Riding on the momentum from its picture-perfect September initial public offering (IPO) (and flush with cash), Hangzhou-based Alibaba Group Holding (BABA) is keeping busy with new projects and investments. After listing on the New York Stock Exchange and raising $25 billion, eyes are still on the Chinese company.
As the world’s largest e-commerce company, Alibaba has conquered the global technology industry. So, what does the future look like for the tech darling? This article outlines a few of Alibaba’s next moves as the e-commerce giant steps beyond the honeymoon phase of its 2014 IPO and into the next stages of its life as a public company.
Entry into the Smart-Car Market
Earlier this month, Alibaba announced it will be establishing a joint fund to create its first smart car as part of its partnership with China’s largest automaker SAIC Motor Corp. Together, the duo is investing $160 million (1 billion yuan) in the project with plans to unveil their first car in 2016. SAIC will develop the vehicle, and Alibaba will provide the operating system and cloud-computing services.
The venture marks Alibaba’s foray into the sector of Internet-connected vehicles, a market pushed by the Chinese government that is also attracting tech giants in both China and abroad. Alibaba joins the likes of Google (GOOG), Apple (AAPL) and close competitor Baidu (BIDU)—China’s largest search engine— in the race to bring Internet-connected cars to the road. Baidu hopes to introduce its autonomous vehicle to the marketplace this year.
Ant Financial IPO
Alibaba’s financial arm, Zhejiang Ant Small & Micro Financial Services Group – known as Ant Financial – is slated for a reported 2017 IPO in Shanghai. The financial services affiliate is valued at $35--$40 billion and is seeking to raise $4 billion (25 billion yuan) ahead of its public debut.
Ant Financial commands ownership of Alipay, China’s most used e-payment platform, and also runs Alipay’s Internet market fund Yu’e Bao. Additionally, the entity operates a bank and a credit-scoring service. Heeding Chinese banking regulations surrounding foreign ownership, Ant Financial separated from Alibaba in 2011 and is now controlled by Alibaba’s top employees and CEO Jack Ma. Once Ant Financial goes public, Alibaba will hit the jackpot, raking in up to 37.5 percent of the pre-tax earnings.
Alibaba is revisiting its approach to mobile messaging. In an attempt to rival Tencent’s wildly popular WeChat, Alibaba recently unveiled DingTalk, a messaging app targeting small to mid-sized businesses that merges social and business networking. The project marks Alibaba’s reentry into the Chinese mobile messaging market after making the chat app Laiwang available at the end of 2012. The app proved to be a flop, and its anemic user base is eclipsed by WeChat’s 500 million users.
The e-commerce giant is investing money in foreign apps to enhance its social media ventures and further the development of its mobile services. Just this month, Alibaba announced plans to invest $200 million in the Venice, Ca.-based photo messaging app Snapchat, raising the four-year-old company’s valuation to $15 billion. Last year, Alibaba invested $215 million in Tango, another messaging app, and contributed to a $250 million funding round for Lyft, the San Francisco-based ride-sharing app.
Coming to America
Alibaba will be bringing Aliyun, its cloud computing services, to the United States. soon. The company has four pre-existing data centers and will be setting up its first satellite division overseas in Silicon Valley, with plans to extend to Europe and Southeast Asia before the end of the year. The establishment of the U.S. data center will mark Alibaba’s first expansion outside of China.
The cloud computing hub will first service Chinese companies operating within the United States and then eye prospective American companies. Aliyun will target other e-commerce merchants and businesses, offering the same commercial cloud and on-demand bandwidth services that has made it the most popular cloud-operating business in China.
The Bottom Line
After a record-breaking IPO, Alibaba has landed upon a sizable cash reserve that it can use to make many as well as large investments. The company is doing just that—investing in technologies and products at home and abroad to expand its empire. Alibaba also knows investor excitement will recede, and that it needs to stay relevant in order to maintain a certain hype.