Earlier this year, Twitter (TWTR +0.00%) had its initial public offering on the New York Stock Exchange. Twitter shares, initially priced around $12, are now trading around $55. While Twitter may be the talk of Wall Street, Sina (SINA +0.00%) should be what investors are talking about. Many people haven't heard of Sina, which is a Chinese Internet company that owns several popular websites and has its own Weibo (microblogging) service. Weibo is China's version of Twitter.
Sina is a great buy, and here are three reasons why:
Huge user base
In March, Twitter had almost 550 million registered users. Sina's Weibo had 503 million registered users at the end of 2012. Weibo is the largest microblogging site in China, with about 56% of the microblogging population using its site.
In 2012 alone, Weibo's user base grew a whopping 73%, while Twitter's user base only grew 32%. There are no official user base numbers for 2013, but it's safe to assume that by the end of this year Weibo will have more registered users than Twitter.
Deep value
Sina's market cap is only $5 billion, versus Twitters $31 billion. Sina's had huge difficulties trying to monetize its Weibo service. Quartz reports that Twitter currently makes about $0.55 per active user every quarter. Tech in Asia reported that about 10% of Weibo's users are active daily. That means there would be around 61 million active daily users by the end of 2013.
Because Twitter and Sina release different metrics for active accounts, it is difficult to determine how many active monthly users Weibo actually has, which makes it hard to compare Sina to Twitter. However, Credit Suisse estimates that Weibo has approximately 81 million active monthly users.
Assuming that Weibo earns roughly the same dollar amount per monthly active user as Twitter, Sina would would be pulling in $176 million in revenue per year. But, Sina's failure to properly monetize its Weibo service has led to hundreds of millions of dollars in missed revenue.
Sina, like Twitter, makes most of its money from advertising. When the user bases of both Twitter and Weibo increase, so do advertising revenues. Advertising money is migrating away from TV and print to the Internet. This shift in the advertising industry could prove to be very lucrative for both companies. GroupM predicts that Chinese Internet advertising expenditures will rise 34% next year.
The tech giant approves
In April, Alibaba, China's largest tech company, bought an 18% stake in Sina's Weibo for $586 million. That investment valued Weibo at $3.2 billion. Alibaba and Sina also have an agreement in which Alibaba could increase its stake in Weibo by 30%.
Reuters reports that Alibaba plans to draw traffic from Sina's Weibo service onto its extremely popular e-commerce site, Taobao. Sina states its partnership with Alibaba is expected to generate about $380 million in advertising and social commerce services revenue for Weibo over the next three years.
Foolish takeaway
Sina is undervalued based on its number of users and the advertising reach it provides to large e-retailers like Alibaba. Sina experienced twice the user growth that Twitter did last year, but while Sina has not done a good job tapping its huge user base for ad revenue, it will surely do so in the near future.
China's Internet penetration rate is only 42%, indicating that several hundred million more Internet users are likely to come online in the future, and many of them will be using Sina's Weibo.
