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China wants to break up Alibaba’s influential media business

The South China Morning Post’s office

Alibaba has been told by the Chinese government to give up its media properties over fears that the e-commerce giant has become too influential.

The list of media properties that Alibaba owns and has stake in include The South China Morning Post newspaper, social media platform Weibo, video streaming platform Youku Tudou, movie production house Alibaba Pictures and Focus Media, China’s largest offline advertising network.

Why is this happening now?

  • The Chinese government took a close look at Alibaba’s media properties and were surprised at how much reach Alibaba has gained through its media business, according to The Wall Street Journal. It has asked Alibaba to reduce the size of its media business.

  • China has increasingly clamped down on Alibaba after it was angered with founder Jack Ma’s comments about Chinese president Xi Jinping’s efforts to regulate Ant Group, Alibaba’s financial arm as it offers consumer-focused financial services. The company’s finance platform, Alipay, has reams of data on user spending, borrowing and lending habits and histories.

  • This saw Ant’s $37 billion dual IPO pulled by China earlier this year as it wanted the company to return to its original core business of payments, and focus on correcting issues in the areas of personal lending, wealth management and insurance.

Why does this matter?

  • Alibaba is currently the largest digital ad seller in China, with its ad revenues accounting for more than 32% of the market in 2019.

  • Baidu, Alibaba and Tencent (collectively known as BAT), which occupy more than 60% of the total digital advertising market in China.

  • SCMP remains a loss-making investment for Alibaba and the publisher has been working towards creating a self-sustaining model through creative new business models, with the aim of building multiple streams of revenue.

  • SCMP reversed its decision to move away from a subscription model, having taken down its paywall after its acquisition by Alibaba in 2016.

  • This could have implications for Tencent, which owns the WeChat super app and Bytedance, which owns TikTok (Douyin in China) and news aggregator Jinri Toutiao.