Alibaba’s investment in Snapchat is as mysterious as the app’s vanishing photos. The Chinese shopping giant Alibaba invests $200m in SnapChat, a messaging app that allows its users to send photos to their friends which only appear for 10 seconds. This is surprising considering Snapchat is banned in China. This investment raises questions as to what value the start-up would bring to Alibaba, which is currently one of the largest online commerce platforms globally.
To begin with, Alibaba has made a priority to develop its mobile services after seeing an increase in shopping via smartphones and tablets. However, the attempt to create a popular messaging app was not as successful as the rival Tencent Holdings Ltd’s WeChat service, who is also an investor in Snapchat, so any strategic advantage for Alibaba’s Investment would be minimal.
Sources from Alibaba claim that this deal is more of an opportunistic financial investment rather than just a strategic plan and this is proved by the fact that Alibaba’s name comes up when any tech firm around the world is trying to raise money.
Another point worth emphasising is Alibaba’s ongoing investments into messaging technology in North America and Europe – markets that Alibaba is keen to expand into. This includes the $215m investment into the message app Tango last year, in addition to the $250 million round in ride sharing app Lyft. A key person to the deal was Imran Khan, hired by Snapchat as Chief Strategy Officer last December. Khan was formerly Head Investment Banking in Asia at Credit Suisse and was influential to executing Alibaba’s IPO in the U.S.
Those close to the deal claim that the deals Alibaba is conducting in the U.S. are central to its strategy to become the world’s dominant online retailer. This current investment with Snapchat is ranked amongst its largest investments to date. This can only be seen as good news for Snapchat, as its value has risen to $15 billion beating Facebook’s proposal to buy it in late 2013 for $3 billion.