Some thoughts about why Jack Ma, the owner of Alibaba, paid $266 million to acquire South China Morning Post

Before buying South China Morning Post (SCMP), Jack Ma took over or invested in many other media companies such as Youku Tudou (a popular Chinese video website) and Sina (a Chinese online newspaper). As a business man, the reasons for having a stake in media companies are obvious — to advertise (the annoying 60-second before you watch a video on those sites), promote and broaden the influence of his companies and brands, since Youku Tudou and Sina target at the same Chinese ordinary citizen group as Taobao and other companies of Jack Ma.

However, apart from the aforesaid reasons, there is another different and important reason for Jack Ma to purchase SCMP. On one hand, SCMP is an English newspaper targeting at the English-speaking and more highly-educated group: elite businessmen, professionals and even politicians in Hong Kong and foreign countries instead of ordinary citizens in mainland China. On the other hand, Alibaba is trying very hard to open up foreign markets. However, its path to foreign markets has not been smooth and at the same time it faces more and more severe competitions and tough challenges at home too.

Alibaba has long stuck in the struggle of fighting against counterfeit goods and frauds especially when it tried to explore the foreign markets where the law of ownership is more improved than in mainland China. (Alibaba kept being blacklisted by United States trade representative and other influential European regulating organizations and was even sued by luxury brands in US).

The problem also makes Alibaba less competitive at home since other emerging B2C platforms such as Jingdong have less counterfeit goods and frauds. Even there is such problem, it is also less tough for those other B2C platforms to cope with since they are single sellers. Moreover, although Alibaba is famous for its platform for SMEs to E-trade, figures have shown the government intra-trades have made up a quite large proportion of its revenue. This is not a sustainable revenue source since China is experiencing more aggressive economy reform and private companies will be more dominated in future Chinese market. These two reasons also urge Alibaba to explore foreign market. Alibaba’s going public in New York could be seen as a signal.

Therefore, having a better English-version narrative and creating a better image to those foreign decision-makers can definitely benefit its ambition of exploring foreign markets.

The Chinese government will support Alibaba in exploring ways (including purchasing SCMP) to open up foreign markets, directly or indirectly, since China has long wanted to make RMB an international currency as US dollars, and to conveyed the image of good-quality Chinese goods to the world (When the chairperson of China Xi Jinping visited US president, he went with Jack Ma).

Furthermore, Alibaba’s bread and butter now relies heavily on cloud technology and big data processing. Purchasing media companies and transforming traditional newspaper into digital ends (with free access to a large population) is just what it is advantageous in.

“People should learn more about China, [and] the coverage about China should be balanced and fair.”, according to the executive vice chairperson of Alibaba, Joseph Tsai. The acquisition of SCMP is therefore a strategic, implicitly politically backed, and proper step of Alibaba on its way to the foreign markets.

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