Sina Drops Google Search - Analyst Blog
March 30 2011 - 5:30AM
Zacks
A leading online media company and a provider of mobile
value-added services in China, Sina Corp. (SINA)
announced that a contract which allowed it to use Google
Inc.’s (GOOG) search engine has expired. Currently, Sina
uses its own proprietary technology instead of Google’s
service.
Sina’s move is not surprising, as many Chinese companies such as
Tom Online Inc. has dropped its partnership with Google in the
world’s biggest Internet market, in terms of users. Tom Online Inc.
stopped using Google’s service from March 2010.
China is very sensitive regarding the Internet and imposes
significant restrictions on online search. The Chinese government
has blocked Google’s YouTube site as well as social-networking
websites such as FaceBook and Twitter.
Google has been battling with the Chinese government over
Internet censorship for some time. In early 2010, the company moved
its Chinese services offshore to a site in Hong Kong. Most
recently, Google alleged that China is blocking its e-mail service,
a claim fiercely opposed by the Chinese Government.
According to research firm Enfodesk, Google’s market share in
China fell to below 20.0% in the fourth quarter ended December,
2010, while local player Baidu.com (BIDU) saw its
search market share reach 75.5%. As Google’s Chinese business
shrinks, we believe Sina has the potential to grow its market
share.
Our Take
According to CNNIC, China’s total Internet users reached 457
million in 2010, up 19.1% compared with 2009. However, Internet
penetration rate of 34.3% is low compared to 70.0% in the United
States, which reflects the potential of the market.
We believe Sina is well positioned to take advantage of this
potential, based on strong growth in the education and Internet
e-commerce market. Moreover, SINA is well positioned to take
advantage of the growing trends in the wireless service field in
China, as it can attract more users to its wireless services than
its competitors through its popular website.
However, the competition within the Internet business in China
is fierce, as the industry is crowded with Internet portals such as
Sohu.com Inc. (SOHU) and Tencent Holdings and
popular Internet search companies such as Baidu, AirMedia
Group (AMCN), Microsoft Corp.
(MSFT) and Google that have attracted a lot of advertising clients.
Sina is a relatively small company compared to its peers and hence,
encounters intense competition in the advertising market.
We maintain a Neutral recommendation over the long term (6-12
months). Currently, Sina has a Zacks #3 Rank, which implies a Hold
rating in the short-term (1-3 months).
AIRMEDIA GP-ADR (AMCN): Free Stock Analysis Report
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GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis Report
SINA CORP (SINA): Free Stock Analysis Report
SOHU.COM INC (SOHU): Free Stock Analysis Report
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