Alibaba buyer? You're investing in these companies, too. (+video)(Read article summary)
Alibaba is set for a record-breaking IPO this week. But in addition to being a hot property on its own, Alibaba has been bankrolling some businesses you may know well.
Until recently, the Alibaba Group was probably the biggest company you’d never heard of. Bountiful media coverage of the firm’s potentially record-setting initial public offering this week changed that. And China’s Internet behemoth has been bankrolling some businesses you may know well.
When you get a lift from car-sharing operator Lyft, Alibaba is along for the ride—the company backed a $250 million investment earlier this year.
Use messaging app Tango? Alibaba led a $280 million investment earlier this year. Bought products on ShopRunner? Alibaba was part of a $206 million cash injection in October. Game maker Kabam ($120 million) and online sports memorabilia seller Fanatics ($170 million) are two other recent beneficiaries of Alibaba’s largesse.
The company that stands to most benefit from Alibaba’s IPO—which the Wall Street Journal is reporting could raise $25 billion, smashing global records—is a household name in America. Yahoo! took a big stake in Alibaba in 2005, an investment that has been a lifeline for the U.S. Internet company. Yahoo’s 22.5% stake could have a market valuation of more than $35 billion after the IPO, the Wall Street Journal reports.
The deals Alibaba inked across the world ahead of the IPO shows the company is not content to be big just in China. Alibaba’s rapid-fire investments in the U.S. and abroad are “the best indicator of the direction the company will go,” says Henry Guo, senior research analyst at JG Capital. “Extension into the international market is a key strategy for the future.”
If Alibaba wants to build trust in established markets like the U.S., the recent spate of acquisitions gives the company know-how and table stakes. “In the near term, Alibaba wants to get more familiar and have partnerships with the smarter firms out here, and the venture capitalists behind them,” says Sameet Sinha, a senior analyst with B. Riley & Company. “They need to establish their credibility as a company.”
Alibaba is already e-commerce king in China, home of the world’s most populous Internet users. Its array of services makes it the Chinese equivalent of Amazon, eBay and PayPal—all under one roof. But to expand market share, the company needs to grow abroad, analysts say.
Alibaba’s first outright foray into the U.S. market, 11 Main, launched in June as a high-end marketplace for boutique fashion, home and jewelry retailers. But the invitation-only site is a long way from competing with Amazon on its home turf.
Time is on Alibaba’s side. Its lock on Chinese e-commerce means it will grow as more Chinese shop online. The nation has more than 600 million people online, but that’s only about a 45% Internet penetration rate in a country of 1.3 billion people.
But gaining credibility in the U.S. market will mean overcoming reservations Americans may have about a Chinese company, Sinha adds. “They need to do things to develop the trust of the U.S. consumer.”