January 5th, 2017
FRANCE-CHINA-WEIBO

Investors Dream? Or Destined to fail?

Chinese Microblogging Site Weibo files for 500 million dollar SPO.

With western social networking sites such as twitter and Facebook outlawed by the Chinese government, domestic sites such as Weibo have thrived. With increased interest from companies looking to advertise on their site they have reportedly tripled their revenue during 2013 and expect to continue this rise into the foreseeable future. Is this then the perfect time for investors to capitalise on the Initial Public Offering that looks o so juicy?

Probably the best way of forecasting the successfulness of Weibo is to look at its western counterparts. Below we see a comparison of GOOG, FB and TWTR since the birth of their stocks.

FB-GOOG-TWTR

All of the social networking sites have seen an increase in that last year, and especially google have been a sound investment. Twitter is the only one that really strikes fear into the heart of the sound headed investor. The other thing to take note of is that they all raised drastically in 2013 which ties into the increase in Weibo’s profits. Was this a one off boost that we will never see again or will it repeat itself for Weibo? Considering the successfulness of other social network sites, most would probably say it’s worth the gamble.

There is however, a big looming elephant in the room, or as I see it 2 big elephants. Responsible for housing both these elephants is the Chinese Government who have already banned Facebook and Twitter completely (apart from a 17 square mile free trading zone in Shanghai) and also impacted Google’s share of the search engine market down to 5% due to Google disagreeing to their censorship policies. They have also, probably due to Weibo’s unfiltered state, started to crack down on various microbloggers. Due to a new law passed allowing the government to jail so called ‘rumour mongers’ dozens of microbloggers have been jailed in the last year. This in turn has driven users away from Weibo in favour of mobile messaging services. The ‘China Internet Network Information Center’ reported that during 2013, almost 28 million people chose to abandon the platform. These government crackdowns are starting to harm Weibo in a serious way.

You might be starting to wonder if I am ever going to talk about the mysterious 2nd elephant. Well, imagine if the Laws imposed by the Government on Social Media were to turn in favour of Weibo allowing it’s users to grow again. Although this might at first seem useful to the domestic social networking site, it would also be the start of a journey towards the global giants of Facebook, Twitter and Google being allowed into the Chinese market and at least 1 of these 3 would almost certainly come to dominate the Chinese market. As such it would seem that Weibo is going to struggle on whichever path the Chinese Government chooses to guide it down.

In conclusion it would appear that, as tempting as the Weibo fruits may be, they carry with them a high amount of risk. The only question remaining is, is the risk worth the reward? I’ll leave that decision up to you.

THIS IS NOT INTENDED AS FINANCIAL ADVICE AND SHOULD NOT BE THE ONLY CONSIDERATION WHEN MAKING AN INVESTMENT.

Sources:
http://www.forbes.com/sites/hengshao/2014/03/14/chinas-twitter-weibo-files-for-500-million-ipo/
http://www.bbc.co.uk/news/business-26588397
http://uk.finance.yahoo.com/

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