Blame it on weak market sentiment or Alibaba’s highly anticipated initial public offering, but Weibo, Sina Corp.’s Twitter-like microblogging service, appears to have failed to ignite investor interest with its US listing plans.
According to its latest regulatory filing, Weibo is seeking to raise US$437 million in its IPO at a price range of US$17 to US$19 per share, less than the US$500 million it had planned to raise according to its IPO application. That puts the company’s valuation between US$3.2 billion and US$3.6 billion, far less than its initial target of US$6 billion.
If anything, Weibo’s move shows the competitive pressure coming from Tencent Holdings’ (00700.HK) WeChat service. Weibo needed to lower its targets to help ensure the success of the IPO.
Fresh funding is key for Weibo to transform itself from a social media platform to an interactive portal for mobile commerce, with the help from its second largest shareholder Alibaba Group.
Alibaba will see its stake in Weibo increase to 32 percent from 19.3 percent prior to the IPO as Sina will sell 24 million shares and Weibo will issue three million new shares to Alibaba, while Sina’s stake in Weibo will drop to 57 percent from 78 percent prior to the deal. That indicates Alibaba’s growing impact on Weibo’s business after the IPO.
Right now, Weibo appears to be losing its growth momentum in the face of Tencent’s challenge. An increasing number of people are preferring the WeChat mobile application for peer-to-peer communications, information gathering as well as mobile commerce.
Though China’s largest social media platform, Weibo is gaining the image of an outdated communication portal.
Still, the platform maintains a strong influence over Chinese internet users, primarily because of its celebrity accounts, also known as Big Vs, who use the platform to express their views on current affairs. The government’s stepped-up efforts to control political discussions have not diminished the Big Vs’ following.
Meanwhile, Alibaba is keen on building its own mobile commerce presence to narrow the gap with Tencent. It has its own Laiwang mobile application as well as investments in Weibo and Tango. It is also developing its own mobile operating system, Aliyun, in cooperation with handset makers in a bid to secure the upstream segment of the whole industry value chain.
However, the e-commerce giant still doesn’t have a clear roadmap on the direction that all these mobile-based platforms should take.
Leveraging Weibo’s powerful presence over the internet, Alibaba and Sina should think of transforming the platform into a promotional vehicle for sellers on Taobao, TMall as well as offline retailers through greater interaction with consumers.
That should help to bridge the gap in Alibaba’s online-to-offline ecosystem. In addition, such commercial collaboration with retailers will build a sustainable business model for Weibo itself.
Clearly, the major challenge for Weibo’s management is how to monetize the platform. Display advertising on the Weibo site is not enough to grow the company’s valuation. Transforming itself into a social platform for e-commerce holds the key to improving its outlook — and luring investors.
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