INTERNET: Facing Stiff Competition, the Twitter-Like Weibo Looks to ‘Oasis’ for Relief

Bottom line: Weibo and its stock could remain under pressure for some time to come, potentially a long time if its new Oasis platform doesn’t provide the kind of relief that it is hoping for.

Weibo looks to Oasis for relief

With corporate earnings in the spotlight, I’ve decided to zoom in this week on the Twitter-like Weibo (Nasdaq: WB), following the release of its quarterly results a week ago. As a long-time China tech watcher, I particularly like Weibo for its ability to reinvent itself, and like to think of it as “The little company that could, then couldn’t, then could again, then couldn’t” and so on.

Hopefully I’m not dating myself with that reference to the American childhood classic “The Little Engine That Could,” about a train that overcomes various obstacles to show the world its true abilities. But the bottom line is that Weibo has reinvented itself at least once in its brief lifetime that began with a bang a decade ago. It’s currently trying to do that again with a new soon-to-launch product called Oasis, which I’ll examine more closely in the second half of this column.

The fact that Weibo is still alive and doing relatively well testifies to its ability to find new relevance in China’s ever-changing internet — no easy feat where the latest craze often appears overnight, only to fade and die two or three years later. Many compare the company to Twitter (Nasdaq: TWTR), and as a user of both I can testify to the similarities. That’s no coincidence, since Weibo’s initial meteoric rise was a direct offshoot of the blocking of Twitter in China in 2009.

The two companies have followed somewhat similar paths since then, though Weibo really can’t compare with Twitter’s claim to fame as the main soapbox of the world’s most powerful leader, U.S. President Donald Trump. But to get a sense of where Weibo currently stands in the world, it’s helpful to look at some of its metrics compared with Twitter. The latter is a far more global company, but one that has also struggled to monetize its big user base.

The two companies have done a bit of a seesaw over the last couple of years. Weibo lived in Twitter’s shadow for most of its early years. But it notched a major achievement when it passed its U.S. peer in terms of users and market value in 2017 — impressive feats when one considers that Twitter was both older and far more globally diverse than its Chinese little sibling.

But investors seem to be souring on Weibo these days. Following a more than 60% plunge in its stock over the last two years, the company is now worth about $10 billion, or less than half of Twitter’s latest value of about $23 billion. In terms of daily average users, Weibo is still ahead with 216 million versus Twitter’s 145 million, according to their latest reports. But many may wonder about the quality of Weibo’s users compared with Twitter’s. Weibo’s complete reliance on China is also probably considered a big risk factor.

Both companies are now profitable, which was difficult for each to achieve as both looked for ways to monetize their large user bases. But Twitter’s revenue is still about twice as big as Weibo’s, with $824 million for the former versus $468 million for the latter in their latest quarters. That does seem to show that Twitter indeed has higher quality users that advertisers are willing to pay more to reach.

Ups and downs

All that said, we’ll spend the rest of this column briefly recounting Weibo’s biggest ups and downs, and finish by looking at its latest attempt to reinvent itself with Oasis.

Following its sudden rise to prominence in 2009, Weibo enjoyed a few years in the sun as it became an important news source for many Chinese who traditionally mistrusted more official media. It also helped that the government embraced Weibo as an effective platform to communicate with the people.

A crowning achievement during that initial success period came in 2013 when e-commerce giant Alibaba (NYSE: BABA) made a major investment in Weibo. Alibaba continues to be a major stakeholder in the company to this day, and provided 7% of Weibo’s revenue last year, according to its 2018 annual report.

But Weibo began to fall out of favor not long after the Alibaba tie-up, as alternatives began to appear in the social networking realm, most notably the wildly popular WeChat. Weibo found a new lease on life around three years ago by hopping on China’s video craze. But that effect has rapidly worn off in the last year as other services like Kuaishou and Douyin have grown rapidly.

That brings us to the present where Weibo is trying to once again reinvent itself with Oasis, which the company describes as “a platform for people to share the status of their life.” Apparently that’s a nod to the fact that current Weibo users mostly share news and their related views, similar to Twitter. Thus this new platform, which is set to launch this month pending regulatory approval, could be a more Facebook-like way to share more personal things.

Interestingly, a transcript from Weibo’s latest quarterly earnings call shows only three analysts asked questions, quite a small number for such a high-profile company. One of those asked about Oasis, while the other two queried on a softening ad market that is hurting not only Weibo but other advertising-dependent companies.

The low analyst interest could partly be explained by the flood of other Chinese internet companies reporting earnings last week, including big names like Tencent, and Huya. But it does seem like interest in the company is waning in the face of more dynamic up-and-comers with far faster growth.

For the short term certainly, people seem to be skeptical about Weibo due to the competition factor and slowing ad market. It’s quite possible the company could reinvent itself once again with Oasis, as it did in the past with video. But that element is still quite a big question mark, especially in the face of existing competition from WeChat. That means the company and its stock could remain under pressure for some time to come, potentially a long time if Oasis doesn’t provide the kind of relief that Weibo is hoping for.

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