For the first time in history, Weibo(Nasdaq:WB), the Chinese microblogging service often referred to as a Twitter copycat, has surpassed Twitter in market value. With a climbing user base and boosted revenue growth, Weibo recorded a market value of USD 11.32 billion on Tuesday.
Twitter, who has struggled to win over advertisers due to stagnated user growth, is faced with dropping revenue and a free fall of its share price. Rumors that Twitter is looking to sell have been in the press for a while.
In contrast with the murky fate of Twitter, Weibo’s surge in growth this year has impressed Wall Street.
In a similar vein to present-day Twitter, three years ago, Weibo had itself weathered some tough times faced with a contracting userbase. So how did Weibo manage to regain momentum and increase its popularity with users?
Weibo started gloriously as a leader among many of the early disciples of Twitter in China.
Set up in August 2009, Weibo achieved explosive popularity in China through close ties to celebrities. Its early strategy of inviting celebrities, business gurus, and public opinion leaders to its platform made it a prominent influencer hub in China. The popularity brought Weibo to its heyday in 2011, however it wasn’t long before there was talk of users abandoning Weibo and the platform losing its way. A report by research institute GlobalWebIndex indicated Weibo’s active users plummeted 40% from Q2 2012 to Q4.
Several reasons contributed to Weibo’s sudden precarious situation, prominent among which was the deteriorating user experience of the app.
Weibo initially attempted to become a mass platform by trying to include as many functions as possible in the platform through sequential upgrades. One result was that users began to find the app too muddled and non-specific. The rush to commercialization from 2012 had also ushered in a dampening of user experience. Marketing opportunities offered to advertisers, including “Promoted Feeds”, ended up overwhelming user newsfeeds, fueling user discontent.
Meanwhile, upstart WeChat, was cutting into the amount of time users spent on Weibo. Launched in 2011, Tencent’s WeChat, an erstwhile instant messaging app, expanded rapidly to over 200 million registered users in just under two years. Taking advantage of the deficiencies of the Weibo platform, WeChat in contrast, quickly became more attractive to users.
WeChat began life as a social networking app, operating a messaging function and the microblogging service ‘Moments’. For acquaintances, it posed as a better place to connect and interact through than over Weibo, although the latter had been making efforts to reinforce its social network functions. Additionally, WeChat armed itself with a subscription feature “Official Accounts (OA)”, where users could read, write and share posts. This function was a huge threat to Weibo’s essential role as a media platform, as WeChat OA soon rose as one of the most favorable social media platforms for both readers and authors.
According to a report by state-backed China Internet Network Information Center, among people who reported spending less time on microblogging services (not limited to Sina Weibo) in 2013, 37.4% said they started to spend more time on WeChat.
Behind Weibo’s Revival
In contrast to the common perception that Weibo is in decline, monthly active users(MAU) have grown at a rate above 30% for nine consecutive quarters since 2014 Q2, and its revenue and profits have skyrocketed at a YoY growth rate of 36% and 246%. Figures all point to the fact that Weibo is reviving for 2016.
Growing new users from a vast yet untapped market
The key metric here is Weibo’s user growth revival.
In its beginnings, the predominant users active on Weibo were the middle and upper-class crust of major cities. Weibo attracted these users by providing a public hub to track happenings in China and a high-quality community to communicate political and social affairs.
However, due to limited market potential, Weibo pivoted to expand from the ‘elite’-centered community towards a platform that embraces the vast yet untapped grassroots crowd from lower tier cities and younger age groups.
The first essential strategy Weibo adopted right was that it timely grasped the mobile trend in lower tier cities. With the fast penetration of smartphones, lower tier cities skipped the PC era and directly marched into the mobile era. Smartphones became the primary channel for users in these regions to access social apps like Weibo.
Approaching 2013, Weibo had made mobile its priority. One signal was the appointment of Wang Gaofei, the head of Sina's Wireless Department, as General Manager of Weibo. Weibo also established alliances with local smartphone brands to pre-install its app on new smartphones. Its partners included Xiaomi, Meizu, OPPO and Vivo, all of which are top domestic brands with huge numbers of users in lower tier cities. As reported, the mobile MAU of Weibo on domestic smartphones increased 98% YoY from Q2 2015 to 2016.
In addition, Weibo changed the direction of its content from serious social affairs, which inherently has a higher intellectual barrier, to entertainment, readily more accessible to all. It made public discussion on Weibo more inclusive and more preferable for Weibo’s new target users, who were primarily interested in the pursuit of entertainment.
To boost content across various topics, Weibo initiated a campaign in 2014 to sponsor bloggers on its platform with ad revenue sharing in a variety of segment areas, including music, movies and travel. In 2015, 32 segments were in operation, and in November 2015, 2.3 million bloggers were writing regularly on Weibo, among which 250,000 achieved monthly pageviews of more than 100,000.
Weibo also struck cooperation deals with 20 TV channels in 2014 and became a major promotion platform for more than 100 TV shows, triggering rounds and rounds of trending topics on Weibo.
Weibo updated its mobile app to version 6 introducing the key function “Discover” to the app’s frontpage. Through Discover, users can navigate directly to categorized content they are interested in without subscribing to any accounts, which makes accessing relevant content much easier on the platform.
These strategies successfully catered to the preferences of the new target userbase and quickly took effect. According to a report by the mobile data research firm QuestMobile, as of June 2016, users from second-tier cities became predominant, accounting for 33% of all users. Additionally time spent by users in third-tier cities and below on Weibo, increased by more than 14% in the first half of this year, compared with the single-digit increase rate of users in first and second-tier cities.
In terms of age groups, comparing user demographics in 2012 and 2015, the percentage of the post 90s and noughties generation has increased from 37% to more than 49%, according to Weibo’s annual reports.
Videos -- Weibo’s trump card to boost user retention
Beyond attracting users to the platform, Weibo has also put in place measures to keep users on the platform as long as possible by introducing multimedia functions.
The early Weibo resembled Twitter in that image and text were the main content types offered for consumption. Long blogs, GIFs, short videos and live streaming have all since been introduced to satisfy user needs for different types of digital content. Short videos and live streaming in particular, have made major contributions to Weibo’s growth renaissance, both in terms of engaging users and provided vehicles for advertising revenue.
Back in 2013 Weibo imbedded the interactive video service Miaopai - with additional investments in parent company Yixia Technology - to make up for its long criticized lack of product development. This April, Weibo further enhanced two tricky functions, the auto-playing of videos in its timeline and a video recommendation steam that autoplays recommended videos without having to scroll down.
These recent developments have no doubt contributed to short video consumption having surged 235% to 1.27 billion views in Q2 this year, compared with the same period in 2015.
Weibo integrated Yixia’s live streaming app, Yi Zhibo, into Weibo this May. Live streaming is a booming business in China at present, helped along by a special tip-based monetization model. Using this function, web celebrities on Weibo have become more engaged than ever, interacting with fans through live streams, driven by a new channel to pocket money from fans. As of June, an average of 7.73 million users were watching live streams on Weibo daily, spending 387,000 hours in total per day on the platform for live streaming content.
Owing to the large size of the live streaming market, Weibo still has great potential to boost its userbase. An estimation by Morgan Stanley predicts that Weibo will see monthly active users of 400 million by 2018.
These positive changes have happened at a cost. According to an earlier survey conducted by China Tech Insights, new users attracted to Weibo are primarily female (53.1%) and of the generation born after 1990 (59.4%). Among those who no longer use Weibo, a good many users had monthly incomes above RMB 8,000 (33.8%) and were the recipients of higher education (48.5%). These users are normally defined as the upper strata of Chinese society. This clearly indicates a tradeoff between different user groups and a different direction for the social product based on changed user demographics.
Weibo has waged ahead with radical changes. Change inevitably causes discontent among certain users, but in the case of Weibo, we see that change has brought new life to the platform and resulted in an evolution of the community.
In contrast with the doom and gloom facing Twitter, Weibo seems to have a relatively optimistic future ahead.Though its strategies won’t necessarily lead to absolute future success for all markets, Weibo may possibly serve as inspiration for Twitter, providing a blueprint for a new future at this crucial tipping point.