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RedTech Advisors On Sina Weibo Regulatory Risk And Censorship

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  • 1. Research Note Sector: InternetAug 11, 2011 Risky Business Sina Weibo Intensifies Censorship Of Tragic Train Crash Companies in note Sina, Tencent Summary  Digital Kow-tow: Censors are deleting fast and furiously at Wenzhou Train Crash: Sina’s microblogging platform Weibo to kow-tow to On July 23, two bullet government sensitivities about the recent train crash in trains collided in eastern Wenzhou. During the past week, censors have intensified China, killing at least 39 their efforts to wipe the platform clean of any “controversial” people and injuring more posts and done away with whole groups tracking the issue. than 192. The accident was After relatively robust coverage of the event last week, this first reported on Sina’s is a turn for the worse that risks backlash among users on a microblog, China’s most very public and sensitive event in China. Moreover, the ham- active microblogging site, handed way in which Sina is executing the cleansing implies with more than 140 million pressure from the government and once again resurrects the registered users. In the debate over regulatory risk for Sina’s most promising asset. days following the crash, the microbloggers issued a Highlights barrage of posts,  Regulatory Risk: Lingering concerns over regulatory risk expressing everything from are warranted. Incidents like the Wenzhou crash and the sympathy for victims to subsequent public anger and concern expressed through outrage at the government Sina weibo serve as a reminder that the risk of shutdown for fast-tracking the train still lingers and in a place like China it always will. Though project. The government Sina Weibo remained open for business during the recent has recently signaled that it train crash in China, it’s started to systematically delete will be more closely comments and neuter what had been reasonably robust monitoring microblog coverage of the tragedy. This is damaging the Weibo brand. platforms.  Trusted Partner: Sina Weibo exists at the whim and fancy of Beijing. So far, the government has been smart about letting Chinese use the platform as a place to vent, as longRecent Notes as some topics remain taboo, like Falun Gong, Taiwan independence, the bald spot on the back of Hu Jintao’s head,Looking Good: Jiayuan Q2-11 and now, apparently, the train crash in Wenzhou that killedEarnings Preview 39 people. The week after the crash Sina Weibo users kept up a lively discourse on the tragedy, expressing sympathy,Asia Tech & Anti-Depressants concern, anger, rage, fear, frustration and disappointment. At some point, this candid debate became too much forThe China Tech Letter Beijing, and led to the tightening of Weibo’s leash.Buy! Buy! Buy! Chinese Go  Keeping It Interesting (And Boring): In being a trustedOn An Online Spending Spree partner, Sina risks stifling the vibrant expression that makes Weibo attractive, which would severely diminish its value.Matchmakers: China’s Online Since the majority of Weibo users are young and highlyDating Game educated, we believe they are not the types to be easily engaged by a platform that increasingly self-neuters. TheRenRen: Anti-Social Behavior trick for Sina will always be keeping the platform lively and genuine enough so that it remains relevant, while alsoTaomee: A Real China keeping it tame enough to allay government concerns. ThisInternet IPO is a challenging balancing act and will become more so as China’s middle class grows and starts to care more about politics, corruption and other social issues.www.redtechadvisors.com michael.clendenin@redtechadvisors.com
  • 2. Research Note: Sina Weibo Aug. 11, 2011Regulatory Risk: First, we were amazed at how Sina and Tencentmicroblogs were the first to break the news of the tragic train crash inWenzhou on July 23. Then we were impressed by the robust coverage ofthe event by microbloggers, who posted fast and furiously, spreading rumors Overt censorship isand reality, venting anger at the government and offering their sympathies to damaging the Sinathe victims. Now we are shocked at the audacity with which Weibo is Weibo brand.cleansing the historic record of the event, deleting any posts that might runafoul of government sensitivities and thus risking a backlash among usersthat had turned to the platform because it offered them a sense of what wasreally happening in Wenzhou and, moreover, allowed them to vent theirfrustrations over social and political issues, like government corruption. Thisis damaging the Sina Weibo brand.Figure 1Digital Cleansing: For 10 days running, the three most popular topics on Sina Weibo were all related tothe crash, but on August 2 Chinese mysteriously became more interested in Chinese Valentines Day, TVanchor Yansong Bai and soccer.Source: Sina Weibomichael.clendenin@redtechadvisors.com www.redtechadvisors.comPage 2 of 8 © RedTech Advisors (China) Ltd., 2011. All rights reserved
  • 3. Figure 2 Anger Management: After the crash, many posts started as news related, then they quickly switched to a combination of sympathy for victims and fear and concern over riding trains, China’s primary method of long-distance transportation. Soonafter, a lot of anger and frustration built up over rumors of incompentance and corruption at the Ministry of Railways. Sina is now busy deleting these posts. Weibo’s role in covering the Wenzhou crash and typical user expression.These types ofposts are theones that Sinais mostaggressivelydeleting now. Source: RedTech Advisors michael.clendenin@redtechadvisors.com www.redtechadvisors.com Page 3 of 8 © RedTech Advisors (China) Ltd., 2011. All rights reserved
  • 4. Trusted Partner: Sina Weibo – and its rivals -- exist at the whim andfancy of Beijing. So far, the government has been smart about lettingChinese use microblogs as a place to vent – and did they ever during the Government will moretrain crash, posting more than 10mn messages on Sina and 20mn on closely monitorTencent. But we believe Sina’s belated move to delete substantial blocks of microblogs in future.posts related to the train crash is a direct result of increased governmentpressure to rein in the platform over the past week. An editorial in yesterday’sstate-controlled People’s Daily – an important mouthpiece of the government– was a clear signal that the government is going to more closely monitormicroblog platforms in the future because of the level of anger, frustration(and rumor) that was expressed on microblogs after the crash.Figure 3See this link to read the original Chinese article, titled “People’s Opinion:How To Refute Rumor In The Weibo Era?” A platform with 195 million users has a distinctive feature of news media, and has indeed become an important news source for other media. In this context, it is not an unnecessary act to discuss “where is the moral bottom line of weibo.” Not only do media insiders need to be cautious using weibo, but also ordinary posters should be honest and responsible for their own speech. It is not entirely reliable for individuals to discipline themselves, but luckily, an internet public opinion place in an open environment has a good self-purifying system. ‘The eyes of common people are sharp’. Weibo’s development has just started. So far, although the voices on weibo have an aspect that mixes the genuine and the false, overall, it has had undeniable contribution to promote the right to know, right to express, right to participate and right to monitor citizens. To pursue and guard the truth is the value and basic prerequisite for new media to develop and thrive. As long as weibo users always remain rational, objective and moderate, and weibo management holds firmly to the principle of “good treatment, good usage, good management”, weibo can for sure have a more positive impact on facilitating social progress.Source: People’s Dailymichael.clendenin@redtechadvisors.com www.redtechadvisors.comPage 4 of 8 © RedTech Advisors (China) Ltd., 2011. All rights reserved
  • 5. Keeping It Interesting (And Boring): Sina Weibo is the most activeof all the microblogs, taking about 90% market share by user time. Why?One reason is because it’s so good at rooting out scandals and such. So ablatant attempt to sterilize the platform of a topic of such high interest as thetrain crash naturally risks alienating users. Since the majority of Weibo usersare young and highly educated, we believe they are not the types to be easilyduped by ham-handed propaganda and their satirical jibes are evidence ofthat (see picture).The trick for Sina will always be keeping the platform lively enough andgenuine enough so that it remains relevant, while also keeping it tameenough to satisfy any government concerns. The Wenzhou crash shows thatthis will always be a challenging balancing act and will become increasinglydifficult as China’s middle class grows and starts to care more about politics,corruption and other social issues.Figure 4“Id rather believe this than the official explanation for the train crash.”Source: Sina Weibo via Penn Olsenmichael.clendenin@redtechadvisors.com www.redtechadvisors.comPage 5 of 8 © RedTech Advisors (China) Ltd., 2011. All rights reserved
  • 6. Figure 5Handicapped: A recent survey of 4,000 Weibo users in eight cities showed they most value Weibo forletting them express themselves. If this is lost, then Sina Weibo loses one of its core assets. Why Chinese Microblog Keep Up With Friends 42% C ollect Info 47% Relaxation 54% Share & C hat 56% Record life 59% Express Opinions 74% 0% 10% 20% 30% 40% 50% 60% 70% 80%Source: SinoMonitor (July 2011)Figure 6A user generated poll placed on Weibo after the crash.Source: Sina Weibo via Penn OlsenWhat Will Users Do?: So, it’s pretty clear that the Great Eye of Mordor isfixed upon Charles Chao, little Sina Weibo and all its copycats. UltimateIy,the question is do users rebel and start to use the platform less, or does thisbout of overt censorship fade from memory within a few weeks as bits ofjuicy gossip about celebrities and corrupt local officials takes center stageonce again?While we believe damage has been done to the Weibo brand, it’s not enoughto counter it’s valued usefulness as the most open tool for masscommunication on the Internet in China. The train crash has not onlymichael.clendenin@redtechadvisors.com www.redtechadvisors.comPage 6 of 8 © RedTech Advisors (China) Ltd., 2011. All rights reserved
  • 7. confirmed the power of microblogs in China, but also revealed just how muchcandid discourse the central government will tolerate. The line in the sand isnow clear: users can harass and poke fun at local and maybe even provinciallevel officials. In some cases, they can even criticise select centralgovernment officials, but the central government as an entity is off limits. Criticism of certain individual officials isSo we expect Chinese microbloggers to continuing their muckraking in small OK, but general angercities and to flock to rumors of titilating affairs between celebs and to hunt at the government isdown ne’erdowells that have purportedly wronged the masses with some not fit for Weibo.alleged slight. So the short-term regulatory risk to microblogs still remainslow. But if we look a few years out, eventually these microbloggers will wantmore than the scraps of small-time politicos and bunglers. There willinevitably be more high-profile events that will focus people’s anger towardthe government, and many of these people will turn to microblogs to vent.And every time they are blocked or deleted, a little more value leaks out ofWeibo.Figure 7A Weibo No-no: At left, a mock movie poster featuring top Chinese railway officials postedto Sina Weibo in response to the train collision near Wenzhou. The poster references apropaganda film about the founding of the Communist Party, “Beginning of the GreatRevival,” but instead leads with “In honor of the 90th anniversary of the Communist Party:The Fright Driven Train Crew.” The red words at the bottom say “Heaven is only a trainticket away.” … What’s (Sort Of) Acceptable: At right, 20-year-old Guo Meimei got in hotwater when she started posting pictures of herself with gifts from a “godfather” and jokedthat she was the CEO of the China Red Cross. It turned out to be false, but not beforemicrobloggers unleashed a tirade of criticism against the Red Cross, alleging corruption.Source: Sina Weibomichael.clendenin@redtechadvisors.com www.redtechadvisors.comPage 7 of 8 © RedTech Advisors (China) Ltd., 2011. All rights reserved
  • 8. RedTech Advisors (China) Ltd. World Union Building 199 Wulumuqi North Road, Suite 1612 Shanghai 200040 China Tel: +86 21 6248 3973 Last edited: 11 August 2011 Copyright © 2011 RedTech Advisors (China) Ltd. All rights reserved. No part of this publication may be reproduced, transmitted, transcribed, stored in a retrieval system, or translated into any language, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior written permission from RedTech Advisors (China) Ltd. All copyright, confidential information, patents, design rights and all other intellectual property rights of whatsoever nature contained herein are and shall remain the sole and exclusive property of RedTech Advisors (China) Ltd. The information furnished herein is believed to be accurate and reliable. However, no responsibility is assumed by RedTech Advisors (China) Ltd. for its use, or for any infringements of patents or other rights of third parties resulting from its use. The RedTech Advisors (China) Ltd. name and logo are trademarks or registered trademarks of RedTech Advisors (China) Ltd. All other trademarks are the property of their respective ownersLegal Stuff …© 2011 RedTech Advisors. All Rights Reserved. Reproduction and distribution of this publication in any form without prior written permission isforbidden. The conclusions, projections and recommendations represent RedTech’s initial analysis. As a result, our positions are subject to refinementsor major changes as RedTech analysts gather more information and perform further analysis. RedTech disclaims all warranties as to the accuracy,completeness or adequacy of such information. Although RedTech’s research may discuss legal issues and/or investment issues related to theinformation technology business, RedTech does not provide legal advice or stock recommendations and its research should not be construed or used assuch. RedTech shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. Theopinions expressed herein are subject to change without notice.michael.clendenin@redtechadvisors.com www.redtechadvisors.comPage 8 of 8 © RedTech Advisors (China) Ltd., 2011. All rights reserved