Consumer Staples Author：Chendi Qian Mar 01, 2020 12:30 PM (GMT+8)

Net revenue is expected to go down by over 15% in the first three months of the new year.

Image credit: Adeolu Eletu/Unsplash

On February 26, Weibo (WB:NASDAQ) published its annual and fourth-quarter financial reports of the year ended December 31 of 2019. The company said (in Chinese) that "net revenue of USD 468.1 million, a decrease of 3% each year, and a decrease of 2% compared to the same period last year. Advertising and marketing revenue for the fourth quarter of 2019 was USD 405.9 million, a decrease of 3% from USD 417 million in the same period last year."

The number of monthly active users in December 2019 was 516 million, a net increase of approximately 54 million compared to the same period last year. The average daily active users in December 2019 were 222 million, a net increase of about 22 million compared with the same period last year.

Since the coronavirus was officially confirmed by the National Health Commission on January 8, China has been going through hard times to defeat the disease. The spread of the virus has affected almost every unit in China, and Weibo's business has surely taken a hit. It has affected the company's first-quarter performance, and due to the high uncertainty in the future, the estimation for net revenue has been decreased to the range of 15% - 20%. The data could possibly be modified in days to come but the influence may last until the second quarter.

The stock of Weibo almost hit the bottom line in the past six months. On February 26, it sold at a price of USD 41 per share, compared to the bottom line of USD 40.66 per share. Since the outbreak of coronavirus, the stock price has declined significantly. The virus outbreak has affected many companies especially restaurants, malls, and hotels among others.  Most of these companies are Weibo's main clients and when the demand side suffers Weibo's business performance is also affected.

Before that, during the period of September and December, the performance looked much better than it is currently doing. According to Weibo CEO Wang Gaofei said (in Chinese), "The strong increase in the scale and activity of Weibo users is mainly due to our optimization of products and improvement of the content consumption experience."

The firm's main revenue comes from advertising and marketing, based on the huge active users including famous bloggers and stars. Brands can promote their products and service by creating their own accounts, as well as recommendations by bloggers which appears on the 'weibo resou' (an analog of Twitter's 'Trends') and broadcasts the hottest trending topics. In the fourth quarter of 2019, Weibo improved its online video functions. In December, Weibo's daily average active user consumption of vertical PGC content increased by nearly 30% month-on-month.

Besides Weibo, other players in China's social media industry also need to be watched closely, especially short video platforms. TikTok and Kuaishou, the two most widely used short video platforms downloads were more than 6.97 million and 5.32 million between January 10 to February 10, respectively.

As of February 14, Kasdata's (ID: caasdata6) search on Douyin (抖音, Chinese version of TikTok) for the phrase 'coronavirus pneumonia,' produced hundreds of related topics in Chinese version. Among them, a video with the keyword 'new coronavirus,' had been played as many as 21.8 billion times. Due to the outbreak, businesses have accelerated the pace of transfer from offline to online. An example is online car sales. Online platforms have welcomed an explosive growth. On February 5, the download volume of DingTalk, a collaboration app (developed by Alibaba group) jumped to the top of the free list on Apple's app store. This is also the first time in the Apple app store for office applications, with users covering over 200 million.