E-commerce company Alibaba Group is to pay US$586 million for an 18 percent stake in Sina Corp's Weibo microblog service, it announced yesterday.

The two companies are to work on user account connectivity, data exchange, online payments and online marketing, Sina said. Weibo has more than 500 million users for its microblog services while more than 800 million people use Alibaba's Alipay service.

"It's cooperation between the top social media platform and the top e-commerce platform. It will create huge business opportunities," said Charles Cao, Sina's chief executive.

The alliance is expected to bring Sina Weibo about US$380 million in advertising and social commerce services revenue within the next three years, Sina said. It has been trying to cash in on Weibo's huge user base but received a lukewarm market response over the past few years.

Sina's US-listed shares jumped 17 percent to US$58.85 in premarket trading yesterday, according to Reuters.

Alibaba has the option of increasing its stake to 30 percent within a stipulated time, Sina said, without providing details.

Monetizing services

"It's a win-win alliance to help Weibo better monetize and help e-commerce with social features," said Zhang Wei, a partner in Partners China, a venture capital firm.

Sina has been trying to monetize Weibo services through advertising, membership fees and other methods. But it hasn't found an effective method, especially after Tencent Inc launched popular social messaging product Weixin, or WeChat, which is expected to soon have more than 400 million users.

The deal values Sina Weibo at US$3 billion, much lower than the peak value of more than US$10 billion estimated by investment banks several years ago.

The alliance is expected to help Alibaba, one of China's three biggest Internet firms, enhance its social platforms to compete with rivals Tencent and Baidu Inc.

Alibaba, founded by Chinese Internet entrepreneur Jack Ma, runs Taobao, Alibaba.com and Alipay and is the country's No. 1 e-commerce website.

But Alibaba is not so strong on search and social sectors - the hottest functions in the dot-com industry in the battle among China's BAT, referring to Baidu, Alibaba and Tencent.

Alibaba's investment in Weibo should drive web traffic to Alibaba's websites, including Taobao, according to industry insiders.