Saturday, March 14, 2015 3:45:38 PM
Mar. 13, 2015 3:02 AM ET
WestEnd511 - Seeking Alpha
BABA's investment in Snapchat addresses its weak presence in mobile messenger.
Mobile messenger directly relates to BABA's m-pay, m-commerce and m-ad initiatives.
BABA should acquire Snapchat in the long-run at 100x EV/MAU.
Alibaba (NYSE:BABA) made a $200m investment in Snapchat that values the messenger startup at $15b, implying a 1.3% equity stake by BABA. While the stake appears to be passive, I believe that BABA could potentially expand its stake in the messenger platform to broaden its presence in mobile. Over the past five years, it is evident that BABA is falling behind the mobile messenger trend that has benefited rival Tencent's WeChat and NAVER's LINE messenger in Asia.
In North America, Facebook's (NASDAQ:FB) Whatsapp and FB Messenger as well as the Canadian start-up Kik have dominated communication over mobile messenger apps. Clearly, BABA's presence is diminishing among mobile apps, which has been winning mobile engagement at the expense of microblogs as we have witnessed in Weibo's (NASDAQ:WB) result. The lack of meaningful presence in mobile messengers will particularly impact BABA's business in mobile payment, mobile ad, mobile ecommerce and mobile commerce (ie. location-based services). As such, BABA needs to build a strong mobile messenger presence to counter ongoing rise of Tencent's WeChat, Whatsapp, and FB Messenger.
Better late than never
BABA's passive stake in Snapchat addresses its lack of presence in mobile messengers. As I mentioned earlier, while BABA dominates China's ecommerce market and currently the mobile payment with YuE'Bao mobile wallet, this competitive advantage is unsustainable in my view as engagement shifts towards mobile messenger apps. Higher engagement could lead to higher utilization of derivative service such as mobile payment, social networking, o2o booking and mobile banking. In the long-term, mobile messenger could even incorporate an even more robust mobile commerce platform that we have today with LBS push-notification and O2O functions. In short, mobile messenger could be the center stage for most of our mobile activities and BABA's ecommerce, mobile ad and mobile payment platform depends on this move.
BABA certainly understands this concept. In addition to Snapchat, BABA also invested in Tango, a mobile messaging and calling app that has 250m registered users. In my view, Tango's current user growth may be stagnating and that BABA is in need of a more globally focused mobile messenger that has stickiness and reach. Snapchat fits this profile and could be accretive to BABA's long-term vision of driving the global ecommerce and mcommerce platform.
Will BABA buy Snapchat?
I believe so. With close to 200m monthly active users and valuation of $15b, Snapchat is valued at 75x EV/MAU which compares favorably to that of FB's 150x EV/MAU and Twitter's (NYSE:TWTR) 100x EV/MAU. When looking at the Asian comps, Tencent is trading at 200x EV/MAU and NAVER is trading at 110x EV/MAU. Under a takeout scenario, BABA will be paying 100x EV/MAU based on the blended of Snapchat comps, implying a total EV of $20b, which is similar to that of what FB paid for Whatsapp.
Conclusion
BABA's passive stake is a good start in building its mobile messenger presence and remains my top pick among the Chinese internet names.
Recent BABA News
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 10/18/2024 08:00:38 PM
- Honeywell Seeks Division Spinoff; Foxconn Expands Production With Nvidia GB200; Chinese Stocks Plunge • IH Market News • 10/08/2024 10:39:39 AM
- NextPlat Secures Four-Year Extension of OPKO Healthcare E-Commerce Program in China and Agrees to the Expansion of the Program into Japan • PR Newswire (US) • 10/07/2024 12:00:00 PM
- AIG names new CFO; Progyny Drops 24% After Losing Key 2025 Contract; Exicure Jumps 190% With Nasdaq Extension • IH Market News • 09/19/2024 10:26:48 AM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 09/13/2024 08:01:58 PM
- Apple Loses EU Dispute; Google’s $2.7 Billion Fine Upheld; Oracle Shares Surge 9% • IH Market News • 09/10/2024 10:02:31 AM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 09/06/2024 08:00:22 PM
- Broadcom Down 10% Post-Earnings, UiPath Up 8%; Qualcomm Eyes Intel Assets; Salesforce Acquires Own Company • IH Market News • 09/06/2024 11:59:00 AM
- Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16] • Edgar (US Regulatory) • 09/05/2024 08:01:03 PM
- Alibaba.com Unveils Game-Changing AI Sourcing Agent, Helping SMEs Simplify Global Trade • PR Newswire (US) • 09/05/2024 06:00:00 PM
- Alibaba.com and Mastercard Team up to Launch U.S. Co-Branded Business Credit Card Powered by Cardless • PR Newswire (US) • 09/05/2024 06:00:00 PM
- Qualcomm Develops Mixed Reality Glasses; Verizon to Boost Dividend, Eyes Acquisition; Samsonite Plans US Dual Listing • IH Market News • 09/05/2024 10:11:35 AM
- Alibaba International Wraps Up 2024 Global E-Commerce Challenge, Highlighting Youth Innovation • PR Newswire (US) • 09/04/2024 01:34:00 PM
- Alibaba International Wraps Up 2024 Global E-Commerce Challenge, Highlighting Youth Innovation • PR Newswire (US) • 09/04/2024 01:13:00 PM
- High Volatility Expected in Nvidia Report, Ambarella Soars 20%, Hertz Strengthens Board, Apple Cuts Jobs • IH Market News • 08/28/2024 09:50:36 AM
- Cruise and Uber Join Forces for Robotaxis, Alibaba Shifts Primary Listing to Hong Kong, Altria Hikes Dividend 4.1% • IH Market News • 08/23/2024 12:20:26 PM
- Alibaba Group Announces June Quarter 2024 Results • Business Wire • 08/15/2024 10:30:00 AM
- U.S. Futures Rise on Easing Inflation, Oil Prices Rise • IH Market News • 08/15/2024 10:09:48 AM
- Google Forced to Modify Play Store, Apple Innovates, Victoria’s Secret Hires CEO, Mars Buys Kellanova • IH Market News • 08/15/2024 10:05:46 AM
- Google Mandated to Modify Play Store, Apple Innovates, Victoria’s Secret Hires CEO, Mars Buys Kellanova • IH Market News • 08/15/2024 10:05:46 AM
- Form 13F-HR - Quarterly report filed by institutional managers, Holdings • Edgar (US Regulatory) • 08/14/2024 08:03:09 PM
- Starbucks Rises 3%; Disney Unveils New Films and Expansions; Uber CEO Questions Tesla Robotaxi Viability, and More • IH Market News • 08/12/2024 09:46:16 AM
- TSMC July Revenue Surges 45%, Nasdaq Accelerates Penny Stock Delistings, Moody’s Downgrades Intel to BAA1, and More • IH Market News • 08/09/2024 09:44:44 AM
- Alibaba Group Will Announce June Quarter 2024 Results on August 15, 2024 • Business Wire • 08/02/2024 09:00:00 AM
SANUWAVE Announces Reverse Stock Split, Note and Warrant Exchange, and PIPE Offering • SNWV • Oct 18, 2024 9:31 AM
Vocodia Addresses Recent Stock Price Movement and Future Strategic Partnerships • VHAI • Oct 18, 2024 9:00 AM
Mass Megawatts Announces the Start of an Online Discount Solar Energy Equipment Business with Revenue Recognized for the First Time Since Year 2010 in this Fiscal Quarter • MMMW • Oct 18, 2024 7:32 AM
Unitronix Corp Advances DeFi Innovation with Tokenized Real-World Assets Integration • UTRX • Oct 17, 2024 7:38 AM
Mass Megawatts Commences Solar Energy Sales Efforts • MMMW • Oct 16, 2024 7:45 AM
SANUWAVE Health Announces 1-For-375 Reverse Stock Split • SNWV • Oct 16, 2024 7:40 AM