Prospectus Summary
PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our ADSs discussed under “Risk Factors,” before deciding whether to buy our ADSs.Our Business
Weibo is a leading social media platform for people to create, distribute and discover Chinese-language content. By providing an unprecedented and simple way for Chinese people and organizations to publicly express themselves in real time, interact with others on a massive global platform and stay connected with the world, Weibo has had a profound social impact in China.
Since our inception four years ago, Weibo has amassed a large user base in China and in Chinese communities in more than 190 countries. In December 2013, Weibo had 129.1 million monthly active users, or MAUs, and 61.4 million average daily active users, or average DAUs, increasing from 96.7 million MAUs and 45.1 million average DAUs in December 2012, respectively, and 72.9 million MAUs and 25.2 million average DAUs in December 2011, respectively. A microcosm of Chinese society, Weibo has attracted a wide range of users, including ordinary people, celebrities and other public figures, as well as organizations such as media outlets, businesses, government agencies and charities.
Weibo represents a new online experience in China by combining the means of real-time public self-expression with a powerful platform for social interaction, as well as content aggregation and distribution. Any user can create and post a feed of up to 140 Chinese characters and attach multimedia or long-form content. User relationships on Weibo may be asymmetric; any user can follow any other user and add comments to a feed while reposting. The simple, asymmetric and distributed nature of Weibo allows an original feed to become a live viral conversation stream. Over 2.8 billion feeds were shared on Weibo in December 2013, including 2.2 billion feeds with pictures, 81.7 million feeds with short videos and 21.5 million feeds with songs.
Weibo has become a cultural phenomenon in China. Weibo allows people to be heard publicly and exposed to the rich ideas, cultures and experiences of the broader world. Media outlets use Weibo as a source of news and a distribution channel for their headline news. Government agencies and officials use Weibo as an official communication channel for disseminating timely information and gauging public opinion to improve public services. Individuals and charities use Weibo to make the world a better place by launching charitable projects, seeking donations and volunteers and leveraging the celebrities and organizations on Weibo to amplify their social influence.
In addition to users, Weibo’s ecosystem includes customers and platform partners:
Designed with a “mobile first” philosophy, Weibo displays content in a simple information feed format. With a limit of 140 Chinese characters per feed, the high information-density of Chinese characters and users’ ability to personalize content information flow, Weibo is particularly suited for mobile use, and we have seen significant mobile adoption. Over 70% of our MAUs in December 2013 accessed Weibo from mobile devices at least once during the month. In the fourth quarter of 2013, we had over 120 million check-ins where users recorded their location by using a mobile device to post their location in a feed on Weibo. Mobile revenues accounted for 28.0% of our advertising and marketing revenues in 2013.
We began monetization of our platform in 2012. We generate revenues primarily from customers who purchase advertising and marketing services, and, to a lesser extent, from platform partners who develop games for our users to play. We provide most of our services to users free of charge, with VIP membership services. In 2012 and 2013, we generated 77.4% and 78.8% of our revenues from advertising and marketing services, 19.3% and 12.2% from game-related services, and 3.3% and 5.9% from VIP membership services, respectively. While we distinguish between users, customers and platform partners in classifying our products and analyzing our sources of revenues, the same person or organization may simultaneously be included in two or more of the categories.
We have since experienced rapid revenue growth. Our revenues increased from $65.9 million in 2012 to $188.3 million in 2013, while our net loss decreased from $102.5 million to $38.1 million and our negative Adjusted EBITDA decreased from $81.0 million to $6.3 million for the same period. See “Prospectus Summary—Summary Combined and Consolidated Financial Data—Non-GAAP Financial Measures” for a reconciliation of net loss to Adjusted EBITDA. Due to our limited operating history and evolving monetization model, comparisons of our results of operations from period to period may not be meaningful.
We are a majority-owned subsidiary of SINA and thus a “controlled company” as defined under [NYSE/NASDAQ] rules. For so long as SINA owns more than 50% of our total outstanding voting securities, we are permitted to elect to rely on certain exemptions from corporate governance rules, including an exemption from the rule that a majority of our board of directors must be independent directors, and an exemption from the rule that our director nominees must be selected or recommended solely by independent directors. Historically, SINA has provided us with many services essential to our operations and administration, and we have entered into agreements with SINA with respect to various ongoing relationships between us. Our chief executive officer Mr. Gaofei Wang is also a corporate senior vice president of SINA. If we have any conflicts of interest with SINA, we may not resolve such conflicts on favorable terms for us because of SINA’s controlling ownership interest in us and Mr. Wang’s executive officer position at both companies. The accompanying combined and consolidated financial statements include all assets, liabilities, revenues, expenses and cash flows that were directly attributable to our business for all periods presented. See “Our Relationship with Major Shareholders—Our Relationship with SINA” and “Risk Factors—Risks Related to Our Carve-out from SINA and Our Relationship with SINA.”
Our Core Attributes
Our priority is to provide the best possible user experience for creating, distributing and discovering Chinese-language content online and to differentiate our social media platform through the scale of our user base and user engagement. We have designed our platform around five core attributes:
Public
Any user can choose to follow the feeds of any other user. This asymmetric relationship significantly enriches the content on Weibo, as people not only come to our platform to follow breaking news, live events and original feeds but also participate in public discussions. The asymmetric nature of Weibo also allows feeds to reach users several degrees of followings away. Getting heard by thousands or even millions of people and reaching people one might not have otherwise is a life-changing experience for ordinary people in China. Weibo is also the public forum of choice for many celebrities and other public figures.
Real-time
News breaks on Weibo from ordinary people at the scene of a headline event, from public figures who have a personal announcement to make, and from businesses, government agencies and other organizations that want direct access to a public audience. People use Weibo to follow news and events around the world. Media outlets also use Weibo because it is original, real-time and viral.
Social
People come to Weibo to join in public discussions and see and learn from each other’s comments. Social engagement comes in many forms, as when a user Likes a feed, Comments on a feed with an emoticon or casts a Vote on a particular issue. Users post feeds and repost other users’ feeds many times with comments added. Such live, public, social interaction not only broadens users’ view of the world and shapes their minds but also stimulates new ideas and promotes information sharing among users from all walks of life, even allowing public figures to join in on conversations between ordinary people.
Aggregated
Content on Weibo is contributed by ordinary people, public figures and organizations, including media outlets, government agencies and businesses. Through Weibo Connect, our over 340,000 platform partners enable their users to share content from their websites and applications to Weibo and attract our users back to their properties to access the content. Many media outlets in China, such as CCTV, Hunan Satellite Television Station, Phoenix TV and People’s Daily, frequently use Weibo as a platform to distribute content and engage with audiences. We also work with companies with large online content libraries of videos, songs, mobile applications, books and points of interest (such as restaurants, hotels and theaters), which we call objects, to create Weibo Pages for their content. Organic content creation from our users and content contributed by our platform partners resulted in the sharing of over 2.8 billion feeds on Weibo in December 2013, including 2.2 billion feeds with photos, 81.7 million feeds with short videos and 21.5 million feeds with songs.
Distributed
We allow content to be easily and virally distributed on our platform and to the properties of our platform partners, as well as to other online and offline media outlets. Our broad distribution reach and the original, real-time and viral nature of Weibo make it a top choice for many public figures, businesses, government agencies and other organizations as their official channel for public communication.
Our Value Proposition to Users
Users are our first priority. Weibo is used in many ways by different users. Some examples include:
Users come to Weibo for many reasons. Below are some examples:
Express Themselves to the World
Users come to Weibo to express, share and publicize their opinions, ideas, photos, activities and other content and comment on feeds from other users. It is an unprecedented experience for people in China to be able to publicly express themselves in real time on a platform with such a vast scale.
Discover Relevant and Rich Content
Users come to Weibo to discover and learn more about what is going on with the people, organizations and topics that interest them. Weibo allows users to search our rich content and filter it into highly personalized information streams by choosing the users, events, topics and subjects that they want to follow.
Stay Current and Connected
Users come to Weibo to stay current on the latest trends and events and connect with other users who share similar interests. On our platform, users can witness and discuss live events in the making, whether through ordinary people providing eyewitness accounts of news events, celebrities sharing their latest experiences with fans, or traditional media using Weibo as a second screen to enhance the overall user experience.
Make a Social Impact
Weibo helps people come together to realize common goals and to accomplish things that they could not accomplish on their own. We sponsor Weibo Charity to help charities and individuals to launch charitable projects, seek fundraising and recruit volunteers for public service.
Engage with Followers
Weibo offers organizations, such as businesses, government agencies, media outlets and schools, the ability to engage and interact with their followers to create commercial and social value. An organization can apply for a Weibo enterprise account to engage with followers. Businesses and other organizations use Professional Pages together with our advertising and marketing services to attract followers, create brand awareness, drive interest generation, convert sales, conduct loyalty marketing and stimulate engagement with potential and existing customers. Weibo has also become an official channel for public communication for other organizations, including government agencies and not-for-profit organizations.
Our Value Proposition to Advertising and Marketing Customers
We have developed a comprehensive database of our users’ social interest graphs as a result of the numerous activities taking place on our platform. With a reach of 129.1 million MAUs as of December 2013, we offer compelling advertising and marketing solutions tailored to the different needs of a variety of customers. Although businesses and organizations can use Weibo to communicate with their followers free of charge, many choose to purchase our advertising and marketing services to reach a broader audience and further promote their brands, products and services. Our advertising and marketing solutions provide our customers with the following benefits:
Targeted
Our customers have the ability to improve the relevance of their advertising based on users’ social interest graphs, which draw upon a variety of factors, including demographics, social relationships and interests. Interests are tracked based on user actions such as Follow, Comment and Like.
Earned Media and Reach
Weibo feeds, whether organic or promoted, have the potential to spread virally due to the public and widely distributed nature of our platform. Our customers are charged for the initial advertising exposure or engagement, and they can further benefit from users down the chain reposting the ads across our platform at no additional cost. This is often referred to as “earned media,” and it has a powerful influence on a user’s interest and purchase decisions when the recommendations come from friends, celebrities and other influential figures.
Native Ads
Native ads allow our customers to communicate in a similar format as organic feeds and capture user attention as users consume information feeds. This solution is particularly mobile friendly and is a key product offering for our advertising and marketing customers.
Engagement
Through enterprise accounts, we give businesses and other organizations the opportunity to engage and build relationships with our users by building Professional Pages. Any verified organization can create a Professional Page from its enterprise account to attract followers, create brand awareness, drive interest generation, convert sales, conduct loyalty marketing and stimulate engagement with potential and existing customers.
Tailored Solutions
We offer a wide range of advertising and marketing solutions for customers ranging from large companies to SMEs to individuals. For large brand advertisers, we offer display ads with wide reach and are currently testing targeted ad solutions as well. For SMEs, we offer promoted feeds to allow them to reach our users with a smaller budget. For individuals, we offer Fans Headline to enable them to more effectively reach their followers.
Performance-Based Solutions
We offer advertising and marketing solutions based on performance-based pricing, such as cost per engagement. Advertising and marketing customers are charged only for the initial exposure or engagement. Thus, any earned media resulting from users reposting the ad allows our customers to achieve a lower effective advertising and marketing cost.
Complementary to Traditional Media
Weibo collaborates with traditional media such as television shows to add a unique, social, online dimension to popular offline content, amplifying a show’s reach and buzz and helping it build a lasting following. Non-TV advertisers may also leverage Weibo’s complementary nature to TV and engage with a show’s audience on Weibo without running expensive TV ads.
Our Value Proposition to Platform Partners
The scale and vibrancy of our platform have attracted a broad range of platform partners, including third-party websites, media outlets and application developers. We offer a set of open application programming interfaces with embedded widgets and development tools that allow our platform partners to share their content to our platform through their users and distribute our content across their properties. Others, like developers, also use our open application programming interfaces to build applications, such as online games integrated on Weibo. As of December 31, 2013, we had over 340,000 platform partners.
We are focused on growing our open platform network by offering and improving the following benefits to our platform partners:
Social Distribution of Content
We enable our platform partners to share their content to our platform, expand their reach and interact with our users through Weibo Connect. We provide platform partners with a set of embedded widgets like “Weibo Log-in” or “Weibo Share” that allow users to log in to our platform partners’ websites or apps using their Weibo accounts and share content from their websites or apps through the social relationships that they have with other users on our platform.
Building with Weibo Content
Our platform partners leverage Weibo content to create or enhance their product and service offerings. For example, online and traditional news media often link to or cite feeds from Weibo as their source of news. As another example, one of our platform partners uses Weibo data to generate reports for brands to help them keep up with current trends in their industry and manage public relations.
Monetization and Payments
We help our platform partners create and enhance their monetization opportunities. We also provide an online payment infrastructure that enables our platform partners to receive payments from our users in an easy-to-use, secure and trusted environment.
Our Strategies
We intend to further enhance Weibo’s value to our users, advertising and marketing customers and platform partners by pursuing the following strategies:
Our Challenges
Our ability to execute our strategies is subject to risks and uncertainties, including those relating to:
Corporate History and Structure
Our parent, SINA, launched Weibo in August 2009, originally as a microblogging service. In 2010, SINA incorporated a subsidiary, T.CN Corporation, in the Cayman Islands to hold the assets associated with the Weibo business. In 2011, Weibo was upgraded with social networking features and improved open platform architecture to support internally developed and third-party developer applications on our platform. In 2012, T.CN Corporation was renamed Weibo Corporation. In April 2013, Alibaba Group invested $585.8 million through its wholly owned subsidiary, Ali WB Investments Holding Limited, or Ali WB, in ordinary and preferred shares representing approximately 18% of Weibo Corporation’s then total outstanding shares on a fully diluted basis.
Weibo Corporation holds 100% of the equity of Weibo Hong Kong Limited, or Weibo HK, which in turn holds 100% of the equity in Weibo Internet Technology (China) Co., Ltd., or Weibo Technology, our wholly owned subsidiary in China.
We are a holding company, and we conduct our business in China through Weibo Technology and our VIE, Beijing Weimeng Technology Co., Ltd., or Weimeng, and Weimeng’s subsidiary. See “Corporate History and Structure” and “Risk Factors—Risks Relating to Our Corporate Structure.” We rely principally on dividends and other distributions from Weibo Technology for our cash needs, including the funds necessary to pay dividends to our shareholders or service any debt we may incur. Weimeng holds an Internet Content Provision License and other permits that are necessary for operating our business in China. We gained control and became the primary beneficiary of Weimeng in 2010 through a series of contractual arrangements between Weibo Technology and Weimeng and Weimeng’s shareholders.
In December 2013, Weimeng acquired from SINA the entire equity interest in Beijing Weibo Interactive Internet Technology Co., Ltd., or Weibo Interactive, a PRC company engaged in the online game business, for a consideration of $10.1 million.
The following diagram illustrates our corporate structure, including our subsidiaries, our VIE and the VIE’s subsidiary, as of the date of this prospectus:
Implications of Being an Emerging Growth Company
As a company with less than $1.0 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company’s internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. However, we have elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.
We will remain an emerging growth company until the earliest of (a) the last day of our fiscal year during which we have total annual gross revenues of at least $1.0 billion; (b) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (c) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our ADSs that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.
Corporate Information
Our principal executive offices are located at 7/F, Shuohuang Development Plaza, No. 6 Caihefang Road, Haidian District, Beijing, 100080, People’s Republic of China. Our telephone number at this address is +86 10 6061-8000. Our registered office in the Cayman Islands is located at the offices of Floor 4, Willow House, Cricket Square, P. O. Box 2804, Grand Cayman KY1-1112, Cayman Islands. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., located at 400 Madison Avenue, 4th Floor, New York, New York 10017.