Sina (NASDAQ:SINA) launched a Twitter-like microblogging website named Weibo in China in 2009. The company recently entered into a partnership with Alipay, Chinese e-commerce leader Alibaba’s third-party online payment platform, to offer payment services to Weibo app users. The new service is known as Weibo Payment, and it allows users to make online and offline payments through their Alipay accounts. Users can make online purchases from retailers and can also opt for paying offline via QR codes. Last year, Sina launched a similar service of its own called Weibo Wallet. However, the product failed to gain traction in the market and it will now instead be used for making payments for financial products. 
The strategic tie-up between Alipay and Sina comes after Alibaba’s purchase of 18% stake in Weibo last year for $586 million. Interestingly, the deal valued Weibo alone at $3.3 billion, which was the entire market capitalization for Sina at that time even though Weibo generated less than one-fourth of the company’s revenues. Weibo raked in revenues of $44 million in the third quarter of 2013, higher by about 46% compared to the prior period. The sharp up-move came about as monetization on Weibo grew at a fast rate due to the platform’s rising popularity among users and SMEs. The number of daily active users on Weibo rose by 11.2% sequentially to reach 60.2 million by the end of the quarter. 
Weibo Payment Will Help Counter Growing Competition From Tencent’s WeChat
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Sina is facing increased competition from WeChat (a mobile messaging application by Tencent) which is having a negative impact on the number of users and the average time spent by users on Weibo. WeChat has over 600 million users. According to a study by China Internet Network Information Center, about 37% of Weibo users migrated to WeChat’s application last year. It is estimated that as a result of the migration Weibo’s user base fell by 9% over the previous year to end 2013 at 281 million.  We believe that Weibo Payment will help Sina to compete more effectively with Tencent by enticing Alibaba’s users to open Weibo accounts.
WeChat is also increasing its focus on e-commerce to generate money. It launched its own payment service last year which is being embraced by users. The Chinese e-commerce market is experiencing strong growth – the volume of transactions in the Chinese e-commerce market is expected to grow from about $300 billion in 2013 to $540 billion by 2015.  In our view, Sina’s partnership with Alibaba will allow both the companies to counter competition from WeChat in e-commerce. About 48% of daily active users on Weibo have already integrated their Alibaba accounts to be able to share items with other users. Buying these items will be just a few more taps away with the integration of Alipay in Weibo.Notes:
- Chinese Internet Giants Alibaba and Sina Weibo Partner Up To Launch Weibo Payment, Tech Crunch, January 2014 [↩]
- SINA Corporation’s CEO Discusses Q3 2013 Results – Earnings Call Transcript, Seeking Alpha, November 2013 [↩]
- China Microblog Users Fall 9% on Tencent App Competition, Bloomberg, January 2014 [↩]
- E-commerce in China: Driving a new consumer culture, KPMG, January 2014 [↩]