April 30 (Bloomberg) -- Alibaba Group Holding Ltd. committed to invest $586 million in a Chinese Twitter-like service as billionaire Jack Ma expands his campaign to lure smartphone and tablet users from Tencent Holdings Ltd.
Alibaba, China’s largest e-commerce company, agreed to buy an 18 percent stake in Sina Corp.’s Weibo unit, with an option to increase its holding in the message service to 30 percent, according to a statement released yesterday. The companies also agreed to cooperate on online payments and marketing.
Alibaba founder Ma, who started developing the company’s mobile business three years ago, hasn’t been able to keep pace with Tencent and its WeChat messaging service for customers who access the Internet through mobile devices. Buying a stake in Weibo, with its 503 million registered users, may boost Ma’s efforts to compete with his Shenzhen-based competitor in making money from those platforms.
“They are forming a strategic cooperation to compete against Tencent,” said Thomas Chong, an analyst at Bank of China International Holdings Ltd. in Hong Kong. “Now the biggest challenge is execution.”
Alibaba’s most popular e-commerce platforms include Taobao Marketplace, a cross between Amazon.com Inc. and EBay Inc. with more than 500 million registered users, and Tmall.com, a business-to-consumer portal. The two businesses sold more than $3.1 billion worth of goods in one day during a Nov. 11 promotion.
Hangzhou, China-based Alibaba could use Weibo’s popularity with mobile users to expand its mobile e-commerce business, Chong said. Ma said last month Alibaba may use acquisitions to boost growth through apps.
About 75 percent of Weibo’s 46.2 million daily active users access the service through mobile devices, according to Sina. Tencent, led by billionaire Ma Huateng, had more than 300 million users by January. The billionaires aren’t related.
“We believe that the cooperation of our two robust platforms will bring unique and valuable services to Weibo users,” Alibaba’s Ma said in the statement. The stake will make mobile “a core part of Alibaba’s strategy,” he said.
Alibaba said this month it’s working with five Chinese handset makers to use its operating system, called AMOS, as it takes on Google Inc. and Tencent for mobile device users.
A Chinese government research institute said in March that the nation’s smartphone makers are “heavily dependent” on Google’s Android software and that is hampering the development of the domestic industry.
“We believe e-commerce will play a vital role in building an eco-system around Weibo’s open platform,” said Charles Chao, chairman and chief executive officer of Sina.
The move could help Sina boost its market value, which has nearly halved since June 2011 as it struggles to monetize Weibo and as growth in its Web portal business weakens, said Cao Lei, a director at Hangzhou-based China e-Business Research Center.
“Sina has been investing a lot of money into Weibo, Alibaba’s deal could help Sina with liquidity,” Cao said. “The cooperation will also help Weibo’s monetization.”
Shares of Sina surged 9.4 percent to $55.03 at the close in New York yesterday. The deal values Weibo at $3.2 billion, compared with Sina’s total market capitalization of $3.67 billion at yesterday’s closing price.
Jerry Huang, a director of investor relations for Tencent in Shenzhen, didn’t respond to an e-mail and phone call seeking comments during a public holiday in China.
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