Alibaba invests in Sina Weibo to build links with users of the Twitter-like service

Alibaba is investing US$586 million for an 18 percent stake in Weibo

Chinese Internet giant Alibaba Group has acquired an 18 percent stake in the Twitter-like Weibo service from Sina, as part of a partnership focused on social commerce and giving merchants on Alibaba the opportunity to connect and build relationships with Weibo users.

The deal is expected to generate US$380 million in advertising and social commerce services revenues for Weibo over the next three years, Sina said in a statement.

Alibaba, through a wholly owned subsidiary, has paid $586 million for the stake in Weibo. It also has the option to increase its ownership in Weibo to 30 percent in the future at a mutually agreed valuation.

The two companies will work together in the areas of user account connectivity, data exchange, online payment and online marketing, among other things, and will explore new business models for social commerce based on the interactions of users on Weibo and on Alibaba's e-commerce platforms, Sina said in the statement.

Sina's Weibo has grown to a dominant position in China where Twitter and Facebook are blocked. It and other microblogs have emerged as powerful forums for political and economic discussion by China's people. Other sites run by Sina include a portal with regional versions and a mobile portal. In the fourth quarter of 2012, the company's revenue was $139 million, most of it from advertising.

China's Internet users were 564 million at the end of December last year, and users of weibo microblog services were 309 million, according to the government-linked China Internet Network Information Center. At 42 percent penetration, China's Internet population is large, but user growth slowed in recent years, CNNIC said in January.

Alibaba, which is China's largest e-commerce operator, and leads in the online retail market with its sites Taobao Marketplace and Tmall.com, has recently tried to spread its wings including into areas such as search.

The cooperation between Alibaba and Weibo will bring valuable services to Weibo users, as well as make the mobile Internet a core part of Alibaba's strategy, Jack Ma, Alibaba's chairman, said in the statement. The company did not comment beyond the Sina release.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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