Published April 29, 2013
Shares of SINA Corp. (SINA) got a 15% bump on Monday after the Shanghai-based social network operator inked a $586 million deal with China’s largest e-commerce platform, Alibaba.
The transaction gives Alibaba, operator of China's leading digital marketplace and the country's biggest online retail website Taobao, an 18% stake in SINA’s popular social network Weibo.com.
It also carries the right for Alibaba to up its stake in fast-growing Weibo to 30% in the future on a “mutually agreed valuation.”
SINA, which also operates the SINA web and mobile portals, said it secured a strategic alliance with several affiliated groups of Alibaba, including Taobao Software. The combined group will “jointly explore” social commerce and develop “innovative marketing solutions” in an effort to enable merchants on Alibaba to better connect with Weibo’s roughly 400 million users through e-commerce.
While terms were not disclosed, the parties in a joint statement said the deal is expected to yield some $380 million in advertising and social commerce services revenues in total for Weibo over the next three years.
The partnership would allow online merchants to “take advantage of the traffic shift toward social and mobile Internet” by offering products and services on the Weibo social network.
“We believe e-commerce will play a vital role in building an eco-system around Weibo's open platform," SINA CEO Charles Chao said in a statement.
The move comes as next-generation tech giants and social media sites in particular continue to look for ways to drive profits. Facebook (FB), the world’s largest social network that has similarly struggled with revenue generation, has recently revamped its ad platform and e-commerce strategies in an effort to better its top-line and attract advertisers.