Alibaba Group Holding Ltd (阿里巴巴) on Friday said that it had offered to pay about US$3.6 billion to buy Chinese online video Web site Youku Tudou Inc (優酷土豆), continuing a streak of investments and buyouts.
However, Alibaba is most likely less interested in Youku Tudou’s finances — it lost money last year and in the first half of this year — than it is in the number of users it attracts.
Youku Tudou, a cross between Google Inc’s YouTube and Netflix Inc, draws more than 500 million people each month to the movies and TV shows it licenses and produces, in addition to user-generated videos.
Photo: Bloomberg
In a news release on Friday, Alibaba said it had offered to pay US$26.60 for each Youku Tudou share it did not own, a 30 percent premium over Youku Tudou’s closing price on the New York Stock Exchange on Thursday.
Last year, Alibaba spent US$1.2 billion for an 18 percent stake in Youku Tudou.
Youku Tudou shares rose 22 percent, the most since March 2012, to US$24.91 on Friday in New York, while Alibaba was little changed at US$71.99.
During a conference call on Friday, Alibaba executive vice chairman Joseph Tsai (蔡崇信) said the closer cooperation with Youku Tudou in the year since Alibaba made a strategic investment in the company persuaded Alibaba to take it over.
In particular, Tsai said the two companies were able to learn more about users by linking up viewing patterns in Youku and shopping patterns on Alibaba, which could help Alibaba create more valuable advertising products.
“Without owning the company entirely, a lot of these cooperations are only partial; we’re not able to get the entire data sets,” Tsai said.
He added that ownership of Youku Tudou also helps Alibaba attract a predominantly younger generation of users who watch Youku’s content on their smartphones and tablets.
Although Alibaba’s online shopping applications are popular on smartphones, the company has not made as much revenue off mobile advertisements as it has off those for the PC.
Youku Tudou, which was created by the merger of two of China’s earliest online video giants, has struggled to make money despite its large number of viewers.
In part, its problems stem from competition from sites backed by Baidu Inc (百度) and Tencent Holdings Ltd (騰訊), both of which have raised bids for the licensing fees of popular TV shows.
Online video advertising also pays little in China compared with Western markets.
With complete control of Youku Tudou, Alibaba would be able to add that company to its Alimama (阿里媽媽) advertising network and to push Youku Tudou users — a majority of whom are on smartphones — to its e-commerce sites. Youku Tudou also fits in with a broader Alibaba initiative of growing its entertainment offerings.
This year, Alibaba paid about US$4.6 billion to take a 20 percent stake in struggling consumer electronics retailer Suning Appliance Co (蘇寧電器), in large part to take advantage of the company’s countrywide logistics network.
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