Sina Weibo, the micro-blogging platform that took root among China’s white-collar class, may be worth more than $3 billion today after Alibaba agreed to pay $586 million to buy preferred and ordinary shares in the company.
The deal creates a strategic alliance between Alibaba, which runs the eBay of China, and Sina Weibo, which is kind of like a Facebook-Twitter hybrid. Weibo grew to 46 million daily users and earned $50 million in advertising revenue last year, according to an SEC filing last week from parent company Sina. It was 12 percent of parent company Sina’s total advertising revenue.
Like Twitter and Facebook, Sina Weibo has gotten a lot more aggressive about pushing in-stream or news feed advertising. Last week, they announced a new product called “Window Recommendations” in partnership with Alibaba’s Taobao. In that integration, about 3 to 5 ads featuring Taobao goods get pushed into a Weibo stream.
The two companies say the deal happened so that both companies could better connect Alibaba merchants to their Weibo users and followers and experiment with new ideas in social commerce. The partnership could bring $380 million in advertising and e-commerce revenues to Weibo over the next three years, Sina said. Alibaba also reserves the right to bump its ownership up to 30 percent.
It’s interesting because no such equivalent partnership exists in Western markets. E-commerce companies like eBay and Amazon have basic Facebook integrations but no deep strategic investments.
Alibaba is also making the deal as it’s expected to go for a very highly anticipated IPO. The company recently did a management re-shuffle, putting in Jonathan Lu Xaoxi as its new CEO, after founder Jack Ma stepped down.