Alibaba, China’s largest e-commerce company, recently made headlines by committing to purchase an 18% stake in Weibo, China’s largest microblogging platform, for $586 million. The deal reportedly gives Alibaba an option to increase its stake to 30%.
The alliance will allow Alibaba to drive more web traffic to its e-commerce sites. With over 500 million registered users and 46 million daily active users, Weibo provides a broad base of potential customers who can be directed to Alibaba’s mobile e-commerce business. Weibo, which controls a wealth of user information but previously had trouble monetizing its data, is expected to generate $380 million in advertising and commercial revenue from the partnership over the next three years.
The investment in Weibo may further prepare Alibaba’s own fledgling mobile operating system, AMOS, to take on Google’s Android in China. In April, Alibaba announced that it would promote AMOS through subsidies to handset makers and programs allowing customers to buy AMOS-based devices with no money down. Alibaba could make its OS even more attractive to Chinese users by integrating Weibo features.
Jack Ma, Alibaba’s colorful and charismatic founder, stepped down as CEO earlier this month, explaining that at 48, he is “a bit old for the internet.” Ma remains chairman of the company, while Jonathan Lu takes over as CEO. Alibaba is expected to go public within the next year.