Thursday, August 15, 2013

Bezos purchase of Post has parallels in China

Versión en español aquí.

Amazon's Jeff Bezos isn't the only e-commerce billionaire making news with acquisitions. Jack Ma, chairman of China's e-commerce leader, Alibaba, has invested hundreds of millions of dollars in a Twitter-like microblogging service and a mapping service.

Both of these giants have been bolting on companies that can help them gain synergies by combining content, social networks, internet retailing, mapping (location-based selling and services), mobile platforms, devices and operating systems. 

Their model and chief competitor is Google, the worldwide leader in online advertising. Google has been getting into all of these businesses. In order to compete globally, the big internet companies -- like Facebook, Amazon, Yahoo, Twitter and, in China, Alibaba and TenCent -- are seeing the need to develop all parts of online business. 

The trend has implications for content providers, such as news organizations, and ultimately for freedom of expression. First, though, the business trends.

Mobile is the next battleground

Alibaba and its peers are seeing an opportunity in mobile. Alibaba already has some 700 million users of its online auction and retail services, but with the investment in Weibo and commitment to advertise on that social network, it becomes more mobile and more social, according to Wall Street Journal reporter Tom Orlik. 

Alibaba's main reason for paying $586 million for an 18 percent stake in Weibo is to provide a mobile platform for its retail offerings, according to an analysis by The Street. Weibo has 50 million active daily users. They give Alibaba a tool to face off a challenge to its retail dominance from another Chinese Internet giant, TenCent, which has 300 million users of a mobile instant messaging service called WeChat. 

Mobile is becoming the new battleground of the Internet, not just in China, but globally. Facebook reported revenue growth of 53 percent in its most recent quarter, driven by its aggressive focus on advertising on mobile devices. Analysts quoted by Bloomberg saw huge growth potential for the company in mobile advertising. 

Location tied to retail

Another aspect of Internet competition is linking mobile devices to location services and internet purchasing. Increasingly, users of mobile devices are using location services to make choices about shopping at brick-and-mortar locations. Or they combine social, mobile and location services to find nearby friends and meet at restaurants or entertainment venues.

Alibaba recently strengthened its position in location services by acquiring a 28 percent stake in AutoNavi Holdings for $294 million, which will allow it to link the location service to its retail offerings. The Wall Street Journal offered this analysis of the deal: 

The two companies will also cooperate and combine their data to develop e-commerce products that make use of the actual location of smartphone users.
The tie-up is another step in Alibaba’s efforts to gather control over services offered on smartphones. It will likely present a challenge to rival Tencent Holdings Ltd., which analysts have said is likely to make use of its popular messaging application, WeChat, to earn revenue off of marketing and e-commerce also based on the users’ physical location.
We are seeing a dizzying race to consolidate Internet dominance by a handful of giants -- Google, Amazon, Twitter, Facebook, Alibaba, TenCent and others -- who are acquiring companies that will help them in their quest. Facebook's purchase of Instagram in 2012 for $1 billion is a major example of the trend. 

Control of content

The consolidation we are seeing has implications for the news business. 

Weibo, whose social network offers a back-channel alternative news source in a country with tightly controlled media, bears one strong similarity to the Washington Post. The content of both affects government policy. 

Granted, Weibo is a social network, not a news organization, and is filled with rumor and misinformation. But Weibo also publishes news about government corruption and coverups not found in official media. It is important enough to require the attention of thousands of government censors. 

The Internet conglomerates that are emerging will have awesome financial power, global reach and the potential to drive politics and policy through their content, lobbying efforts and opinion leadership. 

Questions for citizens

The Internet giants have the potential, long term, to drive global conversations about any issue. 

Will they be a voice for democracy and freedom of expression? 
Will they promote their own financial interests at the expense of human rights and a healthy environment? 
Will they exercise mind control in the Big Brother scenario of "1984"? 
Will these new media moguls lead us into wars or be voices for diplomacy? 

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