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Reuters / Carlos Barria
Battling for China’s eyeballs.

Tencent denies WeChat Singapore IPO as Sina wins more eyeballs for Weibo

Adam Pasick
By Adam Pasick

Senior Editor

The clash of the Chinese Internet titans got even more interesting on Tuesday, as Tencent denied a report it’s considering a Singapore IPO for its popular WeChat messaging app, and Sina fended off a WeChat onslaught to boost ad revenues and users for its Weibo microblog.

The immutable laws of corporate Internet rivalries dictate that companies must covet what they lack: Tencent has a booming mobile game business and a runaway hit with the voice and messaging app WeChat, also known as Weixin, which has more than 400 million users in China. What it needs is e-commerce and advertising revenues, currently the domain of Alibaba, which has the huge Taobao and Tmall online marketplaces, and its partially-owned ally Sina, which tripled its Weibo revenues to $30 million in the second quarter. Alibaba and Sina, in turn, lack the social and gaming chops of Tencent.

Expanding into a rival’s sweet spot while protecting your own turf from the same is an expensive proposition: Sina said Tuesday it had unexpectedly swung to a second quarter loss of $11.5 million from a profit of $33.2 million a year earlier, in part because of costs associated with Alibaba’s purchase of an 18% stake in the company. But in the all-important competition for users’ time and attention, daily active Weibo users rose 8.3% to 54 million, and time spent on the Weibo mobile app rose 14.5%. Investors saw more positives than negatives in the quarterly results, pushing the company’s New York-listed shares up 5.9% in after-hours trading.

Starting in the third quarter, Sina expects the Alibaba partnership to bring in significant advertising from online merchants; it certainly won’t hurt that Alibaba has banned merchants from using WeChat on its platform, and encouraged the use of Weibo.

Tencent on Tuesday disputed a report by the state-owned China Daily that it plans to spin off WeChat in a public offering in Singapore. The paper cited a source who said an “initial public offering of a spinoff on the same stock exchange with the holding company will raise more issues for Tencent”, and Singapore would be “an apparently easier choice.” A Tencent spokesman called the news “not true.”

Regardless of the truth of this particular rumor, don’t rule out a WeChat IPO. Tapping the markets for additional funds would help Tencent develop ways of monetizing its massive gaming and social audience—especially since Alibaba’s pockets are set to get a lot deeper later this year with a widely expected IPO of its own.

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