UCWeb and AutoNavi
In the previous article, we discussed how Alibaba’s (BABA) acquisition initiatives and other investment measures drove EBITDA margins down. During the earnings conference call, management provided more detail on the acquisition process.
In February 2014, Alibaba announced that it would acquire AutoNavi Holdings and completed the deal at a value of $1.5 billion in July last year. AutoNavi, which is based in Beijing, bolstered its Internet mapping tools. Alibaba already had a 28% stake in the company and took over full control by acquiring the remaining 72% stake. Alibaba is trying to win a big portion of China’s Internet population of 641 million by acquiring AutoNavi, and it can now compete directly with Baidu Maps (BIDU) and with Tencent Holdings (TCEHY) for taxi and restaurant recommendation services.
Alibaba completed the acquisition of UCWeb, China’s number one mobile browser company, to form the UC Mobile Business Group in June of last year. Alibaba made this move amid the intense mobile competition with both Baidu and Tencent. This acquisition enabled deeper synergies between Alibaba’s strengths in e-commerce, cloud computing, and big data with UCWeb’s expertise in mobile.
An update on the investments in these acquisitions
As UCWeb has good understanding of mobile users’ behavior and can boost Alibaba’s mobile traffic, UCWeb has high value for the company in terms of unique visitors. The company has more than 100 million daily active users. After the acquisition, UCWeb improved the mobile access capability and mobile experience of Taobao users.
AutoNavi provides essential mapping information to Alibaba’s marketplace. After the acquisition, AutoNavi became the sole supplier of mapping services for Alibaba’s marketplace. The AutoNavi map app is the number two mobile app and map app in China. Since AutoNavi has solid navigation business, it has strong collaboration with automakers in China and has supported both Tmall and Taobao.
To gain portfolio exposure to Baidu, investors can consider ETFs such as the SPDR S&P Emerging Asia Pacific ETF (GMF). Baidu makes up 2% of GMF’s portfolio. Investors can also consider ETFs such as the iShares China Large-Cap ETF (FXI), which has major holdings in financial banks in China.