Subscribe to Money Morning get daily headlines subscribe now! Money Morning Private Briefing today's private briefing Access Your Profit Alerts

Alibaba IPO: As Industry Competition Heats Up, Alibaba Buys ChinaVision

With the Alibaba IPO on the horizon, the Chinese e-commerce giant took another big swing at the competition this week when it purchased a 60% stake in ChinaVision Media Group Ltd.

Alibaba spent approximately $804 million on the deal. ChinaVision is a television and film production company, and the acquisition will allow Alibaba to offer additional entertainment content to its customers.

Alibaba IPOAlibaba and ChinaVision will reportedly form a strategic committee that will explore the companies' combined opportunities in online entertainment and media-related fields. ChinaVision stock, which trades in Hong Kong, more than tripled following the announcement.

The purchase is another on the long list Alibaba has made in the months preceding its highly publicized initial public offering.

It's also another attempt for Alibaba to separate itself from its biggest competition in China – social media and gaming company Tencent.

Why Alibaba Needs to Fight Off Tencent

On Monday, Tencent spent $215 million for a 15% stake in – China's second-largest e-commerce company behind Alibaba.

Because it has primarily operated as a social media and gaming company, Tencent has a much stronger hold in the mobile market than Alibaba. The mobile industry is growing rapidly in China, and according to research firm Analysys International, mobile commerce expanded by 800% in China in 2013 to a total of $212.2 billion.

But Tencent fired a direct shot at Alibaba with its move into the e-commerce world.

The fact that the mobile-established Tencent is now moving into e-commerce has to worry Alibaba officials, whether they'll admit it or not.

Mobile has been viewed as a weakness of Alibaba's, and last week the company launched a massive mobile-only, one-day sale titled "Mobile Taobao 3.8 Life Festival" in an attempt to supercharge mobile purchases. The event didn't create as much buzz as Alibaba had hoped, but company officials were pleased with the results (but did not release specific numbers).

The fact that both companies continue making purchases to compete with one another is a great sign for investors looking to play Alibaba's IPO…

Join the conversation. Click here to jump to comments…

Leave a Reply

Your email address will not be published. Required fields are marked *

Some HTML is OK