Sina – Investment Conference Presentation – Part 3 –

Sina Presentation – Part 3 – My Comments

For part 2, see http://chinese-net-gaming-stock.blogspot.com/2007/04/sina-investment-conference-presentation_18.html

Future is looking bright for Sina. By replacing video ads for text ads, she can charge more per ads. In addition, she is going into so many exciting new business areas.

Sina truly has many strong channels. As times go by, especially with more multimedia contents, the cost of entry will increase and the number of competitors will decrease. In addition to just ad based, many channels can be fee based. For example, Sina is number 1 in both the finance channel and auto channel. I am certain there are premier products Sina can develop that would be fee-based in those two channels.

Sina is also number 1 in sports channel, 3 times bigger than the next competitor. For the 2008 Olympics, Sina has to be the biggest beneficiary. Because Sohu is the official sponsor, I don’t think Sina can get 3 times the Olympic revenue of Sohu. Or in other words, Sina will benefit the most from Olympic in absolute term while Sohu might benefit the most from Olympic in percentage term. Nevertheless, Sina will benefit greatly from the Olympics.

On the mobile front, I don’t see mobile continues to go down by 15% for the next two years. But I guess one would never know. But most importantly, by 2008, if 3G really gets started, Sina might found herself in a different business model.

Rather than just two mobile telecom operators (Mobile and Unicom), there will be 4 (maybe even more). Rather than just a service provider, Sina would be a content provider. Her music boxes gives her great music contents. Her WAP and portal gives her great news contents. Her video initiative gives her great video contents.

Right now, in the current SP model, we have 2 mobile providers with hundreds or thousands of SPs, the power resides in the mobile providers. But if we have 4 or 5 mobile providers and maybe 4 or 5 dominant content providers, the business model will be different.

Right now, life is hard to be a mobile service provider. But after 3G, the cost of entry is so high to be a dominant content provider; only giants like Sina can be one. By then, the equation of power would have shifted. The power of the mobile operators and the content providers will be of equal footing. That would only mean good things for the industry as a whole.

It is interesting that Sina is developing Sina Music Box. It is hard to see how can this initiative can be successful unless China really crack down on piracy. Would China go after Baidu or Sogou or Yahoo? I don’t know. But if I can figure out a way to track its popularity, it might be a fun thing to do.

Sina is probably doing the same thing on the video front. It is probably going into the video aggregator business. If Sina can do what she does on the Music Box, she has a much better chance of success. These P2P startups are in a much weaker position than Baidu or Sohu. Even though they are darlings of venture capitalists now, but they are not Baidu and Sohu. The record companies can’t stop Baidu or Sohu from searching pirated songs. On the other hands, Chinese TV stations like CCTV can (and had) stop these P2P startups from “officially” provide CCTV programs on their programs. It is entirely possible that even if Sina music box fails, the experience would carry over to allow Sina to develop a successful “Sina video box”.

The recent punitive measure from USA to pressure China on the piracy front is good news for Sina. Her Sina Music Box and her video initiatives only carry legal contents. Sina’s music and video platform initiatives can only work when China starts to take piracy seriously.

Finally, Sina is in such a strong position and is going after so many promising new businesses, with their track record of great executions, it is hard not to like the company. But its so expansive. Its PE is 50.1 (compare with 32.2 for Sohu and 15 for Ntes). Most of its major new business expansion won’t start to see profit kick in until 2008 (Olympic in 2008, video ads and embedded video ads in 2008, 3g mobile contents in 2009, other initiatives like video TV channels, video aggregator business, music box, fee based services for premium financial and auto contents maybe in 2009 or latter). There doesn’t seem to have a kicker in the short term.
My final verdict: as long as Charles Chao is the CEO, own Sina until retirement. That is if one can find a reasonable point of entry.