Twitter's Doing Exactly The Right Thing Cutting Off Leeches

Twitter's doing exactly the right thing by taking back ownership of its own product and shutting off LinkedIn from leeching off its success.

Read the full Forbes post here

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China's Train Crash in a Coal Mine

By Eric Jackson08/03/11 - 08:51 AM EDT

NEW YORK (TheStreet) -- With all the noise surrounding the debt-ceiling debate over the last few weeks, you might not have heard about a terrible train crash in Wenzhou, China that took place nearly two weeks ago.

The collision of two high-speed trains killed at least 40 people and injured almost 200. Authorities said a lightning strike knocked out power to one train, causing it to stall, and that a monitoring device then failed to alert the second train.

From a raw numbers perspective, the Wenzhou accident isn't so different from the August 2007 collapse of a bridge in Minneapolis that caused 100 cars to plunge into the Mississippi River. Thirteen people died, and more than 100 were injured.

Firefighters and civilians search for passengers from the wreckage of the Wenzhou train crash on Saturday, July 23.

We don't talk much about that crash today. There was an 18-month investigation by the National Transportation Safety Board. The board's conclusions were that over time the bridge started carrying a higher load-bearing weight than it was designed for.

Unfortunately, we haven't heard whether other bridges built decades ago are also at risk because their current loads are exceeding their designed capacity.

There was a lot of media coverage of the Minneapolis disaster, but I can't recall much public outrage. Eventually, Anderson Cooper packed up and went home and the NFL season started.

Yet, in China, the story -- and the public anger over it -- seems to grow by the day.

I first heard about the crash via a friend on Twitter, who was monitoring updates on Sina's(SINA) Weibo service (China's equivalent of Twitter).

Although Weibo has hundreds of censors on staff, the service saw an outpouring of emotions and information about the crash, which I believe is the first major Chinese tragedy since Weibo became used on a widespread basis.

I wonder whether people used the service as a release valve -- one that had never been available to them before.

[Read the full post in TheStreet.com here]

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Why the “Winner Takes All” Strategy Doesn’t Always Work

Chinese Internet companies are going ga-ga pursuing "winner takes all" strategies. It will work for some, but not others.

Read the full post here at Forbes.

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Red-Hot Growth for Sina

By Eric Jackson
RealMoney Contributor
5/12/2011 12:15 PM EDT
Click here for more stories by Eric Jackson

Sina (SINA - commentary - Trade Now) reported its earnings last night, and news services accordingly showed their collective ability to cut and paste from the press release, letting you know that the company beat on revenue but came up a bit short on earnings per share. Sina also guided conservatively for the coming quarter on revenue, with the bottom end of the range dipping below analysts' current estimates.

But all that information, which is normally most important for investors, is really irrelevant for Sina -- and it has been so for at least the past six months.

What investors this morning care most about is the growth in Weibo-registered users. Last night, Sina announced this number had recently surpassed 140 million, with 150,000 "verified" users (of which I'm proud to be one). These figures were all as of April, up from 100 million in late February, when the company last reported earnings. So this represents a gain of 40 million new users in two months. Previously, conventional wisdom was that Weibo growth came to 10 million a month. It's actually double that.

CEO Charles Chao also reiterated that the company was continuing to invest a lot in engineering, headcount (censors) and marketing this year. This should ensure that Weibo holds on to a significant share of the social-networking market in China.

Monetization still isn't top priority for Weibo. Still, Chao has hinted at a six possible business models being examined to generate user-based-derived revenue in the months and quarters ahead.

In my view, Chao is doing exactly the right thing. Investors shouldn't be nervous about extra costs related to building out the internal infrastructure in support of more Weibo users. They also shouldn't worry about if revenue is lighter this year, even though sales have certainly grown in comparison with last year's numbers.

...

[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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Wall Street Journal China Opinion: 人人上市后 我依然看涨新浪

Despite RenRen's big run yesterday, Sina (SINA) to me is still the "Facebook of China" until proven otherwise.

Read my full post in Wall Street Journal China here.

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Sina Flashback: What I Said About $SINA in December at $71.50

I've owned SINA since November and talked about it since December. Here's why I liked it back then and still hold it.

Read my full post in Forbes.

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Why Sina Might Be Bought Out

By Eric Jackson, Senior Contributor03/09/11 - 08:30 AM EST

Stock quotes in this article:SINA, AAPL, SOHU, NTES, BIDU, YHOO, GOOG

NEW YORK (TheStreet) - Sina(SINA_) would be an attractive buy-out candidate.

In 18 months, it has created from scratch a Twitter-like service called Sina Weibo that -- as of last month -- surpassed 100 million users. That's something that took Twitter twice the amount of time.

To call Weibo a Twitter clone does it a disservice. It's actually much more functional than Twitter with a superior Apple(AAPL_) iPhone application, commenting and forwarding system, along with instant messaging and location-based services. It is more of a combination of Twitter and Facebook that a pure copycat of Twitter.

Since the start of last July, Sina's stock is up 146%, and its market capitalization stands at more than $5 billion. Remember that it was worth $2 billion when it was just known for its traditional advertising-supported portal business (which has also been on fire since last summer - just ask its competitors Sohu(SOHU_) andNetEase.com(NTES_). Sina also has almost $1 billion in cash.

Keep in mind that, since July 1, Sohu's stock has increased almost 100% on its own -- just on its ad-supported business. Although it has a Twitter-like microblogging service, it is far less popular than Sina's.

Therefore, even though Sina has seen its stock price soar since July, it is reasonable to argue that the "extra" value created in market capitalization for Sina relative to Sohu directly attributable to Weibo is only an extra $1.1 billion.

Yet, Weibo is a powerful platform to drive future growth for the company. We all understand this intuitively when we think about Facebook and Twitter. Twitter was recently valued in asecondary market stock sale (which has surprisingly turned out to be very accurate indicators of actual values later award by private sophisticated investors) at $7.7 billion. Yet, Twitter's revenues were reportedly only $45 million last year . Twitter is supposed to have 160 million users at the moment. Sina Weibo might surpass them in users by September.

Facebook was recently valued by General Atlantic Partners at $65 billion. Its revenues were$1.2 billion to $2 billion in 2010 . Facebook now has 500 million users worldwide.

.......

[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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Give NetEase a Second Look

By Eric Jackson, RealMoney Contributor , On Thursday February 24, 2011, 3:00 pm EST

Amid all the recent attention that major Chinese Internet companies have been receiving, one has been left out of the discussion: NetEase.com. That is, until last night. The company announced some very strong results that propelled the stock to a big jump this morning. Here's what you need to know about the company and why you might want to take a second look.

NetEase.com is one of the first-generation Chinese portals from 10 years ago, along with Sina and Sohu -- China.com never made it past the dot-com bubble.

NetEase.com, which actually uses the URL "www.163.com" in China, has quietly been growing its revenue over the last few years, benefiting from the growth of the Chinese Internet market. Annual revenue went from $303 million in 2007 to $550 million in 2009. In last night's earnings report, we learned that annual revenue in 2010 went up to $857 million. That's quite a nice ramp.

Net profit for fiscal 2010 was $339 million, up from $173 million in 2007. In other words, net margins were 40% last year on a billion-dollar business.

The top-line fourth-quarter numbers for NetEase were 12% higher than what Wall Street analysts were expecting. This growth came from a boost of 13% from growth in online games quarter on quarter and 44% from online advertising in the quarter.

This surge in advertising growth was apparent in Sohu's results a few weeks ago. That surprise from Sohu led to a one-month gain of 22% while the Nasdaq has basically been flat. This growth in online advertising will likely take center stage next Tuesday when Sina announces its quarterly results. It would be hard to believe that it won't ride the same rising tide to a strong quarter.

NetEase said that for the rest of 2011, it expects strong advertising demand to continue. The company specifically called out the auto, Internet services, consumer electronics, apparel and food and beverage industries as areas where it is seeing the greatest demand. The company will continue to push its games. It is preparing to launch Starcraft II and Cataclysm. It also hopes to make inroads in online air ticketing (although this is never a business with great margins).

NetEase doesn't have a shiny new microblogging tool like Sina's Weibo site. It's also not nearly as well known in the U.S. as Sohu. However, its anonymity is part of the reason you might want to take a closer look here. The stock jumped 10% this morning, as the Street was caught off guard by the positive results. However, even with that gain, NetEase is up 25% in the last year. Even though that beats the Nasdaq's return of 22% over that same period, it vastly trails the 66% one-year return from Sohu and the eye-popping 112% return from Sina.

NetEase -- again, with this morning's move included -- is selling at a forward price-to-earnings ratio of 15x for a company that has grown its earnings by 25% a year for the last three years. Sina's forward P/E ratio is 38x. NetEase also has an enterprise value to EBITDA ratio for the last 12 months of less than 11x. Sina's is 44x.

The low-profile nature of NetEase -- and its lagging stock price compared with its peers -- is a reason you might want to own the stock. In the worst-case scenario where it continues to lag its peers, you still have a good chance of beating the U.S. market's returns.

But you might want to use these positive results to also re-examine Sohu. Despite its 66% move in the last 12 months, Sohu is still very "cheap" compared with Sina, with a 15x forward P/E and a trailing enterprise-value-to-EBITDA of less than 9x.

Also, Shanda Interactive is announcing its quarterly results on Wednesday. Shanda is another value-play Chinese stock like NetEase. Shanda was once a leader in the online gaming space, but it has since been forgotten. Expectations are low, and the stock is cheap and has been bumping along $40 for several months. An upside surprise would give a boost to the stock. NetEase's 12% increase in online gaming revenue is a good sign for Shanda.

Finally, don't forget BitAuto, which will release its earnings on March 3. It has an auto listing revenue model, rather than a heavy portal advertising model, but it might also benefit from a healthy auto space in China.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider BITA to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Eric owned SINA and SNDA at the time of publication.

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Investors Want Into China's Social Network

By Eric Jackson
RealMoney Contributor
1/31/2011 5:30 PM EST
Click here for more stories by Eric Jackson

A slew of social networking sites are operating in China at the moment. They are benefiting from the Chinese government's decision to block the popular U.S. sites Facebook and Twitter on the mainland. Smart Chinese entrepreneurs have unabashedly copied these popular sites to try and be the first mover within China. The current issue of Fast Company has a cover story on the heated rivalry between two popular Chinese social networking sites, Renren and Kaixin001. Here's what U.S. investors should know.

The two sites, which are both currently private, although Renren is expected to go public this year, currently have 260 million users. That's pretty amazing when you consider that Facebook itself has gained 600 million users globally over a much longer period of time. It's also astounding how readily Renren and Kaixin001's founders admit copycatting the U.S. websites.

Renren's founder is a Wang Xing, who studied at the prestigious Tsinghua University before going to the U.S. to pursue a Ph.D., then dropping out to start Renren with about $45,000 in seed capital.

Kaixin001 was the first mover in China's social networking space and has over 100 million users. Although Kaixin001 had the initial buzz, Renren has now surpassed it in growth, at 165 million users. Renren was also sneaky in the early days when it was trying to catch up to Kaixin001: It bought the URL www.kaixin.comand invited people to join a social network that looked like Kaixin001 but was actually signing people up to Renren. Kaixin has since won a court battle to say this is improper. But even today, the URL redirects to Renren.

Only a third of the Chinese population is online (vs. 75% in the U.S.). Therefore, social networking and e-commerce sites in China have enormous potential for the next five years. Additionally, there's big opportunity ahead for increased ad spending on websites (which also goes for the U.S.). The growth should be even faster in China, though, because of the increased rise of purchasing power of a growing middle class.

...

[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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Video: SINA May Skyrocket: China Watch

NEW YORK (TheStreet) -- Contributor Eric Jackson explains why he believes Sina Corp. is considerably undervalued from where it will be six to 12 months from now.

Fri 01/21/11 06:00 AM EST -- Eric Jackson & Brittany Umar

Stocks in this video: YHOO | SINA | NTES | BIDU | SOHU | CTRP |GOOG

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Sina's Weibo Growth Means It's Significantly Undervalued

Tue 12/21/10 11:30 AM EST -- Eric Jackson

Stocks in this video: SINA | NTES | DANG | AOL | SOHU | YOKU

Eric Jackson says Sina's Weibo service will pass Twitter in number of users next year. Maybe Weibo isn't worth $4 Billion, like Twitter was valued at, but it's still worth more than what Sina's stock price indicates. Eric owns SINA.

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Sina's Got Growth Power in Weibo

By Eric Jackson, Senior Contributor12/08/10 - 07:28 AM EST

NEW YORK (TheStreet) -- Most American investors are aware that Sina(SINA_) andSohu(SOHU_) are among the big Web portals of China. They know that both have been around for a long time and that both sites look cluttered with information and ads compared with their American counterparts. However, there's much more to the story, especially with what's been cooking at Sina over the last 18 months.

As with any area of investing, it pays to dig beneath the surface of the common bullet points about a company to really figure out its competitive strengths and industry dynamics. The great American portals of the Internet's first wave have either been greatly diminished -- like AOL(AOL_) or Yahoo!(YHOO_) -- or have morphed into part of a broader online strategy like Microsoft's(MSFT_) MSN.

Arguably, the most exciting areas of the consumer Web in the last 10 years are social networking sites like Facebook and Twitter, both of which are private. So although both have seen their private valuations balloon over the last few years an argument could be made that public investors haven't appreciated yet their full value in those of comparable companies. But there are no such comparable companies in the U.S., right? True. But look at China.

Youku, one of China's "YouTubes," will come public later this week, while one of China's "Facebooks" --Renren -- will come public in the coming weeks.

Sina, however, has managed to grow its own Twitter. It's called Weibo and it's the biggest reason for the recent ramp-up in the stock price and why Sina is still considerably undervalued compared to where it will be in six to 12 months from now.

Most are familiar with Twitter's success story. It started in late 2006 so it's now four years old. People at first couldn't understand who would be self-indulgent enough to update the world that he just ate a ham sandwich. Few realized that for many users the Twitter stream would become a primary way of getting information -- like an old RSS fee -- as well as staying in touch with friends and on top of areas of interest.

........

[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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