China’s biggest e-commerce group Alibaba has bought an 18% stake in Weibo, China’s largest Twitter-like service, as it looks to tap into the fast-growing social media sector.
Alibaba will pay $586 million for the stake, valuing Weibo at over $3.2 billion.
The deal is expected to help Alibaba drive traffic from Weibo, which has more than 500 million users, to its e-commerce sites such as Taobao.
It will also help generate additional advertising revenue for Weibo.
According to the two firms, the partnership will bring in $380 million more in advertising and social commerce services revenue for Weibo over the next three years.
“We believe that this strategic alliance helps to create a stronger Weibo,” said Jack Ma, chairman of Alibaba.
“It affirms our view of the vitality and importance of social media in unleashing value in e-commerce activities.”
China has become the world’s biggest internet market and it is expected to grow even further in the coming years as more people get access to the internet.
Alibaba, was one of the early pioneers in the sector in China and has benefited from this boom.
It offers various services, including Alibaba.com which connects businesses across the globe to Chinese manufacturers. It also runs online shopping sites for retail consumers in China as well as an online payment service Alipay.
Driven by its success, the firm has been looking to increase its dominance in the Chinese market.
Meanwhile, social media sites such as Weibo have seen tremendous growth in China in recent times and have become a powerful medium for consumers.
The two companies said their partnership will help them grow their respective businesses and that they will “cooperate in the areas of user account connectivity, data exchange, online payment and online marketing, among other things”.
“Weibo and Alibaba’s e-commerce platforms are natural partners,” said Charles Chao, chairman SINA, the parent firm of Weibo.
“Together we provide a unique proposition not only to existing online merchants, but also to individuals or businesses, who wish to offer products and services on social networking platform to take advantage of the traffic shift toward social and mobile internet.”
According to the deal, Alibaba will have the right to increase its ownership in Weibo to 30% at a mutually agreed valuation “within a certain period of time in the future”.