I don't really keep an eye on the public markets except on a very superficial level because it's so far away from the work I do as an early stage investor, but certain transactions have rather important implications across the entire landscape. Alibaba's purchase of an 18% stake in Sina's Weibo (Chinese "twitter") is one of them.
Just some really brief reactions, personal opinions only, as an avid user of Taobao and Wechat, but relative novice on Weibo (in terms of engagement, not length of use) -
Today, Sina wins.
Sina has remained a media company with almost no presence in internet commerce, and this brings them much closer to the transaction. If data from weibo flows more freely from Sina to Taobao as I imagine it will, they can now experiment much more freely with their ad platform to drive transactions. So far, I had seen much fewer clearly performance driven ads than branding ads on Weibo in my limited time spent on the platform.
Also, $586 million USD in cash is pretty significant, especially when according to Google Finance its market capitalization pre-announcement was only $3.33Bn. (The $586mm essentially valued Weibo at $3.26Bn, meaning that its portal business was being valued at next to nothing by the public markets. Sina wasn't out of cash or anything at over $700mm in cash and equivalents as of 12/31/2012, but this nearly doubles their cash reserves.)
Tomorrow, Alibaba can also win.
Weibo has been struggling but it remains one of the most important communication tools in China. With the lack of a fully-functional social network, Weibo has been the go-to place for the general public to get the latest news and gossip and is by far the most prolific generator of memes. It's a top influencer of culture and awareness, and so far as been primarily used for information and entertainment. Oh and one more thing, it is actually more engaging on the mobile than on the web.
Alibaba clearly knows that the future of e-commerce is going to be as much mobile as it is web, and I've seen its mobile application improve greatly over the last year. It is still clunky, but mobile payment is actually functional and I have no doubt the experience will continue to evolve for the better. I'm not wholly convinced that the whole idea of close-knit social commerce is workable (there was a great article written a few months ago in Chinese media by a female entrepreneur whose arguments against social commerce included the fact that one of the most mortifying experiences for a girl is to show up somewhere in the same outfit as a friend, or even stranger) but unicast, follower-based influence as embodied by Weibo and the like may work. The issue here is Weibo is so heavily relied upon as a source of news (something that Twitter is far less about) that I can't help but wonder if there will be some resistance against it becoming much more transparently commercial?
For Tencent, the field remains open, but hurry on the local commerce integration already!
I love the Wechat platform and have been almost evangelical about it (to the point where I refuse to give out my phone number anymore, just Wechat ID, which is not as uncommon as you think in China) since before they even hit 50mm users (they are supposedly almost at 400mm now). In my opinion, Tencent should concentrate on local commerce. It's still unaddressed, despite all of the hoopla Alibaba is making about it, and there's so much opportunity to connect offline merchants to its Wechat platform. There's literally a revolution waiting to happen here and I have met with many companies who are all trying to get a piece of this now that Wechat has reached critical mass and continues to demonstrate admirable stickiness. Local commerce also translates more easily from the networks established within Wechat, which are bi-directional and for peers, more personal as well as geographically similar, than Weibo, whose unicast networks are often more aspirational and so more interesting for brand discovery and conspicuous personal expression such as fashion. Wechat, at least so far in how I use it, is more appropriate for the utilitarian needs typically fulfilled by local merchants (locksmith? dry cleaner? ayi service?).
What do you think?