China’s e-commerce giant, Alibaba announced on Monday that it has agreed to buy 18% stake in the Sina Corporation’s (NASDAQ: SINA) Weibo, a microblogging service, equivalent to Twitter, in a deal estimated at $586 million. The Company said that agreement allows Alibaba to increase its stake to 30% in the future.
Shares of social networking Company, Sina Corporation (NASDAQ: SINA) rallied following the announcement.
According to the deal, both Sina Corp and Alibaba work in tandem to improve ways to combine social networking with e-commerce. Microbloggging services such as offered by Sina Corp have grown exponentially in China, in the recent past.
Last year, Sina Weibo said that it had more than 46 million users, which represented a growth of 82% from the preceding year. Still, the number stands a fraction of what Twitter’s users’ base is. Besides, according to the New York Times, a recent study conducted among 30,000 Weibo users found that around 57% of these accounts had a negligible activity or posts on the microblogging platform.
Meanwhile, the e-commerce giant Alibaba, which was once considered as China’s answer to eBay has continued to expand its traction. Recently, analysts valued Alibaba at more than $55 billion, according to the New York Times. Alibaba which has made quite a few changes in the higher management, is expected to soon (could be as early as this year) make an initial public offering.
The synergy created by the marriage of e-commerce platform and microblogging services is expected to generate about $380 million in advertising and commercial revenue for Weibo services in next three years, expect Sina Corp and Alibaba.
Commenting over the deal, Alibaba’s Chairman Jack Ma, said in a statement, “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.”