How many users do you have? For investors in Chinese internet companies, that's an important question. After new government data highlighted a decline in the number of users of Chinese microblogs, shares of Sina, which owns the popular Weibo site, slid almost seven per cent. But the fundamentals for China's Twitter look strong. Investors may be hung up on the wrong metric.
The nine per cent fall in microbloggers to 281 million in 2013, as noted by the state-backed China Internet Network Information Center, seems to confirm two trends, both of which bode ill for Sina. Stricter rules on "rumour-mongering" announced in September threatened delinquent users with a prison sentence. Meanwhile, rival Tencent has been soaking up users' time through its popular chat app, WeChat.
Yet, Sina's numbers tell a different tale. Third quarter revenue from advertising and fees on Weibo grew 125 and 121 per cent year on year respectively in 2013, and daily active users increased by 11 per cent from the previous quarter to over 60 million. Sina also partnered with e-commerce group Alibaba to work on mobile payments and transactions on Weibo.
The problem is that user numbers can be a false friend. They're helpful when companies have no revenue or earnings, and may help lure advertisers. But they can also become useless.
Tencent, for example, boasts 623 million "monthly active users" on its social network, more than there are internet users in China. Sina Weibo has 600 million registered accounts, but only a tenth of them are "daily active users". While Tencent gives monthly users, Sina gives daily, making it virtually impossible to compare like with like.
What matters more is how quickly users can be turned into revenue. That may mean user numbers fall, but is not necessarily a bad thing. Tencent, which makes 90 per cent of revenue from e-commerce and paying users, saw its revenue from games and in-app purchases of virtual items, including animated "stickers", rise 34 per cent in the third quarter last year. At the same time, the number of subscribers who buy such services fell 17 per cent. As internet business models mature to rely less on advertising money, less can be more.
The nine per cent fall in microbloggers to 281 million in 2013, as noted by the state-backed China Internet Network Information Center, seems to confirm two trends, both of which bode ill for Sina. Stricter rules on "rumour-mongering" announced in September threatened delinquent users with a prison sentence. Meanwhile, rival Tencent has been soaking up users' time through its popular chat app, WeChat.
Yet, Sina's numbers tell a different tale. Third quarter revenue from advertising and fees on Weibo grew 125 and 121 per cent year on year respectively in 2013, and daily active users increased by 11 per cent from the previous quarter to over 60 million. Sina also partnered with e-commerce group Alibaba to work on mobile payments and transactions on Weibo.
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Tencent, for example, boasts 623 million "monthly active users" on its social network, more than there are internet users in China. Sina Weibo has 600 million registered accounts, but only a tenth of them are "daily active users". While Tencent gives monthly users, Sina gives daily, making it virtually impossible to compare like with like.
What matters more is how quickly users can be turned into revenue. That may mean user numbers fall, but is not necessarily a bad thing. Tencent, which makes 90 per cent of revenue from e-commerce and paying users, saw its revenue from games and in-app purchases of virtual items, including animated "stickers", rise 34 per cent in the third quarter last year. At the same time, the number of subscribers who buy such services fell 17 per cent. As internet business models mature to rely less on advertising money, less can be more.