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Worried about Traffic, China’s Alibaba Invests In Thriving Startups


Jul 26, 2018 by Yun Nie
Worried about Traffic, China’s Alibaba Invests In Thriving Startups


Alibaba Group, the Chinese multinational e-commerce, retail, Internet, AI and technology conglomerate, is attempting to boost its traffic from a series of investments, according to the Chinese information platform 36kr.com.

ITjuzi, a Chinese telecommunication, media, technology (jointly known as “TMT”) startup database and business information service provider, reported that Alibaba invested CNY 119.5 billion (USD 17.6 billion) into 35 ventures in 2017. By the middle of July 2018, Alibaba had already invested CNY 102 billion (USD 15 billion) into 38 companies.

Among the latest 38 investments, Focus Media, Babytree, and Xiaohongshu hogged the limelight.

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Vertical expansion plus focused users

The three ventures especially appeal to Alibaba since they share some common features -- focused users and superior traffic.

Focus Media could be one of the most attractive advertisement platforms. Several disclosed documents show that the platform is extremely popular among 200 million middle class individuals in 300 cities. Its med-term goal is to cover 500 cities, according to 36kr.com.

The company’s ubiquitous advertisements in office buildings directly target the white collar workers who are also mainstream consumers for Tmall and Taobao, the two foremost ecommerce platforms of Alibaba.

If the existing advertising strengths of Focus Media is combined with Alibaba’s big data analytics, the two companies will boast a highly accurate advertisement distribution system that improves their advertising value and builds offline outlets for Alibaba.

Xiaohongshu and Babytree are all top firms that focus on community-based products in Alibaba’s vertical integration chain. The former targets young females and the latter aims at mothers.

By cooperating with Xiaohongshu and Babytree, more specific products in Tmall and Taobao will be recommended to the two groups of consumers, which allows Alibaba to include more entrances into its vertical integration.

While Alibaba’s earlier investments in Youku, Weibo, and UC Browser were characterized by large scale and advertisement-centric profit model, community products providers like Xiaohongshu and Babytree are closer to customers and better for vertical expansion.

Traffic Anxiety of Alibaba

Although Alibaba reports steady user growth in its financial statements, fast-developing competitors catalysed Alibaba’s anxiety about its traffic.

According to the Chinese third party data vendor QuestMobile, in first half of 2018, Taobao boasted 550 million monthly active users (MAU) retaining its leadership in ecommerce industry. However, China’s hottest new online bazaar Pinduoduo saw up to 280% year-on-year growth in spite of its 160 million MAU.

To achieve sustainable development, Pinduoduo has to promote its brand and products, which will intensify its competition with Taobao.

Moreover, Pinduoduo is a powerful rival backed by the multinational investment holding conglomerate Tencent.

In the first half of 2018, Tencent emphasised on investing into WeChat-based platforms like Pinduoduo and possesses competition strengths relying on its business ecosystem.

As WeChat reported 930 million MAU and became the largest mobile Internet traffic winner in first half of 2018, its long-time rival Alibaba has been impelled to take a detour and try to seek opportunities in a shrinking market.

Yun Nie

Yun Nie is a New York-based tech reporter. She focuses on India-China financial market, global IT giants and technology-centric market trends. She can be reached at Yunnie@thepassage.cc.

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