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.
China’s biggest e-commerce group Alibaba has bought an 18 percent stake in Weibo, China’s largest Twitter-like service
“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”.
Weibo, “China’s Twitter”, has introduced a code of conduct explicitly restricting the type of messages that can be posted.
China’s biggest microblogging service took the action after local authorities criticized “unfounded” rumors posted by some users.
Reports suggest a credit score system will also be introduced with points deducted for rule breaches.
Repeat offenders face having their accounts deleted.
Weibo’s parent, Sina Corp, says it has more than 300 million registered users.
Users are reported to start with 80 points – they gain more by taking part in promotional activities, but lose points if they break any of the rules.
It is reported that if a subscriber’s points fell below 60 a “low credit” warning would appear on their microblog, leading to the possible cancellation of their account if it hit zero. If they “behaved” for two consecutive months their score is reported to return to 80.
“This is a sign of the authorities trying to restrain the internet in China, but a hardcore group of people will still find ways to get round the restraints,” said Dr. Kerry Brown, head of the Asia Programme at the Chatham House think tank.
“There is a tradition of indirect criticism in which people make points using coded references. I very much doubt these rules will change anything.”
The news was first reported in the western press by The Next Web which quoted from a translated version of the rules created by an anonymous group of volunteers.
Weibo, “China's Twitter”, has introduced a code of conduct explicitly restricting the type of messages that can be posted
The “community convention” says its members may not use the service to:
• Spread rumors
• Publish untrue information
• Attack others with personal insults or libelous comments
• Oppose the basic principles of China’s constitution
• Reveal national secrets
• Threaten China’s honor
• Promote cults or superstitions
• Call for illegal protests or mass gatherings
It adds that members must not use “oblique expressions or other methods” to circumvent the rules.
Users have sometimes abbreviated names or used code words to avoid detection in the past.
The Tech in Asia blog noted that Sina did not invent the rules.
“They are pulled directly from Chinese law and are applicable to Weibo posts regardless of whether Sina includes them in a user contract or not,” it said.
However, it added that Sina Corp’s credit score system was an innovation.
A committee made up of experts and Sina Weibo subscribers will be charged with enforcing the rules.
Sina – and its competitors Baidu and Tencent – were ordered to ensure all their members registered their real identities by March. However, Sina later admitted it had not fully implemented the order.
Last month Chinese officials forced Sina and Tencent to suspend users’ ability to comment on each other’s posts for three days after allowing rumors to spread.
The official news agency, Xinhua, reported that the sites “pledged to strengthen management” afterwards.
Authorities have been critical of false reports spread through microblogs including news of the assassination of North Korean leader Kim Jong-Un, and stories of a military coup that tried to overthrow Chinese President Hu Jintao.
Chinese social media has also been pressured to filter posts featuring words associated with controversial events.
When the former Communist Party’s Chongqing chief, Bo Xilai, was stripped of his Politburo post several sites would not deliver results for searches featuring his name.