Sense of balance

China social media must please everyone to succeed

China's social media companies tread a fine line. Let users speak too freely, and the government is unhappy; clamp down too hard, and internet users may go elsewhere. Somewhere in the middle is profitability, where the government and users are happy enough - and investors and advertisers reap the rewards.

The micro-blogging service Sina Weibo uses a censorship system that has so far been effective enough to satisfy the government. Sensitive posts are often removed within minutes. That has allowed owner Sina to avoid the fate of China's earliest microblogging service Fanfou, which was closed down for 16 months in 2009-2010 after allowing users to discuss riots in Xinjiang.

The controls are also limited enough to satisfy at least some users. Some sensitive posts survive long enough to be read and spread. Around 82 per cent of deleted posts were reposts in a sample studied by independent researcher Tao Zhu.

Sina argues that a certain level of non-compliance with the rules from Beijing is inevitable, blaming the nature of the product and a "lack of clarity on specific implementation procedures" in its filings.

Then there are investors. Private companies dominate China's internet sector. Their shareholders are happy to balance the risks of censorship and non-compliance if it means more users. But they want to see profits too, which Weibo hasn't yet delivered. Sina's share price has fallen 66 per cent to $48 at close of business on March 14, from its peak in April 2011.

To remedy that, Sina must please a fourth group: advertisers. The company is targeting ambitious ad revenues of between $94 and $96 million in the first quarter of this year, compared with the $79 million reported in the first quarter of 2012. Much of that increase is likely to come from selling space on its microblog.

The trouble is that the wealthy, educated users advertisers most covet are those most likely to be turned off if censorship, or commercialisation, become too obvious. It's already a fine line. While Weibo has around 503 million registered users, as many as 43 per cent had empty time lines in a sample surveyed by the University of Hong Kong. As pressure mounts for Weibo to be profitable, the balancing act is getting more precarious.