Wall Street Journal has a great article on the competition among internet firms in China, that are trying to become the Facebook of China. Mark Zuckerberg better watch out!
Charles Chao has built Sina Corp. into a Chinese Twitter. Now he wants it to be a Chinese Facebook, too.
Mr. Chao, Sina’s chief executive, has led the company’s transformation from an online portal focused on news and blogging to China’s most talked-about social-media company. Since he launched Sina Weibo—which lets users send short, Twitter-like messages to their followers—less than two years ago, the service’s popularity has exploded, with more than 140 million users as of March, by Sina’s count. RedTech Advisors LLC, of Shanghai, estimates that Sina Weibo has 57% of China’s microblog users and 87% of its microblog activity.
But in the ultracompetitive world of China’s Internet industry, such leads are hard to keep, and Sina faces pressure from rivals, who are pouring resources into the social-networking sector. Chief among them is Tencent Holdings Ltd., an industry giant with a big pile of cash that has been aggressively promoting its own microblogging site.
In an interview, Mr. Chao laid out a series of changes he is making to Weibo (which literally means “microblog”) to broaden its offerings and attract more users.
Weibo’s initial incarnation was “the right way to enter this market,” said Mr. Chao, a former journalist in his 40s with a serious demeanor. But now there is “a great need for people to communicate, to share among friends, among people who know each other.”
Social-networking sites have taken off in much of the world, with users across the globe becoming increasingly interconnected. But unlike many other markets, China—which has more than 450 million Internet users, more than any other country—isn’t dominated by big U.S. companies like Twitter Inc. and Facebook Inc. In fact, China’s government blocks access to those two sites for users inside the country. MySpace China, an affiliate of the U.S. social-networking site that is partly owned by News Corp., has struggled. News Corp. also owns The Wall Street Journal.
Instead, a host of domestic Chinese companies are competing to fill the space. RenRen Inc., which runs one of the biggest Facebook-like sites in China, raised $743 million in a U.S. initial public offering in May that it is using to beef up its offerings. Rival Kaixin001, held by Happy Networks Ltd., also operates a social-networking site similar to Facebook. Chinese search giant Baidu Inc. is trying to turn its popular message board, Baidu Tieba, or Postbar, into more of a social network, and had its own microblogging service, Baidu Shuoba, or Baidu Talk, which failed to gain traction against Sina and now has been suspended. Sohu.com Inc. and NetEase.com Inc. offer microblogs.
Tencent has a successful online-game business, but executives say they are focusing their efforts on social networking and on their Weibo site in particular, including efforts to have third-party developers make applications for it, as Sina is doing. Tencent’s challenge lies largely in Sina’s users, generally a cosmopolitan set of social “influencers” from which Sina can expand outward and downward, compared with Tencent’s younger users in China’s lower-tier cities, from which it is harder to move up, analysts say.
China’s Internet companies have generated enormous enthusiasm among investors, and some of their valuations have reached levels similar to those of their U.S. counterparts, even though China’s online-advertising market is still smaller than the U.S. market.
Chinese social-media websites collectively have hundreds of millions of users who swap messages and play games on the sites using phones and computers. Facebook itself is considering entering China despite the difficulties of dealing with government censorship—especially for a site that has been used as an organizing tool by protesters in the Middle East and one that has been blocked in China for nearly two years.
Weibo won’t be turning into Facebook, Mr. Chao said, but will have more Facebook-like features to allow for “stronger social relationships based on our new applications.”
Analysts say the transformation will be a challenge. Sina, which was launched in 1999 and trades on Nasdaq, is far smaller than some of its rivals. Its market value of nearly $6 billion is a fraction of Baidu’s more than $40 billion and Tencent’s nearly $50 billion. Tencent has significantly more resources to spend on marketing, with $1.7 billion in cash as of March, compared to Sina’s $577.6 million.
In addition to the more than 200 million users Tencent claims for its microblogging site—it’s hard to compare the companies’ user counts, with their different methods of counting—Tencent has legions of users of its flagship product, QQ, China’s most popular instant-messaging platform, and runs a social-networking site called Qzone.
Mr. Chao said he wasn’t worried. “It’s not a competition about how much cash you have,” but about “product improvement” and “end-user experience,” he said.
IChinaStock, a research website for global investors, says Tencent, which already has social connections between its users, is closer to becoming “China’s Facebook,” but that “in terms of media influence, it will be very difficult for Tencent Weibo to surpass Sina Weibo.”
The growth of social media in China comes even as the government has increased efforts to regulate Internet use. Over the past two years, an increasing number of overseas websites have been blocked in China for long periods of time, damping participation in ever more global social networks despite the legions of Chinese Internet users. Users around China have reported slower and less stable access to popular overseas websites such as Google Inc.’s Gmail, and researchers say it appears traffic to Google’s servers is being limited. Chinese websites, including Sina, are required to police themselves to keep their government-issued operational licenses, a costly task involving dozens of employees who monitor the sites around the clock.
Although Sina is known for its heated discussions, at times over controversial issues such as local government corruption and soaring property prices, most talk on the site isn’t political. When sensitive topics arise, the company can be creative in limiting conversation without cutting it off altogether—for example, by blocking searches of sensitive keywords but not stopping people from publishing them on their own microblogs.
For topics known to be taboo in China, such as the spiritual group Falun Gong, Tibetan independence and the government’s violent 1989 crackdown on student protests in Tiananmen Square, the company sometimes removes messages entirely.
When asked if he was concerned a government crackdown might affect the outspoken nature of Weibo, Mr. Chao said that Sina had years of experience in dealing with content regulations while maintaining its websites and that he was confident the company could handle it.