Alibaba’s Latest Acquisition Continues a Three-Way Battle With Baidu and Tencent

The e-commerce giant is adding app stores to the long list of markets where it competes with China's two other Internet leaders.
By Eric Jhonsa ,

Though their core businesses and biggest competitive strengths are quite different, Alibaba (BABA) - Get Report, Baidu (BIDU) - Get Reportand Tencent are now locked in an intense three-way battle for Chinese Internet leadership that encompasses dozens of services, platforms, and markets. E-commerce, online video, online travel, maps/location services, payments, games, web browsers and online-to-offline (O2O) commerce are some of the fields in which the companies -- either directly or with the help of partners -- are squaring off.

Thus, it's logical that Alibaba would turn to M&A to expand into a market -- Android app stores -- in which Baidu and Tencent have leading positions, but in which Alibaba has been absent to date.

The e-commerce giant is acquiring Android app store owner Wandoujia for a reported $200 million. Research firm Analysys estimates Wandoujia has 5.7% of the Chinese app distribution market, good for fifth place overall and trailing Baidu's 27.4% and Tencent's 19.4%.

The numbers appear to exclude iOS app distribution, which of course is controlled by Apple (AAPL) - Get Report. Alphabet's (GOOGL) - Get Report Google Play doesn't currently operate in China, but might arrive later this year. If/when it does, Google will face an uphill battle taking share from incumbents with considerable reach.

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Wandoujia's founder predicts Alibaba will be able to leverage its considerable user data to deliver personalized app recommendations to app store visitors. Alibaba should also be able to promote Wandoujia across many of its popular apps and services -- possibilities include the Taobao and Tmall e-commerce apps, the Alipay mobile wallet app, and the UCWeb mobile browser -- and in turn promote those apps and services inside Wandoujia's store.

Wandoujia is just the latest in a long line of major acquisitions and investments made by Alibaba -- some fairly sensible, others more head-scratching -- over the last two years, as the company tries to both take on Baidu/Tencent and lower its Chinese e-commerce dependence. Recent notable deals include the $4.2 billion purchase of Chinese online video provider Youku Tudou, a reported $680 million investment in Indian payments/e-commerce firm Paytm, and the $266 million acquisition of the South China Morning Post, a major Hong Kong-based newspaper.

With Alibaba possessing $17.3 billion in cash (to go with $9 billion in debt) at the end of the first quarter, chances are the company's buying spree isn't over.

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