Alibaba
ploughs $200 million into Snapchat in latest startup
deal: source
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[March 12, 2015]
By Edwin Chan and Bill Rigby
(Reuters) - Alibaba Group Holding Ltd is
investing $200 million in photo-messaging app Snapchat, a source
familiar with the deal said, striking its latest Silicon Valley deal as
the Chinese ecommerce company builds up mobile services.
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The investment values the Los Angeles-based company at around $15
billion, according to Bloomberg, citing people familiar with the
situation. This places the four-year-old company into the top ranks
of privately held startups.
With Snapchat blocked in China it is unclear what immediate value
the startup would bring to Alibaba, which handles more online
commerce than Amazon.com Inc <AMZN.O> and eBay Inc <EBAY.O>
combined.
Alibaba, which has seen a steady increase in shopping via
smartphones and tablets, has made it a priority to develop mobile
services. But its attempt to create a popular messaging app has not
had much success, coming up against arch-rival Tencent Holdings
Ltd's <0700.HK> ubiquitous WeChat service.
Tencent, China's biggest social networking and entertainment
company, also invested in Snapchat in 2013, TechCrunch reported at
the time.
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"We know that Tencent powered ahead of Alibaba in mobile with WeChat,
so Snapchat as the 'it' company for youth social networks in the
West has an obvious appeal," said Duncan Clark, managing director of
Beijing-based tech consultancy BDA.
China's large internet firms are making these investments partly as
a defensive move against each other, with potential for financial
returns and partnering in China if regulations permit, said Clark.
"It's better from their perspective from earning virtually nothing
on their cash in the bank. These are small bets for them," said
Clark.
Snapchat's latest valuation, if accurate, would be a massive
increase for a company that Facebook Inc offered to buy in late 2013
for $3 billion.
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Snapchat, which allows its more than 100 million users to send
messages that disappear in seconds, had sought capital to extend its
core service. In January, it began carrying videos and articles from
mainstream media outlets such as CNN and ESPN, bringing Snapchat
into closer competition with Facebook and Twitter Inc <TWTR.N>.
A potential allure for Alibaba could be Snapchat's use as a payment
service, as the Chinese company looks to connect consumers and
merchants in China and the United States. This includes smoothing
the way for cross-border payments.
In November, Snapchat launched a service to let users send money to
each other, in a partnership with online payments company Square.
Snapchat did not respond to requests for comment.
(Additional reporting by Paul Carsten in BEIJING and John Ruwitch in
SHANGHAI; Editing by Diane Craft and Muralikumar Anantharaman)
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