Here’s why Alibaba is paying more than $1 billion for a mapping company

February 21, 2014 Leave a comment

Here’s why Alibaba is paying more than $1 billion for a mapping company

By Lily Kuo @lilkuo February 11, 2014

Chinese e-commerce giant Alibaba made a bid on Feb. 10 for the 72% stake it doesn’t already own in AutoNavi, which operates China’s most popular mapping service. The all-cash deal values AutoNavi at $1.6 billion, up from the $1 billion valuation at which Alibaba acquired its initial stake in the firm last May.

If completed—AutoNavi is convening a committee of directors to consider the unsolicited offer—the deal sets the stage for a race between China’s three largest internet companies over the next frontier of the world’s largest smartphone market: Mapping services. Alibaba, Tencent, and Baidu have each been trying to expand their mobile offerings via location-based services. Here’s how their map apps stack up so far:

Alibaba/AutoNavi: For shopping in the real world

Back in 2012, Alibaba quietly launched a mapping service for users of various Alibaba phone applications like Taobao Local Life, an education services channel, and Etao Guangjie, a price comparison app. The maps show their users food, accommodation, and shopping discounts nearby.

The app hasn’t received much attention, but it’s likely that if AutoNavi is purchased by Alibaba, the two will work on creating a mapping service that similarly connects smartphone users to nearby stores. The AutoNavi app already lets users book restaurants, hotels, or find nearby tourist attractions—with a navigation system that features the voice of popular Taiwanese actress Lin Chi-Ling.

Baidu: For finding your friends

Although Baidu is China’s most popular search engine, its mapping service loses out to AutoNavi, which holds about 31% of the market, compared with Baidu’s 27%. But Baidu’s mapping service, which offers many of the same features as AutoNavi, has been catching up in terms of functionality. Last year, it rolled out a service similar to Google’s Street View and is adding a function that allows users to see, if granted permission, their friends’ locations in real-time.

Most recently, Baidu has been publishing a heat map of the most traveled routes during this year’s Chinese New Year mass migration. A screenshot of the map this week shows people fleeing the city of Dongguan in Guangdong, after a police crackdown on its brothels.

Tencent: For gawking at places you’ll never go

Tencent, the maker of the messaging app WeChat, recently entered the mapping foray with a service that is most notable for its on-the-ground views of remote parts of China like the disputed Diaoyu/Senkaku Islands. The company is working on integrating its maps into WeChat, which is quickly becoming a multi-use platform for everything from shopping to investing to even booking hospital appointments.

Filed under TMT Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment