Sina, Alibaba Overhaul E-Comerce Approach
After a false start earlier this year following their landmark equity tie-up, top web portal Sina (Nasdaq: SINA) and e-commerce leader Alibaba are reportedly preparing for a second bid to combine online shopping with social networking. This second initiative involves the roll-out of a completely new platform that will try to bring Alibaba’s e-commerce services to the more than 500 million registered users of Sina’s popular Weibo microblogging service, often called the Twitter of China. We’ll have to see the actual product before drawing any major conclusions, but I do think this approach looks better than other initial clumsy efforts after the pair announced their tie-up back in April
Before we go any further with the latest news, let’s back up and look at the history behind this alliance to put things in proper perspective. Talks for a tie-up between Sina and Alibaba began late last year, with Alibaba looking to buy a stake in the fast growing Sina Weibo. Such a pairing looked smart to me, as many of Sina Weibo users come from a similar demographic to online shoppers who use Alibaba’s popular TMall and Taobao online marketplaces.
The early talks initially failed due to disagreement on valuation. But the 2 sides quickly realized a deal was in both of their best interests and talks resumed this spring. That resulted in the deal announced in April, which saw Alibaba purchase 18 percent of Sina Weibo for $586 million, valuing Weibo at about $3.3 billion. (previous post)
Amost immediately after the deal was announced, we saw the first clumsy results of the tie-up as a sudden flood of e-commerce advertisements appeared on Sina Weibo pages. That flood must have produced a negative backlash from Weibo users, since the volume of advertisements quickly fell and most such ads have now been relegated to unobtrusive spots in the margins and at the bottom of Sina Weibo pages.
Against that broader backdrop, the latest reports are saying that Sina and Alibaba are preparing to launch a completely new platform called Yun Mao, which will seek to integrate Weibo’s social networking services (SNS) with Alibaba’s e-commerce. (English article) Chinese speakers will recognize that the new platform’s name combines the words yun, shorthand for Alibaba’s cloud computing unit Aliyun, with mao, which is shorthand for Alibaba’s popular TMall B2C e-commerce platform. That implies that Alibaba is the key driver behind this latest drive, with Sina acting as supplier of potential consumers from its vast Weibo user base.
The reports don’t include too much additional detail, except to say the platform will launch in August and new accounts can easily be linked with Sina Weibo accounts. All of this leads me to believe that Alibaba was probably working on Yun Mao as its own SNS initiative before the Sina deal was signed. Still, this kind of new platform looks like a much smarter way to integrate the e-commerce and SNS, since no users will feel like they are suddenly being bombarded by an unexpected and unwanted flood of advertisements and other e-commerce services to their accounts.
As I’ve said above, we’ll have to see what Yun Mao actually looks like and also what initial reception it gets from users before saying more conclusively if it will succeed. Frankly speaking, I don’t know of any major platforms that have successfully combined e-commerce and SNS so far, though many companies like Facebook (Nasdaq: FB) are certainly trying. All that said, I do like Alibaba’s and Sina’s approach of trying to find the right formula in a new platform rather than an existing one, and would give this new initiative a 50-50 chance for some modest success.
Bottom line: A new platform being rolled out by Alibaba and Sina combining e-commerce with SNS stands a reasonable chance of success, at about 50-50.
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