interest-based information. On the homepage, users will find new posts from those they choose to follow as well as relevant interests gathered from a user’s history, trending topics, or related topics.

The search function allows users to find profiles, articles, posts, images and videos related to a given search term. Similarly, Weibo offers channels to bring together users with related interests, or places to view and interact with posts on any topic. To find trending topics, users can use the “Trending” feature to browse the most popular topics on Weibo. Users can find all of these features in the discovery area and connect with others who share their insights.

Self-expression products

Weibo offers many outlets for users to share their thoughts and ideas. This provides the foundation for all interactions on the platform, as connections flow from organic posts.

Users can 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, businesses, celebrities and government leaders can create an individual page to share their identity and thoughts with their followers. VIP members can subscribe to gain access to additional profile features. Additionally, notable organizations and individuals can verify their identity to get a “V” status on their profile.

All users have the option to post stories from their smartphones as images or videos with stickers and filters. Alternatively, users can broadcast and view live streams by individuals and organizations on Weibo.

Social products

In order to maximize engagement, Weibo offers social features including asymmetric follows, reposts, comments, favorites, likes and mentions. With these tools, users can have discussions, share opinions and contribute to a vast network of knowledge.

Recent controversies

With differing opinions as abundant as Weibo’s millions of users, it’s 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 collision with a high-speed train in 2011, Chinese authorities did their best to drown out the news. With parts of wrecked cars even being buried at the accident site to quickly spread the situation, the truth about this event might have been lost if Weibo users had not been among the survivors. Many Weibo users have expressed outrage at the handling of this situation, showing that the Chinese public will fight for their values ​​and opinions.

Muted liberal activism

Prior to mid-2013, there were vocal Chinese businessmen with verified accounts who garnered large followings due to their strong opinions on politics. These views were short-lived when many were reprimanded by Chinese officials, being told to tell the truth and protect the interests of the state. Through persuasion and even dubious arrests of like-minded voices, the nascent seeds of change have been crushed by censorship measures.

Ukrainian crisis

On February 22, 2022, the official account of the Ukrainian Embassy in China condemned Russian aggression against neighboring popular groups. This post topped Weibo’s trending list, getting 12,000 comments in the first four hours. Meanwhile, a Chinese media outlet inadvertently issued instructions to censor any anti-Russian content. This post was quickly deleted.

Weibo shares: an investment opportunity?

Weibo shares are listed as ADR on NASDAQ under the symbol “WB”. They are also listed in Hong Kong under stock code “9898”.

Read Asia Markets’ guide to buying Chinese stocks to learn more about investing in stocks like Weibo.

Like so many other Chinese technology and internet companies, Weibo’s share price has fallen dramatically in recent years. Over the past year, NASDAQ Weibo shares have fallen 48%.

Most of the decline can be attributed to investor concerns about the Chinese government’s crackdown on big tech companies and heightened scrutiny of Chinese ADRs by regulators in the United States.

Despite the stock price crash, Weibo reported no significant changes in its core business. In fact, since its inception as a pro-China platform, Weibo has shown remarkable resilience and adaptability. The app’s extensive user engagement shows that its handling of public and government relations has been successful.

The company has taken steps to take advantage of its share price weakness and to demonstrate its confidence in the underlying business, recently announcing that it will undertake a US$500 million buyback of its NASDAQ-listed shares. .

The redemption will be made over the next 12 months, ending March 31, 2023.

This announcement comes after the publication of its results for the 2021 financial year. The main highlights for investors were:

  • Net revenue of $2.26 billion, up 34% year over year.
  • Advertising and marketing revenue of $1.98 billion, up 33% year over year.
  • Value-added services revenue of $276.3 million, up 36% year-over-year.
  • Operating margin of 31%.
  • Total monthly active users as of December 2021 of 573 million, a net addition of approximately 52 million users on an annual basis.
  • Average daily active users in December 2021 of 249 million, a net addition of approximately 25 million daily users on an annual basis.

Weibo compared to Facebook and Twitter

Weibo is currently trading on a forward P/E of 9.25 and an enterprise value/EBITDA of 8.03. How does this compare to more well-known social media networks in Western economies?

Meta Platforms (NASDAQ:FB) (owner of Facebook and Instagram) is trading on a forward P/E of 17.70 and an enterprise value/EDITDA of 10.81.

Twitter (NYSE: TWTR) is trading 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 reflects a higher level of operational risk perceived by investors and perhaps less opportunity for growth.

For savvy investors convinced of Weibo activity and its continued growth, today’s prices could, however, represent an exceptional buying opportunity.

We hope to have provided valuable information to anyone who has asked “what is Weibo?”. Read more articles on Chinese stocks here. Don’t forget to subscribe to Asia Markets for exclusive subscriber-only content.

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