The Hangzhou-based company recently bought a US$1.22 billion stake in Youku Tudou, which is China’s biggest online video provider. Think along the lines of Nico Nico Douga and YouTube, but in China. Alibaba, along with private equity firm Yunfeng Capital, is paying US$30.50 per American Depositary Receipt of Youku, or a 26.3 per cent premium over the last traded price.
Both companies will co-own 18.5 per cent stake in the online video content service. Youku Tudou’s CEO Victor Koo said that the investment will strengthen the platform further on. Beijing-based tech advisory BDA‘s Chairman Duncan Clark commented that the move is meant to boost its consumer base with non e-commerce business. “I don’t know whether [Alibaba] can make money or not [from this]. As with YouTube, it never made Google much money but it did help them boost traffic. If Alibaba can try to find traffic in the media world that’s driving all the eyeballs and make a consumer play, that’s desirable.”
This deal further builds up on the rivalry between Alibaba and its rival Tencent. The latter teamed up with online retailer JD.com to take on the former to exploit its weakness in the mobile division. This led to JD.com getting a headline slot on Tencent’s WeChat app, which is basically the go-to messaging tool in the region.
JD.com is an online Chinese computer, communication, and consumer electronics retailer. It is the the largest online direct sales company in China in terms of transaction volume.