INTERNET: Weibo Seeks More Relevance with Expanded Messages

Bottom line: Weibo’s elimination of the 140-character length limit for posts looks like a good strategic decision, as it consolidates its position as an alternative news source to traditional state-owned media.

Weibo lifts length limit for posts

Social networking (SNS) leader Weibo (Nasdaq: WB) is taking a radical new step and dropping the rule that strictly limits the length of microblog posts, in its bid to remain relevant and avoid being marginalized by dominant rival WeChat. The move is quite bold on the one hand, but also probably long overdue, in a world where people have many SNS options that provide more flexibility in the kinds of information and messages they share online.

The decision looks broadly positive for Weibo, which has evolved into an informal news source for many of its 200 million users. The company operates a service nearly identical to American SNS pioneer Twitter (NYSE: TWTR), and rapidly rose to become the clear leader in the space after Twitter itself was blocked in China in 2009.

But since then the company’s growth has slowed somewhat, though it appears to be regaining some momentum in the 2 years since forming a major strategic tie-up with e-commerce leader Alibaba (NYSE: BABA). Over that period, Weibo has seen other rivals like NetEase (Nasdaq: NTES) close their rival microblogging services, leaving it as the only real player using the format that allows subscribers to follow each other.

According to the latest reports, Weibo has confirmed that it will start testing a new system that lets users post much longer messages than the current limit that caps such posts at a 140 Chinese characters. (English article; Chinese article) A small number of VIP customers will be able to do the longer posts in a trial starting January 28, and the system will be open to the remaining 200 million users a month later.

The new system won’t eliminate the limit altogether, but instead will raise it more than 10-fold to 2,000 characters. Users of Weibo will still only see up to 140 characters in messages posted to their feeds of accounts they follow. But when they click on an individual post in their feed they will be able to see the longer messages. The move comes as the original Twitter reportedly gets set to make a similar change later this year, according to other media reports.

News Alternative

The idea behind these expanded messages is relatively simple. In a country like China where the traditional media are tightly controlled and frequently distrusted, Weibo and other similar services have emerged as an alternative news source for many people. Such news often comes from many unofficial sources that aren’t subject to the same kinds of self-censorship requirements that Beijing imposes on traditional media.

The original idea behind Twitter’s and later Weibo’s limits on message length was to force people to be brief. But with so many people now getting their news on the service, allowing the longer messages should theoretically let people read entire stories with more details and analysis, negating the need to click on a link and go to another site if they want to get more complete information.

The move comes as Weibo seems to be regaining some of its momentum that was fading when it made its New York IPO in 2014. The company’s revenue grew nearly 50 percent in its latest reporting quarter, and it recently moved solidly into the profit column after losing money in its early years. Equally important, Weibo’s subscriber base has been growing steadily in the 30-40 percent range in the last 2 years, indicating that users still find the service relevant.

Investors weren’t too excited by the scrapping of the character limit, bidding down Weibo’s stock by 2.4 percent in the latest session amid a broader sell-off on Wall Street. The stock has lost 20 percent of its value since Christmas amid a broader China sell-off, and at its latest close of $15.61 now trades below its IPO price $17. This latest move, combined with other recent trends, make the stock look like a solid long-term buy, though its current high multiple and uncertainty in China’s stock markets could limit the upside for now.

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