Alibaba is making a move to boost its capabilities in the digital mapping sector. Digital mapping takes large amounts of data and translates them into virtual images much as Google Earth does. Alibaba made an offer to acquire Beijing-based AutoNavi Holdings in a deal valuing the company at about 1.6 billion U.S. dollars. The offer edged out Alibab's domestic competitors Baidu and Tencent, and could be bad news for U.S. tech giants Google and Apple.
China's internet juggernaut may just get bigger. Alibaba Group, known as China's Groupon, Ebay, Twitter and Paypal combined, could soon also become the Google Maps and Mapquest of China.
Alibaba already owns 28 percent of digital mapping service AutoNavi, and has offered to acquire the remaining 72 percent for $21 dollars per share.
"Most of Alibaba's merchants are national or international exporters and importers. So the more local merchants have been using Google Maps and Mapquest in order to direct customers to their stores and locations. This basically means that for the first time now, Alibaba has its own in-house integrated solution for its own merchants to plug in map applications in order to guide customers to those local merchants," said Sam Hamadeh, CEO of research firm PrivCo.
The move points to Alibaba's focus on mobile growth, but it's also part of a broader strategy to edge out competitors Baidu and Tencent. Google and Apple would also likely lose out in this digital land grab.
"It's a loss to Google Maps, certainly, but I think the biggest loser in this is Apple," Hamadeh said. "Apple, finally after years of trying, finally got a cellphone distribution deal with China Mobile. China Mobile is actually one of the largest customers of AutoNavi... I think the natural acquisition would have been the leading mapping provider in China which is AutoNavi and Alibaba beat them to it."
The acquisition would also better position Alibaba in what's known as O2O commerce integrating online commerce, with offline commerce. This would in theory lay the platform for consumers to use smartphones to locate nearby stores, and then use Alibaba's own payment service Alipay to complete transactions, expanding Alibaba's already massive ecosystem.
PrivCo estimates that the AutoNavi acquisition will add $3.4 billion U.S. dollars to Alibaba's IPO valuation, bringing it to $138.4 billion U.S. dollars.
Alibaba is expected to file for an IPO in March, and list in May.
Source: CCTV
