Date
23 October 2017

Mobile maps show way in scramble for uncharted O2O ground

Mobile maps point the way to the next big thing, if the movements of China’s top three internet firms are any signs to go by. Each has been has been reinforcing its offerings, including Alibaba which is taking a development short cut with a proposal to buy out Chinese digital mapping and navigation firm AutoNavi Holdings Ltd. (AMAP.US).

AutoNavi said in an exchange filing Monday that Alibaba, China’s largest e-commerce firm, offered to buy AutoNavi in a deal valuing it at US$1.58 billion. Alibaba already owns 28 percent of AutoNavi.
A takeover would let Alibaba merge AutoNavi’s geographical information and its own merchant database under one big data umbrella to create an online-to-offline ecosystem.

AutoNavi’s map service would be Alibaba’s gateway to mobile phone users on both the Android and iOS platforms, helping users search for local services such as restaurants, medical clinics as well as shopping arcades, and then turning these online activities into offline transactions.

Alibaba operates three major e-commerce units — Taobao Marketplace, China’s largest consumer-focused e-commerce website; business-to-business commerce platform Alibaba.com; and Alipay, an online payment platform.

About 7 million smaller businesses run cyber shops through Alibaba platforms, but there’s no way to use their transaction data to tap offline retail potential. With AutoNavi by its side, Alibaba can plug that gap, opening up possibilities for cross-selling keywords and maps on search engines to help bring in more customers.

For Alibaba, AutoNavi’s map data could be integrated with its existing e-commerce activity database. Alibaba should then get a better picture of users’ overall shopping experience and patterns, online and offline. Alibaba could also build on AutoNavi’s 170 million-plus mobile users to sell specific location-based services.

This kind of alliance also opens up a wealth of opportunities to, for example, send special offers to users when they are in shops or venues, or to encourage users to settle offline transactions at shops through Alipay.

That is also something Tencent (00700.HK) is planning to do through its WeChat instant messaging platform. The latecomer to map services is catching up through integration with Sohu.com’s search engine.

But it has a long way to go. By the reckoning of IT consultancy Analysys, AutoNavi is the market leader in China’s digital mapping market with 31.3 percent market share, while Baidu (BIDU.US) has 26.6 percent and Tencent 2.2 percent.

In terms of subscriber numbers, though, Baidu still controls about half of the market. And Baidu has forged closer ties with local retailers through its existing search engine business, to which the map function is an additional offering. Baidu’s open platform has attracted 400,000 developers and created a quarter of a million apps, according to China Securities Daily.

Alibaba is stepping pressure on rivals but Baidu and Tencent may soon come up with countermoves. All three are branching out from their core markets for what is likely to be a long battle in uncharted territory.

SK

 

EJ Insight writer

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