Top Chinese Internet portal Sina Corp's strategy to focus on its core competencies paid off in the second quarter, with the company reporting strong growth in its advertising business, beating previous forecasts.

 

Sina said yesterday that revenue from online advertising grew by 45 percent year-on-year and 33 percent quarter-on-quarter to US$29.50 million, compared with its previous forecasts of US$26 million to US$27 million.

 

Total revenue rose to US$53.7 million, 16 percent higher than the same period of last year, beating its estimate of US$47.5 million to US$49.5 million.

 

"This is the first time that our advertising business has overtaken the wireless business in the past three and a half years by a large margin," CEO Charles Cao told reporters after announcing the second-quarter financial results.

 

Although NASDAQ-listed Sina is the No 1 Internet portal and biggest online advertising company in China, since 2002 more than half of its revenue has come from wireless value-added services such as text and multimedia mobile messaging and ring-tone downloads.

 

But in the past two years the Chinese Government and mobile operators have been trying to stamp out violent and pornographic content sent to mobile subscribers by value-added service providers, as well as crack down on cheats, which also created difficulties for Sina.

 

In the second quarter the company's non-advertising revenue fell by 6 percent year-on-year to US$24.20 million, including US$22.40 million from mobile value-added services.

 

Sina already posted a warning in early July and forecast yesterday that some regulatory changes starting last month would have a major impact on the company.

 

Cao said Sina would take some measures to alleviate the impact such as a reduction or reorganization of its wireless business unit, but he added that a major lay-off was not under consideration.

 

Another NASDAQ-listed wireless company KongZhong said on Tuesday that it would lay off 15 percent of its 1,000 employees due to the regulatory strikes.

 

Sina's online advertising rivals, including long-time competitor Sohu.com and Chinese Google Baidu, both listed on the NASDAQ stock market in New York in recent years, adding to the firm's woes.

 

In an effort to turn the situation around Sina announced a personnel change in May, promoting Cao, then president and chief financial officer, to chief executive officer.

 

One initiative of Cao's was to steer the company back to its core advertising and content business.

 

"We must do what we are best at," said Cao. "That is, Internet content and advertising."

 

During the FIFA World Cup in June and July, the company spent millions of US dollars getting content about the matches and buying hardware to serve users, which also brought bountiful returns.

 

Cao said his company could get US$8 million from advertising contracts due to the event, which is distributed in its financial results in the second and third quarters.

 

The surprise result comes as investors are dissatisfied with the performance of Sohu.com.

 

Sina's American depository shares fell slightly by 0.26 percent before the announcement of its financial results, but jumped by almost 16 percent to US$24.25 in after-hours trading when the results were released.

 

Sohu reported its quarterly results last Friday. Its advertising revenue only grew US$2.6 million, although it spent US$2 million for the right to broadcast the video clips of matches on its website and claimed to have invested US$6.25 million.

 

"The fight between Sina and Sohu was a focus for many of us during the World Cup and now we can tell who wins and who loses," said Lu Bowang, a senior Internet industry analyst.

 

(China Daily August 4, 2006)