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Sina chief steers China's Twitter deeper into internet finance

Charles Chao.jpg
Sina, which controls online messaging service Weibo Corp, plans to create a separate company dedicated to providing internet finance across its services, Chairman Charles Chao said in an interview with Bloomberg Television.

[BEIJING] Sina Corp, the company behind what's commonly known as China's Twitter, is preparing to compete with the country's web giants in online lending as the mobile market starts to slow.

Sina, which controls online messaging service Weibo Corp, plans to create a separate company dedicated to providing internet finance across its services, Chairman Charles Chao said in an interview with Bloomberg Television. In doing so, it will be opening a new battlefront with larger rivals Tencent Holdings and Alibaba Group Holding. Despite being late to the burgeoning industry, Mr Chao told investors in November that Sina's standing and customer information would help it move quickly once it got the required licenses.

Mr Chao's company has enjoyed accelerating revenue growth in the past 12 months, thanks largely to the rapid take-up of Weibo in rural areas. But that's been tied to rising smartphone sales, which are beginning to slow. Now, the company is hunting for new sources of income and has identified online lending - a highly competitive and increasingly regulated arena. Sina says it can make use of data covering hundreds of millions of users that read its news, exchange messages on Weibo and access its websites.

"This is a long shot. We need patience in this area," Mr Chao said at an industry conference in the central Chinese city of Zhengzhou. "We do have a big dollar-amount investment in this area," he said without getting into specifics.

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Chinese regulators have begun to clamp down on internet financing and peer-to-peer lending after some of the scores of nascent online loan outfits that've sprung up in past years fell under suspicion of perpetuating Ponzi schemes.

Mr Chao, a former PricewaterhouseCoopers auditor, said he welcomed government intervention as it would help normalise a saturated market. In an encouraging sign, Sina Pay - which its users employ to pay for services online - is already gaining traction, he said.

Sina's edge is its detailed knowledge of users, he added. Weibo is commonly used to post everything from videos to text messages and 313 million people access it at least once a month - on par with Twitter. Once combined with information from other sources, that data could be used to better evaluate loan risks.

A foray into online finance represents another new business for a company that's evolved considerably since its initial public offering in 2000, when it was among the first wave of Chinese internet giants to list in the US.

Formerly a web portal along the lines of Yahoo, it enjoyed a spurt of growth after the 2009 introduction of Weibo, which helped its share price triple over the next two years.

In recent years however, it's begun losing ground to nimbler rivals that expanded rapidly into video and mobile advertising. The company's also had to grapple with growing censorship as Beijing grew wary of the influence of online content.

Mr Chao, nicknamed "the Accountant" because of his stint at PwC, was known more for his financial acumen than strategic insight, in an industry that celebrates visionary leaders such as Tencent's Pony Ma and Alibaba's Jack Ma.

As chief financial officer in 2005, he helped Sina design a "poison pill" to defeat a hostile takeover attempt by online games developer Shanda.

Under his leadership, Sina pursued a successful strategy of targeting users outside of major cities and partnering with smartphone makers - despite fierce competition from social media rivals like Tencent's WeChat.

Its sales are projected to grow 33 per cent this year, the fastest pace of expansion since 2008. Sina's share price has risen more than 50 per cent over the past 12 months, while Weibo has more than doubled its market capitalisation during the same period to US$11 billion.

In the long run, live-streaming, Snapchat-like photo services and news aggregation will help Sina increase the amount of time users spend on its platforms, Mr Chao said.

It's investing heavily in contested markets including video streaming and news aggregation, which have swelled its costs. And it owns a substantial stake in Yixia Technology, which closed a US$500 million funding round in November for live-video services including Miaopai.

"We're still going to grow faster than most of our competitors in terms of usage growth, user growth this year," he said, without naming rivals. "But on an overall basis, this market is slowing down so we're also going to focus on the time-spent competition and introduce more sticky products and more diversification in terms of product offerings."