Alibaba buys 18 percent stake in Sina Weibo

Chinese e-commerce giant purchases stake worth US$586 million in microblogging service, and both will collaborate on user-account connectivity, online payment and marketing and explore new business models for social commerce.

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Both companies expect to generate about US$380 million in advertising and social commerce services revenue in aggregate for Weibo over the next three years.

Alibaba Group has agreed to purchase an 18 percent stake in Sina's Weibo for US$586 million, connecting China's largest microblogging service with the country's biggest e-commerce company.

The shares acquired by Alibaba were preferred and ordinary shares, and the e-commerce giant has the option to increase its take to 30 percent at "a mutally agreed valuation", a statement on Monday, noted.

Both companies will work on user-account connectivity, data exchange, online payment and marketing, and will also explore new business models for social commerce based on the interactions of the "hundreds of millions of users" on Weibo and on Alibaba's e-commerce platforms, the statement noted.

The companies also expect to generate about US$380 million in advertising and social commerce services revenue in aggregate for Weibo over the next three years.

Charles Chao, chairman and CEO of Sina, said in the statement, the company believes e-commerce will play a vital role in building an eco-system around Weibo's open platform, and that 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," Chao said.

Rumors that Alibaba Group plans to invest in Sina Weibo , by purchasing a 15 to 20 percent stake in the microblogging service first surfaced in November 2012, but Sina told China Daily in Feburary 2013 that the rumor was false and Weibo merely has normal business relations with Alibaba.

During Sina's Q3 2012 earnings released in November, Chao said the London 2012 Olympics held between July and August last year pushed the number of Weibo active users "to a new record" and registered Weibo accounts surpassed 400 million .

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