Bottom line: Twitter’s growing pursuit of business from Chinese advertisers shows it is watching the market for a potential future entry, while a new equity tie-up could see Didi Kuaidi’s hired car services launch on Weibo later this year.
Social networking (SNS) pioneer Twitter (NYSE: TWTR) and its Chinese clone Weibo Corp (Nasdaq: WB) are both in the China headlines today, each taking gambles on different parts of the market. After previously saying that China isn’t a market where it can do business, the original Twitter has quietly begun to court local advertisers, even as its actual service remains blocked in the country. Meantime, Weibo, which rose to prominence after Twitter was first blocked in China in 2009, has announced a relatively large new investment in local hired car services leader Didi Kuaidi.
Each of these moves is more significant strategically than financially, as neither involves huge sums of the money. Twitter’s decision to court local Chinese advertisers mirrors a similar action last year by rival Facebook (Nasdaq: FB), and indicates the company may be reconsidering its earlier decision to keep its core SNS business out of China. Meantime, Weibo has become the latest in a growing list of major Internet companies to invest in Didi Kuaidi, which could use the popular Chinese SNS website as a new platform for its fast-expanding hired car services.
Let’s begin with Twitter, whose latest move comes just a year after CEO Dick Costolo made a low-key visit to Shanghai to check out the China market. (previous post) That visit surprised many, since Costolo had previously said that China wasn’t a place where Twitter could do business, due to Beijing’s policies that require new media companies to strictly self-censor their user-generated content for sensitive material.
According to the latest reports, Twitter has quietly begun courting Chinese companies to advertise on its service that boasts more than 300 million users outside of China. (English article) It was holding meetings with potential new advertisers on the sidelines of the first Chinese edition of the famous Las Vegas-based Consumer Electronics Show (CES) taking place this week in Shanghai.
Twitter already works with a number of globally-focused Chinese customers, including e-commerce giant Alibaba (NYSE: BABA) and household appliance maker Haier, and is looking for more such customers, a company official said. A separate unnamed Twitter source was quoted in the same report, giving the official view that Twitter still hopes that China will change its stance on censorship. Still, this kind of action certainly appears to be laying the groundwork for a potential future entry to China, where Twitter would compete with stiff competition from both Weibo and Tecent’s (HKEx: 700) popular WeChat.
Next there’s the news that says Weibo has become the latest company to pile into Didi Kuaidi, which was formed earlier this year through a merger of China’s 2 largest online providers of hired car services. (English article) Weibo disclosed the $142 million investment in a brief one-sentence filing with the US securities regulator, though it didn’t think the news was major enough to issue a separate press release.
Perhaps it didn’t find the investment too newsworthy since it is just the latest of many major companies to buy stakes in Didi Kuaidi. The company’s investors already include Internet giants Alibaba and Tencent , as well as Russian high-tech investor Digital Sky Technologies (DST) and Japan’s Softbank. Alibaba is also a major stakeholder in Weibo itself, which perhaps is how Weibo got the introduction to invest in Didi Kuaidi.
Whatever the case, this particular investment does look like a good move for Weibo, which is still losing money but is rapidly moving towards the break-even line. Hired car services is a rapidly growing area, and Weibo can certainly leverage its big base of 200 million monthly active users to help Didi Kuaidi find new business. Accordingly, I would expect that perhaps we’ll see a bigger, more high-profile announcement about a roll-out of Didi Kuaidi’s services on the Weibo platform in the months ahead.