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) -- Most American investors are aware that


(SINA) - Get SINA Corp. Report



(SOHU) - Get Ltd. Report

are among the big Web portals of China. They know that both have been around for a long time and that both sites look cluttered with information and ads compared with their American counterparts. However, there's much more to the story, especially with what's been cooking at Sina over the last 18 months.

As with any area of investing, it pays to dig beneath the surface of the common bullet points about a company to really figure out its competitive strengths and industry dynamics. The great American portals of the Internet's first wave have either been greatly diminished -- like






-- or have morphed into part of a broader online strategy like

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Arguably, the most exciting areas of the consumer Web in the last 10 years are social networking sites like




, both of which are private. So although both have seen their private valuations balloon over the last few years an argument could be made that public investors haven't appreciated yet their full value in those of comparable companies. But there are no such comparable companies in the U.S., right? True. But look at China.


, one of China's "YouTubes," will come public later this week, while one of China's "Facebooks" --


-- will come public in the coming weeks.

Sina, however, has managed to grow its own Twitter. It's called Weibo and it's the biggest reason for the recent ramp-up in the stock price and why Sina is still considerably undervalued compared to where it will be in six to 12 months from now.

Most are familiar with Twitter's success story. It started in late 2006 so it's now four years old. People at first couldn't understand who would be self-indulgent enough to update the world that he just ate a ham sandwich. Few realized that for many users the Twitter stream would become a primary way of getting information -- like an old RSS fee -- as well as staying in touch with friends and on top of areas of interest.

According to


, Twitter now has 190 million users, generating 65 million "tweets" a day and 800,000 search queries a day. Some have estimated that Twitter will generate $190 million in revenue in 2010. Just last week, Twitter raised a new round of financing valuing the company at $3 billion.

Keep in mind that private valuations are always discounted to where investors expect a company to trade in the public markets so as to ensure the most recent investors get at least a decent bump-up in their investment. Twitter has made no plans to hold an initial public offering, but it seems reasonable to assume the company, if it did, would be valued at $4 billion. (Prior to the most recent funding, different investors speculated the company was worth between $ 3 billion to $5 billion.)

Twitter is blocked in China, like Facebook and YouTube. This gave Sina the opportunity to take a hot proven Web concept and release it itself to the Chinese market. Sina launched Weibo 18 months ago.

Amazingly, within six months of launch, Weibo had 75 million users. Sina recently announced that at current growth rates Weibo would surpass Twitter for the largest number of users in the world by the end of March 2011.

One of the things that Sina was smart to do early on was approach a large number of celebrities and Chinese thought leaders to join Weibo. It helped to drive user adoption as people want to keep up with the Ashton Kutchers and Alyssa Milanos of China, I suppose. Sina also recently has launched a $300 million fund for developers creating applications that link to Weibo's open API, which is supported by China's top two venture capital funds IDG Capital and Sequoia Capital. Many Chinese businesses are now advertising their Weibo sites on Web banner ads on Sina and other Chinese portals.

I have my own Weibo account and Sina blog.

Unlike the U.S., you can expect that Weibo will face intense competition in China. Sohu already has announced its intention to catch up and surpass Weibo with its own service. Sohu promises it also will get celebrities and that switching costs will be low for users. I think it's overstating how easy it will be. When a service is free like this for users, and filled with your existing friends, why switch?

Which brings us back to Sina. Twitter received its $3 billion valuation as a stand-alone business. Weibo gets to more fully integrate itself into Sina (referring Web links, blog posts, and photos to other Sina sites, capturing those additional page views). All these page views make the traditional portal business of Sina's that much more valuable.

Although no definitive study has been done yet, it's clear that Weibo's users' incomes are lower than Twitter's. So even when Weibo's service passes Twitter in size, you could argue that it's not as valuable to advertise on.

Yet the growth rates in the two businesses are remarkably different. In less than two years, Weibo would be bigger than Twitter. And Weibo's growth will just be kicking in to high gear next spring (approaching the "hockey stick" part of its adoption). Twitter's growth has plateaued since its founders appeared on Oprah Winfrey's show a couple of years ago. And, of course, the income of Weibo users keeps growing, whereas Twitter users incomes will stay the same.

Sina currently is a $4.3 billion company with a Weibo service that arguably is worth $4 billion today. You're basically getting the portal business for free. Sohu's portal business --which also contains online gaming so it's not a pure apples-to-apples comparison -- is worth just under $3 billion.

Sina's stock price is up 63% in the last three months, but I expect it could double in the next six months as the market starts to better realize the power of Weibo now and moving forward for Sina.

At the time of publication, Jackson was long SINA and MSFT.

Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. You can follow Jackson on Twitter at or @ericjackson