Sina warns name rules will bring disappointing quarter

Sina Crop. (SINAquote) announced a $9.3 million profit yesterday for the 4th quarter of 2011. However, the Chinese internet company warned that government regulations forcing Sina Weibo microbloggers to use their real names would result in a disappointing 1st quarter of 2012.

Almost as cute as a fail whale.

Sina’s revenues grew over 20% for the quarter and the year, posting $133.4 million and $482.8 million, respectively, but lost money for the year due to $350 million in one-time charges. Without the charges, the company would have made a $61.6 million profit for the year.

The company’s Twitter-like Weibo microblogging service has grown by leaps and bounds, setting a world record for posts per minute a few weeks ago while celebrating Chinese New Year.

Overall, microblogging traffic tripled in China in 2011, with 48.7% of China’s 513 million internet users using microblogs. Sina Weibo itself has 200 million users.

That growth is now at risk as the Chinese government takes steps to  “cultivate a civilized online environment” by stepping up regulation of social-networking sites and instant messenger services. 

“We believe the requirement to convert existing users into verified users…will have a negative impact on user activity in the short term,” Charles Chao, chief executive of Sina, said in an earnings call. 

Chao said the regulations had already affected potential new users, with only 55 to 60% of them succeeding at passing the verification process since December. ”These people will still be users,” he continued, “but in a very dramatic scenario, they will not be able to speak, meaning they won’t be able to post messages.”

Sina has not lost faith in the power of Weibo, however, and will continue to invest in the platform. 

Investors looking to invest in a broad array of Chinese internet ventures should look at the Global X Social Media Index ETF (SOCLquote) or the iShares FTSE China 25 (FXI, quote).