How High Can Jack Ma Lift Alibaba Stock?
Alibaba Group Holding Limited (NASDAQ:BABA) is the only company that poses a real threat to Amazon.com, Inc. (NASDAQ:AMZN). Till now, many investors simply viewed BABA stock as an internationally diversified version of Amazon stock, but that perception is increasingly outdated. Alibaba stock is delightfully unique.
This is especially true about the different direction in which Jack Ma and Jeff Bezos are leading their respective firms. Bezos is trying to make Amazon compete with Netflix, Inc. and Uber Technologies Inc.’s “UberRUSH” deliveries service. Alternatively, Alibaba is competing with Bloomberg LLC.
That’s right, Jack Ma is leading Alibaba into the publishing industry in a big way. A flurry of acquisitions has left Alibaba extensive resources for video and article content creation. By contrast, Amazon doesn’t own a single news organization. (Source: “Jack Ma’s growing media empire in China already rivals Jeff Bezos’s in the US,” Quartz, November 23, 2015.)
Sure, Jeff Bezos bought The Washington Post for $250 million and poured $5.0 million into Business Insider, but that has nothing to do with Amazon; Bezos used his personal funds to invest in both news organizations.
In the media space, Amazon is directing its energy towards entertainment, as opposed to journalism. It spent $1.7 billion buying content for its “Amazon Prime” streaming service—and that was just in 2015.
What Did Jack Ma Buy for Alibaba?
There are five key investments that Alibaba made in recent years. All of them point towards a growing media empire that would make Jack Ma not just a Jeff Bezos-like figure, but also a Michael Bloomberg-esque media baron. Here are the bulk of Alibaba’s media buys:
- There’s a financial publication called eBusiness Review that is the Chinese equivalent of the Harvard Business Review. Alibaba invested in the publication in 2013.
- Then in June 2014, a subsidiary of Alibaba bought 40% of Huxiu, a major digital publication in China. Huxiu focuses on business and technology coverage.
- To bolster its holding in print journalism, Alibaba then stepped into the world of video content. In June 2015, it poured $193 million into China Business Network. This network delivers business news in the same style as Bloomberg and has the data services to back it up. (Source: “Alibaba’s latest deal could ultimately challenge the Bloomberg terminal,” Quartz, June 4, 2015.)
- Alibaba also joined forces with Caixin, a major financial magazine in China. The publication is famous for busting a Chinese homebuilder that raised money claiming it could 3D-print a house with revolutionary new materials. Alibaba and Caixin launched an online news site called Wujie Media.
- Finally, most recently, in October 2015, Alibaba partnered with the parent company of Sichuan Daily. They should be setting up another online web site soon.
BABA Stock is Poised for Big Gains
All in all, these media holdings could help Alibaba expand its digital reach. There is a natural overlap between Alibaba’s existing business and publishing. They both involve building a dedicated user base and ultimately selling something to those subscribers.
Making money is a necessity for all private enterprises, but the Internet made that really hard for publishers. The conventional model of advertising revenues got screwed up, because anyone could start a web site and reach an audience. As a result, finding out a sustainable business model for a financial news organization is difficult, but Jack Ma obviously thinks he’s found the answer. I’m expecting him to imitate Bloomberg by developing a great news organization that also sells financial products to the pros.
But Alibaba won’t try to take on Bloomberg just yet. It still has a huge competitive edge in Chinese news, which is a substantially larger market than the United States. If I’m right about this, we could see Alibaba stock hit unprecedented heights. It may even surpass Amazon stock in value, cementing Jack Ma’s legacy as one of the greatest CEOs of our time.