Alibaba Group’s $206 million stake in US startup ShopRunner this fall foreshadowed the Chinese commerce giant’s interests in cross-country expansion. With a looming IPO expected this year and reports of a possible Nasdaq or NYSE listing, all eyes are on the company’s monetization moves.
Often referred to as “the Amazon of China,” Alibaba owns close to 80% of China’s commerce share across all its properties – and its revenue will continue to climb. For the first time, in 2013, the value of China’s online retail market surpassed that of the US, reaching $294 billion and $262 billion, respectively, according to Forrester Research’s China Tech Market Outlook: 2014 report.
“Certainly what they also want to do with their reach, financial strength and experience is build global businesses,” said Jay Eum, cofounder and managing director of TransLink Capital. “But it’s not just China to the US. Obviously, they have great ties to China, but they’re expanding across the region in Asia and are planting platform opportunities across the US as well.”
Backed by Internet heavyweights like Yahoo, which has a 24% ownership stake in the company, and SoftBank, with a 37% ownership stake, Alibaba’s position in the Asia-Pacific region hints at its future in the US, particularly from a mobile standpoint.
China’s tech market has experienced “something similar to what’s going on in the US concurrently, as well, that maybe just started a few years earlier,” Eum added. The boundaries in online were once divided between Baidu, for search; Tencent, for entertainment, chatting and messaging, and commerce with Alibaba.
But just as Google, Facebook and Yahoo have each made mobile landgrabs in the US, the Chinese vendor community has, according to Eum, “really started to mix things up a bit where everybody has really started to encroach on each others’ territory.”
This is evident in large-scale M&A moves by Baidu to acquire mobile app developer 91 Wireless Websoft and Alibaba’s recent launch of a mobile gaming platform.
Although Alibaba originated in 1999 as a B2B buyer-and-seller marketplace (slightly different than its B2C American counterpart, Amazon), the group’s launch of consumer-to-consumer shopping site Taobao Marketplace in 2003 was followed by a string of B2C debuts, such as Tmall.com, Juhuasuan and shopping search engine eTao.com.
These developments have piqued the interest of advertisers eyeing Alibaba Group’s slew of consumer-oriented sites and marketplaces.
“Their advertiser revenue this year should be somewhere around $4.2 billion US dollars,” said Alan Yan, CEO of online advertising company AdChina. “Alibaba is probably the second largest advertising company in China not just in online and digital, but across all media sectors including TV.”
Taobao and Tmall.com offer both onsite and offsite advertising services. For onsite, they have both display and shopping search availabilities. Alibaba Group’s launch of online ad exchange Alimama, as well as the RTB-enabled Taobao Ad Network And Exchange (TANX) illustrates Alibaba’s aggressive developments in monetizing through paid media.
“TANX is probably the no. 3 ad exchange in China,” Yan said. “Their RTB-enabled exchange covers a lot of inventory both onsite and offsite. … They have a huge amount of first-party data as a shopping site if you look at their inventory across all categories.”
In terms of Alibaba’s immediate competitors, Baidu and Google China both wage battles in search. A majority of Google China’s revenue comes from cross-border advertising where marketers are seeking overseas buyers, Yan said. If Alibaba can tackle this “cross-border” targeting terrain, it could potentially trail-blaze new areas of advertising for the company.
“The interesting thing about Alibaba is the scope and scale of what they’re trying to do,” Eum said. “Not only are they actively looking to acquire and make strategic investments in companies in the US, they have investment bankers sourcing deals for them as well as [working with] co-investors like ourselves.”
He added: “It’s fascinating to see how fast-moving they are, how decisive they are. That startup-friendly attitude has earned them a favorable response.”
