Alibaba Group Invests In YouTube of China

Alibaba

As YouTube becomes a de facto method for the masses to gain access to independent programming, Chinese ecommerce giant Alibaba Group announced today it is investing $1.2 billion with a in video website Youku Tudou.  The investment will give Alibaba a 16.5% stake in the company and its partner Yunfeng Capital will receive a 2 percent stake.

Investment comes amid investing spree from Chinese firms

The investment comes as China’s major Internet firms are making multibillion-dollar investments in entertainment, consumer finance and other services as the Chinese firms retool their strategy amidst a shift in accessing the Internet through smartphones and other mobile devices.

Alibaba’s investment will strengthen Youku Tudou’s position as “China’s YouTube,” as Youku Tudou is currently China’s largest online video platform.

Alibaba Group is a Chinese-based group of Internet-based e-commerce businesses including business-to-business online web portals, online retail and payment services, a shopping search engine and data-centric cloud computing services. The firm claims to be a privately controlled, but observers note that few companies emerge to such a position of prominence without the blessing of the Chinese central government.

Chinese ecommerce rivaling US firms

Alibaba is a significant force in ecommerce.  In 2012, for instance, just two of Alibaba’s web portals did $170 billion in sales, more than competitors eBay Inc (NASDAQ:EBAY) and Amazon.com, Inc. (NASDAQ:AMZN) combined.

In 2012, two of Alibaba’s portals together handled 1.1 trillion yuan ($170 billion) in sales, more than competitors eBay Inc (NASDAQ:EBAY) and Amazon.com, Inc. (NASDAQ:AMZN) combined.

The company started as a business to business in 1999 connecting Chinese manufactures with overseas buyers.  Alibaba Group’s sites account for over 60% of the parcels delivered in China. Alipay, one of the Alibaba companies that competes with PayPal, is an online payment escrow service that accounts for roughly half of all online payment transactions within China. The majority of these payments occur using Alibaba services. As of September 25, 2013, the company is seeking an initial public offering in the US after a deal could not be reached with Hong Kong regulators.

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About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com

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