Chinese eCommerce firm Alibaba Group Holding Ltd. has Monday acquired 18 percent of the preferred and ordinary shares micro-blogging service Weibo from its parent Chinese Online media company Sina Corp. (SINA) by investing $586 million.
Sina has also granted Alibaba an option to boost its ownership stake in Weibo to 30 percent at a mutually agreed valuation within a certain period of time in the future.
Separately, Sina also agreed to a strategic alliance between its affiliated entities and the entities of Alibaba Group in order to boost and explore business models for social commerce.
Sina, the Shanghai, China-based Internet portal company, said the deal will enable the users of Weibo, also known as China's 'Twitter', to connect and build relationships with the merchants on Alibaba e-commerce platforms.
The deal is primarily between the Chinese subsidiaries of Weibo Corp. and Alibaba's affiliates such as Taobao (China) Software Co., Ltd. and Zhejiang Tmall.com Technology Co., Ltd. Taobao is a consumer-to-consumer marketplace such as eBay.com, while, Tmall is a top Chinese business-to-consumer site such as Amazon.com.
Weibo.com is a form of social media, featuring microblogging services and social networking services that allow users to connect and share information on its platform anywhere, anytime and with anyone. Weibo has more than 400 million users.
Meanwhile, Alibaba is a family of Internet-based businesses which makes it easy for anyone to buy or sell online anywhere in the world. It constitutes an online marketplace, retail and payment platforms, shopping search engine and more.
"Weibo and Alibaba's e-commerce platforms are natural partners. Together we provide a unique proposition not only to existing online merchants, but also to individuals or businesses, who wish to offer products and services on social networking platform to take advantage of the traffic shift toward social and mobile Internet," Sina Chairman and CEO Charles Chao said in a statement.
The deal will portray the vitality and importance of social media in unleashing value in e-commerce activities. The interactions between hundreds of millions of Weibo users and on Alibaba's e-commerce merchants will help explore new business models for social commerce.
The deal will help generate about $380 million in advertising and social commerce services revenues for Weibo over the next three years. The companies will cooperate in the areas of user account connectivity, data exchange, online payment and online marketing.
"We believe that the cooperation of our two robust platforms will bring unique and valuable services to Weibo users, as well as making the mobile Internet a core part of Alibaba's strategy," said Jack Ma, Chairman of Alibaba.
In a similar move, Sina had previously in July 2012 struck a strategic alliance with Chinese search giant Baidu.com to collaborate on search, content, platform, technology and resources. The deal saw Sina.com providing Baidu as the default search service provider on its microblog app for mobile phones.
In Monday's regular trading session, SINA is currently trading at $57.90, up $7.60 or 15.11% on a volume of 8.32 million shares. In the past 52-week period, the stock has been trading in a range of $41.14 to $70.00.
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