The deal values Weibo at about $3.3 billion — equivalent to Sina’s entire market value as of Friday.

Alibaba and Sina also agreed to cooperate in improving ways to marry social networking with e-commerce, as microblogging services like Sina’s continue to grow in popularity. Sina Weibo said that last year it had more than 46 million daily active users, an increase of 82 percent from the period a year earlier.

Alibaba also retains the option to increase its stake to 30 percent in the future, according the Financial Times, as one research analyst said that the deal “suggests that Alibaba’s ambitions go beyond just commerce.” The Wall Street Journal reports that the deal also highlights Alibaba’s desire to compete more closely with Tencent Holdings, whose Weixin chat application has emerged to rival Sina Weibo.

Some analysts said that Alibaba’s offer for Weibo was generous, according to Reuters, though they pointed out the potential benefits of the strategic alliance:

“(The stake purchase) is as an endorsement from Alibaba … of the value of Sina’s Weibo platform,” Morningstar analyst Dan Su said.

“This indicates the tremendous value of the data that is present on the Weibo platform that can be mined for a lot of activities, such as ecommerce.”

…

“We believe this deal is very positive for Sina. It instantly gives pricing to Sina Weibo with a valuation of $3.26 billion; the per share base could be $48,” T.H. Capital Research analyst Tian Hou said.

“Sina’s resource consolidation with Alibaba Group, which has a huge dominant position in China’s e-commerce, can escalate Weibo’s development,” she said.

© Scott Greene for China Digital Times (CDT), 2013. | Permalink | No comment | Add to del.icio.us
Post tags: alibaba, e-commerce, jack ma, mergers and acquisitions, microblogging, sina weibo, social media, tencent, WeChat
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China’s Ministry of Industry and Information Technology, the regulatory body that governs the Internet and telecommunications sectors, is looking at the possibility of users having to pay a small fee to the telcos to use the app, said Miao Wei, head of the ministry, according to Caixin Media.

Experts say charging a fee could affect its popularity.

Tencent, China’s largest online gaming and social networking company, said recently it plans to invest heavily in Weixin to attract more overseas users.

Weixin (known as WeChat in English) has emerged as a serious challenger to microblogging site Sina Weibo for social media supremacy in China, and Tea Leaf Nation’s Rachel Lu and David Wertime wrote Sunday that its rapid growth may also be affecting the fees that China’s three state-owned mobile providers earn on text messages:

The latest statement from the MIIT has gone viral on Sina Weibo, with over 18,000 users sharing the post and over 6,000 weighing in to comment. User @dhljl echoed a widely held sentiment that “the day Weixin charges a fee is the day it is destroyed.” Weibo commenters apparently comprised many Weixin users as well, as they rushed to defend the service with argument, epithet, or humor.

…

The smart money says that Chinese authorities, and the SOEs with whom they remain closely tied, will not follow through with their threat. At best, it would represent a short-term revenue boost to telecom providers, but at the expense of one of China’s most promising and innovative new products. Even that much cannot be guaranteed. The fee may simply drive erstwhile Weixin users into the arms of the inevitable next-generation Weixin copy-cats, who would gladly continue to siphon revenue from the Big Three.

At worst, the move would enrage users and simply shift wealth from everyday Chinese users and an innovative private company to three SOEs. The appearance of an unholy alliance between government and SOEs prompted one Reuters columnist to call the latter a “vampire squid” late last year, and that perception has only intensified with recent negative state media coverage of Apple, Inc. that appears protectionist in nature.

Without knowing Chinese authorities’ true intent, it’s at least likely that they have used recent statements as trial balloons, gauging reaction on Weibo and other social media platforms in order to determine the extent of possible blowback. It would not be the first time that the Chinese Internet, with its relatively free-wheeling commentary, were used as a window into public sentiment by officials who lack more democratic means of pulse-taking.

Forbes contributor Doug Young claims that the three Chinese telcos have “found a potent ally” in the MIIT:

Firstly, I want to give my strong view that the MIIT has no place in helping to resolve this dispute, and that similar mediation by a government regulator would never happen in a developed market like the US or Western Europe. Participation by the MIIT is even more problematic because the agency has a clear bias towards China’s 3 telcos, China Mobile, China Unicom and China Telecom[/entity]. Anyone who follows the industry will know that officials move freely back and forth between these 3 telcos and the regulator, meaning the MIIT can hardly be a fair middle man in this case. By comparison, Tencent is an entrepreneurial company that probably has few if any former MIIT officials in its ranks.

Miao’s new comments indicate that his agency is siding with the telcos and pressuring Tencent to start charging fees for WeChat, better known by its Chinese name Weixin. Tencent had previously indicated it would let the service remain free and try to monetize the platform by offering value-added services like online games and mobile shopping. If it succumbs to the MIIT’s pressure, look for WeChat’s rapid growth to stall as users defect to other free services. The case could should be an important one to watch, as it could well become a template for the kinds of relationships we’ll see between the Chinese telcos and popular app developers in the future.

© Scott Greene for China Digital Times (CDT), 2013. | Permalink | No comment | Add to del.icio.us
Post tags: microblogging, Ministry of Industry and Information Technology, netizens, online public opinion, social media, telecommunications, tencent, text messaging, Weixin
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