Weibo (WB +0.47%) this week launched Oasis, a new social media app that resembles a hybrid between Facebook's (FB 1.67%) Instagram and Pinterest (PINS 1.28%), to a limited group of test users.
Like Instagram, Oasis lets users edit their photos and videos with filters and promote their posts with hashtags. Like Pinterest, users can browse posts based on interests -- such as travel, fashion, and food -- and follow like-minded users.
Oasis also resembles RED (known as Xiaohongshu in China), another Instagram-like app that lets merchants directly sell their products to users. RED hit 85 million monthly active users (MAUs) in June, but allegations of fake reviews and merchants peddling counterfeit goods caused the app to be pulled from China's app stores in July and August.
Image source: Getty Images.
Oasis doesn't offer any integrated e-commerce functions yet, but they'll likely be introduced after the app's test run. Instagram, Pinterest, and RED all evolved into "social shopping" platforms with shoppable posts, but Weibo's core social platform -- which is often compared to Twitter -- still lacks native e-commerce features.
Understanding Weibo's troubles
Weibo, which was spun off from Sina in 2014, grew its MAUs by 13% annually to 486 million last quarter. The platform continues to gain users because it's widely used by top celebrities and brands in China.
However, Weibo's revenue growth has slowed to a crawl over the past year, as its core advertising business (86% of its second-quarter revenue) hit a brick wall:
|
Metric |
Q2 2018 |
Q3 2018 |
Q4 2018 |
Q1 2019 |
Q2 2019 |
|---|---|---|---|---|---|
|
Revenue growth (YOY) |
68% |
44% |
28% |
14% |
1% |
YOY = Year over year. Data source: Quarterly reports.
That's because many companies in China cut their advertising budgets as the economy slowed down. Competition from other platforms (like ByteDance's TikTok and Toutiao) and the escalating U.S.-China trade war exacerbated the pain.
Why Weibo needs Oasis
China's e-commerce companies, however, have fared better. Alibaba Group Holding's (BABA 1.24%) core commerce revenue soared 44% annually last quarter, while JD.com's total revenue rose 23% -- marking its strongest growth in three quarters. This indicates that Chinese consumers still have plenty of spending power.
Meanwhile, the rise of RED highlights the surging demand for social shopping experiences worldwide -- which is reflected in the growth of Pinduoduo, Alibaba's Taobao video streaming platform, and shoppable posts on Instagram and Pinterest.
Weibo's Oasis. Image source: Weibo.
That's why it makes sense for Weibo to launch Oasis: to gain a foothold in the social shopping market and diversify its revenue away from online ads. Alibaba is already one of Weibo's top stakeholders, so the e-commerce giant could potentially integrate its marketplaces into Oasis.
Weibo can also integrate its core network's live-video streaming technologies -- which were bolstered by its acquisition of Yizhibo in late 2018 -- into Oasis to host live shopping videos. Weibo's live-video platform is already its second-largest revenue stream after ads, but it generates most of its revenue by letting users buy virtual gifts for their favorite broadcasters.
Many other live-video companies -- including YY and Momo -- use the same business model. Therefore, Oasis could differentiate Weibo's live-video platform and diversify its revenue away from virtual gifts.
But let's not get ahead of ourselves...
The initial reviews for Oasis are positive, and there are plenty of ways for Weibo to monetize the platform. However, Weibo hasn't actually said anything about adding e-commerce features yet, so it likely wants to avoid RED's mistakes before diving in.
Oasis won't move the needle for Weibo anytime soon. But it shows that the company knows it's too exposed to the fickle advertising market, and it needs more exposure to China's higher-growth e-commerce and live-video markets.
