China’s Anti-Porn Crackdown Has a Big Trophy: Sina (SINA)

Meng Meng |

Chinese web portal Sina Corp (SINA) was stripped of two online publication licenses as the government stepped up its anti-porn campaign targeting web users as well as some of the internet’s leading companies.

Twenty articles and four videos containing “pornographic and lewd” material was found on Sina, who owned the popular microblogging service Weibo Corp ($WB), said state media Xinhua News. Shares of the company were down 3.06 percent to close at $51.64 in New York Thursday.

Weibo raised $286 million dollars from its U.S. initial public offering. Stocks dipped 4.53 percent to $20.44 at the close in New York on Thursday.

While Beijing vowed to crack down hard on online pornography this time, it failed to explain what was meant by the terms “pornography” or “lewd.” Words such as “pornography” and “adult movies ” were banned on China’s search engines. Nevertheless, millions have found ways to download porn through software that bypasses web monitoring.

In China, pornography has a broad range of meaning - anything with a slight hint of sex might get a writer in trouble. That vague definition did not bother Internet companies ten years ago, since online news stories and magazine pieces were the primary traffic driver during the Internet boom. More recently, though, video websites with a mix of amateur-made content and TV shows began drawing huge traffic, leading to a flurry of companies testing the boundaries of censorship.

Sina was the first big web company came under attack of State Administration of Press, Publication, Radio, Film and Television (SARFT), the censorship apparatus of China. As one of the oldest Internet companies in China, Sina used to impose strict content censorship, but has been easing regulations on users-uploaded material to boost traffic in recent years.

The Beijing-based company posted an apology on its website today following the penalty, saying “it is working closely with related parties to removed problematic content.”

The suspension of Sina’s licenses will have little impact on the web giant, who reported one third of its revenue coming from micro blogging services and is planning to spin off its online fiction unit, according to several analysts. Weibo reported 400 million users last year, dwarfing Sina’s traditional strength like sport news and education. Meanwhile, Sina’s major competitors including Sohu.com Inc. (SOHU) and Baidu Inc. (BIDU) are increasing their bet on online videos.

Sohu introduced the Netflix-like subscription service to provide TV shows and movies last year while IQiyi, the video player under Baidu, a search engine giant, merged with PPS to expand its market share.

The latest anti-porn crackdown raised questions about how tougher regulation could ripple through the internet industry and reshape the revenue model of video providers. Known as the “Cleaning the Web 2014” campaign, it has closed 110 website and 3,300 user accounts on China’s social networking services like Weibo and Tecent’s smartphone messaging application WeChant, according to Xinhua News.  The campaign also brought down Qvod, a popular piece of software that enabled users to stream pirated movies online.

 

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Companies

Symbol Name Price Change % Volume
BIDU Baidu Inc. 170.82 3.07 1.83 2,375,819
SINA Sina Corporation 72.16 -0.18 -0.25 934,684
WB Weibo Corporation 48.45 -0.31 -0.64 1,138,577
SOHU Sohu.com Inc. 36.75 0.73 2.03 268,195
HDSQY Hindustan Petroleum Corp. Ltd. (India) ADR Level 1 n/a n/a n/a 0

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