Alibaba Group has acquired an 18 percent stake in SINA Corp (NASDAQ:SINA)’s Weibo, which is a micro-blogging service similar to Twitter, for a total of $596 million. In December, there were rumors that the e-commerce giant Alibaba is looking to invest in micro-blogging service Weibo.
According to the announcement made by SINA Corp (NASDAQ:SINA), one option, which Alibaba had, was to acquire 30 percent of Weibo in the future. Weibo will earn revenue of $380 million under the deal over a period of three years. According to Sina, the cash constraints of the company will be solved to some extent after this deal. There was no information from Sina on the method of calculation of the revenues. Weibo is a service similar to Twitter. Twitter has been banned in China and thus Weibo enjoys a dominant position there.
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As per the announcement, the strategic alliance between Weibo and Alibaba is in a deal between different subsidiaries of SINA Corp (NASDAQ:SINA) and Alibaba, comprised of PRC subsidiaries of Weibo, and Taobao (China) Software and Zhejiang Tmall.com Technology for Alibaba.
SINA Corp (NASDAQ:SINA) has started to take a deeper interest in Weibo business lately and is on the way to restructuring. CEO Charles Chao is focusing more on earning revenues from the service.
Weibo is very popular amongst the Chinese and has a user base of more than 500 million users. Users share their opinion on different matters on Weibo just as on Twitter. With this deal, it is estimated that web traffic to Alibaba will increase at its Taobao Marketplace.
Both companies, Alibaba and Weibo, will together handle account connectivity, data exchange, online payments and online marketing according to SINA Corp (NASDAQ:SINA).
Alibaba Chairman Jack Ma has been in the 395th place in the 2013 Forbes Billionaires List with a wealth of $3.4 billion.
Jack Ma will leave his position as CEO of the company on May 10th and will handle the position of executive chairman. There are talks that the e-retailer will list its shares in Hong Kong towards the end of this year or in the starting of next year.
The business model of Alibaba, in which Yahoo! Inc. (NASDAQ:YHOO) holds a 23 percent stake, is based on online advertising and subscription fees. There has not been any official word from Alibaba regarding its IPO, but if it lists on the exchange, Yahoo will benefit from windfall gain as the company owns stakes in Alibaba.
The Chinese internet majors are striking deals amongst themselves in order to search for a new source of revenue. The deal between Alibaba and Weibo has emerged as one of the biggest deals between the domestic internet juggernauts of China. The deal will have a multitude of effects on the Internet industry in China.