How Alibaba Could Benefit from the Youku Tudou Acquisition



Online streaming video

In November 2015, Alibaba (BABA) made its move to penetrate the online video streaming service by acquiring Youku Tudou (YOKU) in an all-cash deal worth $4.4 billion. Alibaba already had a 20% stake in Youku Tudou and it later decided to convert this strategic investment into a wholly owned subsidiary.

Youku Tudou provides a platform for online streaming videos and social networking. The company has integrated its advertising and consumer business with Alibaba’s platform. The acquisition could benefit Alibaba in several ways.

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How advantageous is Youku to Alibaba?

The Youku acquisition opens a new avenue for Alibaba to boost its top-line growth, as the video has started to become a preferable media for advertisers to promote their brands. The company already has tie-ups with online retail merchants that can be monetized to boost ad revenue by creating video ads followed by the actual video.

Secondly, Alibaba can capitalize on Youku Tudou’s user base to convert them into potential buyers. In the prior article, we discussed AliCloud’s collaboration with Nvidia (NVDA) towards building a platform for big data. Alibaba can leverage this platform to generate data-driven and user-specific ads based on information generated online by users. The move will help improve its potential for targeting users and, in turn, create value for advertisers. However, according to Youku Tudou, it has 500 million monthly unique visitors compared to Google’s (GOOG) YouTube, which has around 1.3 billion active users.

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