POV: Why has Alibaba invested $200m in SnapChat?
Mindshare Point of View
It was announced late last week that Alibaba, the Chinese technology company, was investing $200m in SnapChat, the LA-based messaging platform and currently ‘darling’ of the technology and media marketplace. Alibaba invested outside of the current investment round that SnapChat is in (which values the company at more than $15b), and the move comes six months after Alibaba had originally attempted to invest in the company (before its own IPO last year). SnapChat has seen a meteoric rise to prominence over the last few years, and recently published figures suggest that the platform currently has more than 700m ‘Snaps’ sent between users every day.
Details and Implications
While much of the news surrounding the investment has focused on the increasingly large valuations for SnapChat, the real story sits with who the investment is coming from, rather than who it’s going to. Over the last twelve months Alibaba has made 26 equity investments, covering more than $6b in investment. While it currently has a much larger footprint in Asia, there has been a recent uptick in Western investments, and alongside SnapChat ($200m), Alibaba has also invested in Lyft (an Uber competitor, at $250m), Tango (a WhatsApp competitor, at $215m), and Shoprunner (an ecommerce platform that competes head to head with Amazon Prime, at $202m). SnapChat has also consistently spurned the advances of Facebook (and refused a $3b acquisition offer in 2013).
While Alibaba has outpaced Tencent to become the third-largest Internet company in the world (with Tencent ‘struggling’ in a lowly fifth position), these recent equity investments in ‘hot’ US start ups that compete directly with either Facebook, Google, or Amazon investments or products would give the perception that Alibaba is looking to increase its footprint outside of Asia and position itself as a serious competitor in the West to the big Silicon Valley players.
The implications for advertisers is that any long term strategy should take into account Alibaba as a serious global technology platform; with large investments in YouKu, SnapChat, a promise of collaboration with Apple on ApplePay, and its own platform too, Alibaba is intent on becoming just as serious player in the West as it is in the East.
SnapChat continues to be the subject of intense press coverage and speculation around an IPO and its expanding advertising product, and this investment will only compound that. However, the bigger part of this story feels like it may be around Alibaba and it’s increasingly bold and diverse investments in the West as it squares up to challenge Google, Amazon, and Facebook.