Alibaba Takes a Big Stake in China’s Gen Z Darling, Bilibili
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Alibaba's (NYSE: BABA) Taobao recently took a 10.8% passive stake in Bilibili (NASDAQ: BILI), a Gen Z-oriented digital platform in China. The investment makes Alibaba one of Bilibil's top stakeholders alongside Tencent (NASDAQOTH: TCEHY), which took a 12% stake in the company last October.
Bilibili generates most of its revenue from mobile games, but it's been expanding its ecosystem with live videos, streaming content, online comics, ads, and a tiny e-commerce platform that sells licensed and tie-in products for its other digital content. The company went public last March at $11.50, and subsequently rallied more than 50% after two quarters of impressive growth.
Image source: Bilibili.
Taobao's investment in Bilibili wasn't surprising, since the two companies partnered up last December to co-develop a "dynamic ecosystem that will better connect content creators, merchandise and users on both platforms."
That partnership enabled content creators on Bilibili to register accounts on Taobao to promote their own merchandise. The two companies also started commercializing Bilibili's other IP assets (including games, videos, and comics) while analyzing the platform's performance with Alibaba's analytics tools. Taobao's investment indicates that things are going well -- and it could benefit both companies.
How can Bilibili help Alibaba?
Alibaba's Tmall and Taobao are the largest online business-to-consumer and consumer-to-consumer marketplaces in China, respectively. However, a growing number of competitors are blurring the lines between social networks and e-commerce platforms.
These challengers include Pinduoduo, which encourages users to co-purchase products with their family members, friends, and co-workers across social media channels to get better bulk prices; and Mogu, which went public last December and lets merchants sell products from live streaming videos.
Tencent is also encouraging e-commerce companies, including its top partners JD.com and Vipshop, to launch their stores in "Mini Programs" for WeChat, the top mobile messaging app platform in China with over a billion monthly active users (MAUs).
Taobao reaches nearly 700 million mobile MAUs with its marketplace, but it's clearly concerned about the rise of social shopping. It launched an internal blogging platform three years ago, but it only had about 1.6 million content creators at the end of 2018. Bilibili hosted about 600,000 active content creators who uploaded 1.7 million videos monthly last quarter, so it tethering those content creators to Taobao could boost its social presence.