Social commerce spotlight: What does Alibaba’s massive Weibo investment mean for social shopping in China?
The deal, valued at $586m, is thought to be the biggest web deal of this year and pushes Weibo’s value to over $3bn.
The move will provide more advertising revenue to Weibo as it tries to monetize its service and increase its lead over rival Tencent Holdings’ social messaging service, WeChat, while also helping to drive more web traffic to Alibaba’s Taobao Marketplace, China’s largest consumer-facing e-commerce site.
The agreement comes with an option to increase Alibaba’s stake to 30% in the future, but at present is expected to generate around $380m in revenue over the next three years.
With up to 500 million accounts (although this is disputed), Weibo is ripe for monetization, but until now has struggled to generate much from its advertising, so adding a commerce component could help kick-start this facet of the business. Indeed, phone maker Xiaomi’s stab at selling some of its phones on the platform last year proved hugely successful: 1.3m reservations for its new model were logged in just five minutes. This was only a short-term experiment, not a long-term sales channel, but indicates the potential success similar strategies could have on a more permanent basis.
It’s also likely that Weibo will play a pivotal role in Alibaba’s future mobile plans, with the company’s founder and chairman Jack Ma commenting: “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.”