Charles Chao: Sina Weibo will integrate real-time search and local information
Sina Technology News, afternoon of April 28th: Sina CEO and President Charles Chao stated today at the ChinaVenture Investment Shanghai Annual Conference held in Shanghai that the widespread coverage of 3G networks and mobile terminals has brought about tremendous development opportunities for mobile internet. Social networking, information services, and mobile terminals are the most important trends for the future of the internet. Sina Weibo combines social networking, real-time search, and localized information services to provide multi-dimensional information.
The following is the full text of the speech:
Good afternoon everyone! There was a bit of a misunderstanding; I originally thought I was here to discuss with PEs some views and ideas on the internet, as well as the progress of Sina Weibo. When I just got off the plane, I saw on Weibo that Mr. Hu Zuliou was discussing the Xinhai Revolution and the Chinese economy. I think this is a grand occasion, so I decided to broaden my topic a little more. We will not only talk about Sina Weibo. I believe many guests present are users of Sina Weibo. Everyone should have an intuitive understanding of what this product is and what it means.
Firstly, from my perspective, let's look at the recent development trends of China's internet. I believe there are several trends worth paying attention to. First, from the content of the internet or online services, there is a trend that has already begun and will become even more obvious in the future: online content is becoming increasingly visualized and video-based. This is a very important trend. In other words, the content we refer to, including raw materials, is evolving towards visualization and videoization. The reason is simple: the terminals we use to capture photos and videos are increasing. The platforms for uploading and sharing are also becoming more complete and convenient. You can imagine that many contents, whether described in text or video, are definitely more intuitive when presented visually.
So this is a trend, meaning that the content on our network will increasingly present itself in a visual manner. This is one of the reasons, though not the only one. As mentioned earlier by a guest, mobile internet has been a hot topic discussed over the past year or so. I also attended the Global Mobile Internet Conference yesterday. I believe mobile internet is a trend and a massive development opportunity. Two factors drive this trend: the continuous popularization and coverage of 3G networks, and the widespread adoption of mobile terminals. Last year, in developed countries, the shipment volume of mobile terminals surpassed the combined total of PCs and familiar laptops.
Currently, the number of mobile internet users in China, obtained directly from operators, is approximately 350 million. Many applications used are relatively basic and simple web surfing apps. However, mobile terminals differ from PCs as they are always with us, allowing instant internet access and much longer usage time compared to PC users. If there are about ten billion PCs globally, mobile terminals could reach up to a hundred billion worldwide.
Many people feel that mobile internet follows a formula sixteen or seventeen times larger. But I don't think this makes any sense. It is a developing trend and where many business opportunities lie in the future. The internet industry brings about changes not only in terminals but also in how people use the internet. For example, in the PC era, we mostly used browsing or searching to obtain content.
In other words, many applications will become smaller units that you can access anytime and anywhere through devices like Apple products or other mobile terminals, directly obtaining personalized services from cloud computing. This is a very important trend. Another significant trend brought by mobile internet is that previously, Morgan Stanley in the U.S. annually released a mobile internet report. In their latest report, which is generally accepted within the mobile internet community, it suggests that social networking combined with information services and mobile terminals represent the most important trends for future internet usage.
Previously, whether it was searching or browsing, we were mainly solving the question of what information we knew. In the era of mobile internet, information becomes multi-dimensional. It not only addresses the concept of "what" but also "who" and "where." Location-based services and many location-targeted services will become important sources.
On Weibo, much content creation is real-time. Through real-time searches, we actually solve more immediate issues, addressing the question of when actions should be taken. Therefore, the concept of mobile internet in the future involves resolving these issues through social networking, real-time searches, and localized information services, leading to multi-dimensional information and content provision. Mobile internet essentially allows people to access information and services anytime and anywhere in a personalized and intelligent manner. This, I believe, is the most crucial information regarding the development of the internet in the near future.
Thirdly, in the context of China's internet environment, I believe everyone pays more attention to commercial opportunities. Most opportunities in China's internet focus on information services and entertainment services, or what we call advertising and gaming models. I believe that in the next decade, we will first witness an explosive growth in e-commerce, followed by the immense driving force it generates. E-commerce does not solely represent e-commerce websites. The increase in vertical B2C sectors will also drive genuine growth in online marketing advertisements.
Therefore, if the previous decade was about information and entertainment, or advertising and games, then in the next decade, we believe e-commerce can become the primary revenue growth driver for the internet industry, which in turn will promote the growth of advertising. From these aspects, we can see the development trends of the internet and the focus of investments.
Next, let's talk about Sina.
A few days ago, I met a professor from Yale University whom I had never seen before. Upon seeing my badge, he said, "You're China's Sina." A few years ago, when people met me, they would say, "You're China's Yahoo." Indeed, many changes have occurred over the years, primarily due to the rapid development of Sina Weibo. This is also reflected in our stock price. We are still leading among portal sites and continue to develop. We have a new business called Sina Weibo.
For Sina Weibo, we have developed many peripheral products to enhance interactivity. According to China's characteristics, we have made many local operational innovations. Today is the 28th, exactly 20 months ago, we launched Sina Weibo. I can introduce to you the data as of the end of February: registered users exceeded 100 million by the end of February. Twitter took more than four years to reach this number, so the explosive power of our product is very strong.
By the end of February, our daily message volume, including retweets, reached 50 million messages. This is a highly interactive platform. The success of Weibo is, of course, related to timing. More importantly, it aligns with the internet development trends I mentioned earlier. Weibo is the best product that interprets this trend. It is a social networking product and a killer app on mobile terminals. Among our users, 50% access Weibo via mobile terminals, and this trend will further develop over the next two years.
Recently, in our Weibo-related products, we launched our LBS (Location-Based Services) product. In the future, we will use the domain weibo.com and hope to leverage an independent platform to make Weibo one of the most important platforms in mobile internet. With users, we can layer on many applications. This platform is already open and will continue to be open in the future. We will have more partners who, through developers, marketing teams, and technical teams, will create a future Weibo ecosystem.
At this stage, regardless of how large our user base is, Weibo is still a very nascent platform and product. Historically, no company has truly built an internet platform in one and a half years. We believe that in the era of mobile internet, many opportunities are equal for everyone, but the platforms that can gain a significant share in mobile internet will be the most critical ones that can attract users.
At this stage, we still hope to further improve our products and services to acquire more users and form a true barrier in the scale of our platform users. Actually, all of you here are involved in various industries, including investing in the internet, and I know many of you. In such a competitive landscape, products and technologies are hard to become competitive barriers. The real barriers are user-scale barriers or platform barriers. At this stage, we hope that the continuous increase in users, along with improvements in products and services, will help us acquire more users and build higher barriers, giving us greater initiative in future competition. Of course, we will commercialize in the future, but at this stage, it is not our top priority. Our top priority remains improving our products and services.
The success of Sina Weibo has greatly enhanced Sina's value in the investment market. Conversely, it has also brought much help to our existing businesses, including branding, influence, and user browsing. I believe the success of Weibo itself is not only the success of this platform but also helps us reinvent or engage in our existing Sina business. This opportunity is also very important.
These are some topics related to Sina Weibo. I remember the host had another question for me, about a management MBO action Sina took two years ago, actually 20 months ago. In Sina's history, we have undergone many equity changes, and many founders left the company early on. Over the past ten years, the CEO has basically been the dominant figure in the company, but the CEO was neither a founder nor a shareholder. That was the situation.
Two years ago, in September 2009, I made a decision with the main members of the management team to contact three PE firms, all of whom are present today. These three PE firms, together with us, formed a structure where the management holds controlling shares, but the PEs provided necessary funds. We also invested, purchasing 10% of the shares, thereby enabling the management to control the company. This is related to our historical reasons; no shareholder can hold more than 10% of our shares in the secondary market.
Through this structural change, the Sina management gained the largest shareholding control. This should be understood in this way. Many people ask me why I did this and what results and benefits it brought? Often, when we act, we do not know how our stock price will perform or how Sina will develop; it is impossible to predict at that time, and I do not know how to predict. But one point is more important: we hope to change the corporate governance structure and the perception of the company by outsiders, including employees inside the company. After doing this, the external perception of Sina, whether in terms of feelings or in pushing cooperative projects, has significantly improved.
Additionally, employees within the company have a stronger sense of belonging. More importantly, it allows our management, especially myself, to have more possibilities or a decision-making environment in the company's planning and development, enabling me to consider the company's long-term strategies and make substantial unprofitable or loss-making investments for long-term strategies or products. This is a crucial change in the decision-making layer. Without this change, the development of Weibo would have been different. Although the launch of the Weibo product itself was unrelated to the MBO, many people think the MBO led to Weibo. Actually, I had already decided to launch this product.
In reality, how to operate this product, how to invest, and how to place it on the company's most important strategic level for consideration are related to our decision-making structure and mechanism. Today, we are willing to invest hundreds of millions or even billions of RMB in creating such a platform without considering losses, our performance, or our revenue. Only in this way can we possibly break out of an old and powerful model to create a new one. I believe we have taken the first step in breaking away from the traditional portal sites. To find third-generation internet companies within first-generation internet companies requires different mechanisms and talents. How to establish such a mechanism and environment to give us the possibility of success is a huge challenge for me.
Therefore, many people ask me what benefits or changes this has brought. For me, the biggest aspect is the psychological and environmental factors in decision-making.
Finally, what implications does this have for PEs? What insights can be gained from our Sina experience in terms of investment? The most important thing is that many markets are indeed very hot right now. Whether it's IPOs or investments in our industry, it's a very hot market. In this process, I believe we have experienced similar markets before, ten years ago in the U.S., including the internet industry going through similar things. But this time, it's a more genuine opportunity. The difference lies in whether the industry or the company is worth investing in.
I believe that in this industry, there won't be too many giant investment companies, but there will be many other small opportunities. In such an era, when many companies need PE investment, it's not simply about funding. More importantly, it's about guidance and assistance in corporate governance. The threshold for going public has dropped significantly for many companies. On the flip side, the risks in capital markets after going public concerning governance structures, strategic planning, and sustainable development will be much greater.
Therefore, I believe the involvement of PEs is very necessary for companies. The key is not just about capital injection but more importantly about helping these people establish very good models, governance structures, and sustainable development strategic plans. Although I am quite far from such an investment environment, I believe this is what PEs should do and the most important work they should undertake. Sina is one of the earliest listed companies in the internet industry, and we have gone through such changes, from peaks to troughs. We have seen a lot, so there isn't much help PEs can offer us. However, I believe PEs can provide significant assistance to many newly listed companies and emerging companies in this market.
That's all for now. Due to time constraints, I'll stop here. I hope to have the chance to share more with you in the future. Thank you!
Related reports: Charles Chao: Social Networking Requires Just Three Nodes for Higher Efficiency; Charles Chao Selected by Time Magazine: Sina Weibo Becomes the "Killer App".
