Sina, Alibaba team up to duel with Tencent

Industry experts said Wednesday that a recent alliance between online media firm Sina Corp and Alibaba Group, owner of China's largest online shopping empire by number of users, may be a self-defense strategy intended to counter fierce attacks by Internet giant Tencent Inc.

NASDAQ-listed Sina Corp said in a statement Monday that it has formed a partnership with Hangzhou-based Alibaba Group to "jointly explore social commerce and develop innovative marketing solutions to enable merchants on Alibaba e-commerce platforms to better connect and build relationships with Weibo users."

Alibaba has also bought an 18 percent stake in Weibo, a Twitter-like microblogging service run by Sina, for $586 million, and has an option to increase its shareholding to 30 percent on a fully diluted basis within an unspecified future time period, the statement said.

Weibo is one of the largest Chinese social networking services. Its user number exceeded 500 million by the end of December 2012, Sina said in February. However, Tencent's instant mobile messaging application WeChat is quickly catching up, registering 300 million users by January 15, only two years after its launch, Tencent announced.

"Sina has its social media, but no shopping platforms, whereas Alibaba has e-commerce websites taobao.com and tmall.com without any social media," Wang Gao, a professor at China Europe International Business School, told the Global Times Wednesday. "Combining the two could mean more new business models, through trial and error, of course."

"WeChat users are now approaching 400 million … If Tencent can manage to turn its WeChat users into users of its online shopping platforms, it will become a serious challenge to (the current e-commerce dominance of) taobao and Tmall," Wang said.

Flush with cash, Tencent runs three shopping websites under its flag: buy.qq.com, paipai.com and 51buy.com. WeChat users can log into these websites with their WeChat account information.

Sina and Alibaba are also planning to work on their user account connectivity, the firms said in the statement, as well as data exchange, online payment, and online marketing.

Semantic analysis has already become a main marketing tool on social networks and has generated a major part of the revenues for social websites such as Facebook, Li Yanchuan, CEO of Chengdu-based Internet startup Aruba Co, told the Global Times Wednesday.

"Suppose five friends are talking about buying clothes on Weibo. Through automatic analysis of their discussion, Weibo can display a targeted advertisement on one of the users' pages. If the user clicks on the ad and buys something on the shopping website, say taobao.com, then Weibo would get a certain amount of kickback from taobao.com," Li said.

For privacy reasons, users' personal information is generally hidden from Weibo employees and advertisers, Li said.

"Weibo has entered a later stage in its life cycle. It'll be gone if it does not make more money soon," Li said.

"The strategic alliance is expected to generate approximately $380 million in advertising and social commerce service revenues in aggregate for Weibo over the next three years," said Sina.