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Tuesday, May 7, 2013

Alibaba and Sina: Join Hands for A Better Future

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(Photo from China.org.cn)

The biggest news last week in China’s Internet industry is Alibaba’s decision to purchase 18 percent of the share from Sina Weibo, by far the largest social network platform in China.

Alibaba is the biggest e-commerce company in China, which most people know it through the much popular B2C platform Taobao.com. Alibaba's business has been growing in an incredible pace for the past few years. Owning the stake in Weibo.com definitely strengthens Alibaba’s strategy in online advertising and sales.

On the other side, Weibo, pretty much the Chinese version of Twitter, has more than 500 million registered users. This massive user base is something that every business would like to tap on.

While Weibo is still prospering, Sina’s share price has been going low for the past few months before Alibaba’s announcement. Weibo has made 66 million dollars in revenue last year, however, the expense is greater, 93 millions, which leads to a net loss of around 27 million dollars. This shows that, just like Twitter, Sina is still struggling to find a profitable business model for its microblog platform.

The alliance between Alibaba and Weibo looks promising for both parties. By leveraging on the large user population, Alibaba’s marketing and advertising could better target the audience and educate more users in online shopping experience. In turn, Weibo could boost its revenue in advertising and maintain a long-term relationship with the e-commerce giant in China. 

From another perspective, Weibo's prosperity is still very much under government's surveillance. Though it may not  be directly affecting its advertising initiative, less free participation from users could still impact the effectiveness of the marketing strategies. That's something Alibaba and Weibo should deal with.

It is a very much promising partnership and collaboration for both Alibaba and Weibo, however, the future down the road still needs both parties' careful planning and steering.

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