Alibaba is already big. But its ambitions are much---much---bigger.
That fact became crystal clear this week when the Chinese tech giant announced that in two months it's launching a new streaming video service called TBO, short for Tmall Box Office. In a meeting with reporters, Alibaba’s head of digital entertainment Patrick Liu said the company’s goal is “to become like HBO in the United States, to become like Netflix in the United States."
But that’s not the half of it.
With this announcement, on top of everything else it already does, Alibaba is now officially competing not just with Netflix for Chinese consumers’ attention, but with just about every major US tech company, from Google to Amazon to Apple. And, because Alibaba has the home field advantage in China, that means that as Alibaba’s empire expands, it is becoming that much harder for American tech companies, many of which view China as the next frontier for growth, to break into a market that has already been nearly impossible for foreign companies to penetrate.
In addition to its e-commerce operations, Alibaba also has a foothold in cloud computing, mobile payments, search, and several strategic investments in ride-sharing. It’s explored messaging apps and social networks—essentially every corner of the digital world. Which is why, according to Rajeev Chand, managing director of the investment bank Rutberg & Co., it’s not altogether surprising that video streaming, which Alibaba has already dabbled in through an investment in Chinese streaming site Youku, would be next on the company’s ever growing list of new markets.
“There’s no question that Alibaba has as vast and ambitious an agenda as any US tech company,” Chand says. “For them to expand into online video is natural.”
And just as Amazon users quickly adjusted to the prospect of Prime Instant Video and Google users took to YouTube, Chand says Alibaba’s vast user base in China will also be “migratable,” floating from service to service without stopping to think about how unusual it is that an e-commerce company or a search engine is suddenly in the web TV business.
“When you look at technology there are no more swimming lanes,” Chand says. “You get a pool rather than swimming lanes.”
That approach has largely worked to the advantage of tech companies in the US as their users dutifully follow them from product to disparate product. The central challenge now, however, is that Alibaba is swimming in an entirely different pool, where it has already---excuse the pun---made a significant splash.
That doesn't mean it's impossible for American tech giants to make it in China. Just last week a leaked email revealed that Uber is booking nearly 1 million rides a day in China and plans to raise $1 billion to expand its operations there. But Chand says that has less to do with Alibaba's absence in the ride-sharing market and more to do with the fact that ride-sharing, itself is such a nascent market overall that even in China, foreign competitors still stand a chance despite substantial domestic competitors such as Didi-Kuaidi, China's homegrown ride-sharing giant, which just announced a $1.5 billion round of funding.
But streaming---like e-commerce, cloud computing, and Alibaba's other businesses---is already a crowded market in China, thanks to the success of existing Chinese sites like Sohu , iQiyi, and Youku Tudou, which Alibaba invested in last year. That means companies like Netflix no longer have the relatively open window for growth that Uber had. So while Alibaba may model its services---including TBO---after Western tech giants, it seems the company's most formidable competition may actually be in its own backyard.
