MEDIA: Alibaba Moves Into Financial Media With SMG
Bottom line: Alibaba’s new tie-up with SMG could produce a homegrown financial news and information giant drawing on both companies’ strengths, but could also face obstacles due to the 2 partners’ differing backgrounds and styles.
E-commerce titan Alibaba (NYSE: BABA) is taking an interesting new step into the news media realm, with word that it’s investing 1.2 billion yuan ($200 million) in one of China’s leading financial newspapers that is owned by Shanghai Media Group (SMG), the country’s second largest state-owned media company. I’ve watched for the last couple of years as traditional newspapers like SMG’s China Business News, or CBN, have struggled to chart a new path in the digital media age.
For many of these traditional media, that movement has meant putting their content online, and launching a mobile app, but not much more. As a result, many are seeing their revenue shrink as advertisers flock to more dynamic new media, mirroring a trend in the west. In that light, this new Alibaba tie-up could breathe some new life into CBN’s new media push, providing new ideas and other expertise to reverse the newspaper’s decline.
Details on the tie-up aren’t too numerous besides the 1.2 billion yuan investment figure, indicating this deal is probably still in its infancy and doesn’t have a very clear road map yet. (Chinese article) The reports say Alibaba’s investment is part of a larger reorganization of SMG being engineered by Li Ruigang, the group’s former head who left to run its investment arm for several years before recently returning to try and reverse its declining fortunes.
The reorganization could ultimately see a number of SMG’s digital assets and CBN combined into a single company that would make an IPO, most likely in Shanghai. One separate report says the new tie-up could ultimately hope to challenge financial news and information providers like Bloomberg and Reuters (NYSE: TRI), the latter of which happens to be my former employer. (Chinese article)
Many Chinese companies have made similar moves over the years, though none has succeeded in seriously challenging the big western companies yet. The financial news and information business is one of the few highly profitable areas remaining in the news media realm because investors are willing to pay big premiums for such information to help them make better decisions. But product design is also critical, since the volume of financial news and information is huge and thus it’s critical for companies to design products where users can quickly and easily find what they want.
From a broader perspective, this particular tie-up certainly looks filled with potential but also could face some big obstacles. CBN has become China’s leading financial daily newspaper over the past year, following the sudden and rapid decline of former leader 21st Century Business Herald after a series of corruption scandals. That kind of scandal could also ultimately undermine CBN, although I haven’t heard any stories of the kinds of systemic corruption at the newspaper similar to what was uncovered at 21st Century Business Herald.
Alibaba would bring its own strengths in data management and interactive product design to any future partnership as well. Alibaba’s e-commerce platforms are famous for their good design and ease of use, and the company is also rapidly developing its ability to manage huge volumes of information to better understand its users and improve the products and services it offers them.
The biggest potential stumbling block would be the huge difference in corporate cultures at these 2 companies. SMG is a traditional state-run media company, which tend to move very slowly and also are accustomed to operating in monopoly environments with little or no competition. Alibaba is just the opposite. Both companies also have very opinionated chiefs who like to be in control and have very different styles. But if Alibaba steps back and takes a supporting role, it’s possible this alliance could produce some interesting results with the potential to create a major new Chinese financial news and information provider.
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