Sina Weibo Sniffs E-Commerce With Alibaba 阿里巴巴或牵手新浪微博
New reports over the weekend have Sina’s (Nasdaq: SINA) popular but profit-challenged Weibo microblogging service sniffing out a strategic tie-up with e-commerce leader Alibaba, in what looks like a very smart tie-up to me if it’s true. Meantime in related news, NetEase (Nasdaq: NTES) is shuttering one of its main social networking services (SNS) sites, again reflecting how difficult it is to make money in the popular but cash-poor world of SNS. Let’s take a look first at the big news regarding a potential Sina-Alibaba tie-up, which would mark a major step in the drive by Sina Weibo towards becoming profitable.
Media are reporting that Alibaba will take a 15-20 percent stake in Weibo as part of a strategic tie-up with the wildly popular microblogging service that is also trying hard to become profitable before a potential initial public offering. (Chinese article) The reports, citing an advertising services firm in a posting on rival Tencent’s (HKEx: 700) microblogging service, say the investment would value Sina Weibo at $2-$3 billion, implying that Alibaba is investing up to $600 million.
From my perspective, this move, if true, looks like one of the smartest things that Sina has done in a while to boost Weibo’s revenue generating capability. Sina Weibo is currently host to more than 300 million registered users, including 36.5 million who use the service on a regular basis. Those users are largely young people under the age of 35, who love to use the service to get the latest news and gossip from celebrities, friends and other users. But those same users see little or no reason to pay money for such service, which they now get for free. They also don’t seem interested in using many of the paid premium services that Weibo has been rolling out over the past year.
By comparison, users of Alibaba’s popular TMall and Taobao e-commerce platforms spend plenty of money on the sites, since that’s their main function. At the same time, Alibaba’s main users are largely cost-conscious, tech-savvy people under the age of 35, which is essentially the same as Sina Weibo’s main demographic.
Thus this looks like a perfect pairing of 2 very complementary companies, since both could drive many of their users to each others’ sites. In Sina Weibo’s case, that also means it could work with many of Alibaba’s merchant partners and Alipay e-payments service to offer targeted e-commerce services on its Weibo site, finally offering a product that some of its users might be willing to pay for. We’ll have to wait and see if the news is really true; but if it is, this could mark an exciting new chapter in Weibo’s drive to profitability and an IPO that could by the end of next year.
Meantime in the other SNS news, media are reporting that NetEase has decided to shutter its Club163 site, reflecting the difficult business environment for SNS. (Chinese article) I’ll admit I don’t know anything about this site, which I suspect was more like Facebook (Nasdaq: FB) than Weibo. I did my own checks, and NetEase’s own microblogging site continues to function as usual. But regardless, the closure of Club163 reflects the tough operating environment and certainly doesn’t bod well for other Facebook-like SNS sites like money-losing Renren (NYSE: RENN) and Kaixin.
Bottom line: Sina Weibo’s reported tie-up with Alibaba looks like a smart move that, if true, could help Weibo achieve its goal of profitability by the end of next year.
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