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SINA Corp. (SINA - Analyst Report) is set to launch its own online payment service WeiboPay (formerly known as SinaPay) in Apr 2013, according to a recent report from Reuters, which quoted China Daily. The online payment service, on the lines of PayPal, will allow Weibo (SINA’s microblog) users to buy items from third-party merchants off the platform.

Launched in 2009, SINA’s Weibo gained massive popularity within a short-span of time. The micro-blogging platform, which is somewhat similar to Twitter, has garnered more than 500 million registered users. SINA has been continuously adding consumer centric features such as apps, games and virtual currency to Weibo and has managed to transform the micro-blog platform to a full fledged social network website.

One such feature was the online payment platform SinaPay, which SINA launched in Jan 2011. However, the service was restricted to VIP mailboxes, online games, e-book downloads, horoscopes and Sina Mall only. In Aug 2012, SINA upgraded the platform and renamed it as WeiboPay.

Of late, SINA had been contemplating entry into the online ecommerce market, primarily to improve monetization of the Weibo platform. Earlier, it was rumored that SINA will tie-up with Chinese ecommerce provider, Alibaba to launch an online payment service. However, both the parties abandoned discussion after they failed to agree on monetization.

SINA’s recent announcement highlights the company’s eagerness to develop its own ecommerce service, rather than forming a tie-up with an established player. The move will bring SINA face to face against the likes of Alibaba, Tencent, Yahoo! (YHOO - Analyst Report) and Baidu (BIDU - Snapshot Report), which recently partnered Walmart (WMT - Analyst Report) to enter the Chinese ecommerce market

Nonetheless, we believe that Weibo’s huge install base will provide SINA a significant competitive edge going forward. Moreover, the company’s continuous endeavor to enrich Weibo content and ongoing investments on product development and marketing further differentiates SINA’s service in our view.

However, higher operating costs remain the major near-term headwind. We believe that any weakness in advertising revenues will impact SINA’s ability to counter increasing operating expenses, which in turn will hurt its bottom line going forward. Further, we believe that increasing regulations from the Chinese government will remain the primary concern for the stock going forward.

Currently, SINA has a Zacks Rank #3 (Hold).

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