SINA Ads and Subtracts

The booming online-ad market continues to drown out the noise emanating from elsewhere in the SINA (Nasdaq: SINA  ) media farm. So when you read that SINA grew its top line by a mere 10% to $51.3 million -- or that adjusted profits inched up from $0.16 per share to $0.19 per share -- in the first quarter, don't brand the Chinese media empire as a slacker.

Internet advertising is a hotbed of growth for SINA. It grew by 43% to $31.8 million and now accounts for a thick 62% slice of the revenue pie here. The performance was bogged down by a 20% slide in the company's mobile-services business.

Yes, that was once the company's bread-and-butter business. Regulatory crackdowns and tighter control of mobile giants like China Mobile (NYSE: CHL  ) and China Unicom (NYSE: CHU  ) then squeezed the growth out of providing mobile-based content and entertainment. It's easy to see why TOM Online (Nasdaq: TOMO  ) is being taken back by its parent company and why other mobile leaders, like NetEase.com (Nasdaq: NTES  ) , have turned to Internet gaming to pay the bills.

So SINA is doing just fine given the erosion in the wireless space. Its performance was actually better than it had originally projected. SINA was expecting to grow its top line by just 3% to 7% over last year's first-quarter showing.

The report isn't perfect. Gross margins contracted, despite the greater emphasis on what should be high-margin ad revenue. Margins actually dipped there, though it would be a shocker to see that trend continue as we head into the next few quarters leading up to the summer 2008 Olympic Games in Beijing.

The current quarter is shaping up nicely, with online advertising showing healthy sequential and year-over-year improvement in the second quarter. Internet advertising will account for more than two-thirds of the $58 million to $60 million in projected quarterly revenue. If margins improve, SINA should have an easy time beating the $0.24 per-share analyst profit target for the period.

The near-term future looks promising for SINA. You just have to ad it up to get there.

For related Foolishness:

• SINA Tunes Up
• Ad Lives at SINA
• It's Time to Go Global

SINA is a Motley Fool Stock Advisor recommendation. NetEase.com is a Rule Breakers pick. Find out what other international picks our growth-stock newsletters like with free 30-day trial subscription offers.

Longtime Fool contributor Rick Munarriz has been a fan of China's high-margin online stocks for a long time. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.