Alibaba mapping a future filled with smart devices

Employees stand on a logo of Alibaba Group Holding Ltd during a media tour organised by government officials at its headquarters on the outskirts of Hangzhou, Zhejiang province, June 20, 2012. [Photo/Agencies]

Cash-rich Internet companies in China are deepening their commitment to online-to-offline deployment as they turn their focus to location-based services.

The latest attempt is that of Alibaba Group Holding Ltd, China's top e-commerce site by revenue, which offered a full takeover of digital mapping firm AutoNavi Holdings Ltd on Monday.

The tie-up, aiming to woo China's growing legions of mobile users, will enable Alibaba to transfer some of its huge virtual business to real-world uses.

The all-cash buyout, following the 28 percent share that Alibaba has held since May, would value the Nasdaq-listed company at $1.6 billion, a 27 percent premium over its closing price at the end of last week.

Alibaba said in a letter that taking control of AutoNavi will help it fend off rivals such as Tencent Holdings Ltd and Baidu Inc, which are eyeing location-based services via smart device rollouts.

AutoNavi holds a number of limited licenses issued by the Chinese government that lets vehicles access accurate street maps. It led the domestic digital mapping market with a 31.3 percent share, IT consultancy Analysys International said in August.

Alibaba faces stiff competition from well-capitalized Internet firms. Search engine provider Baidu, which purchased geographical data from NavInfo Co Ltd, fought for market share by offering a free service in August.

But the deal-making will give Alibaba a boost in extending its reach to catering, logistics and taxi rides, said Hong Bo, an independent information and communications technology analyst who runs consultancy IT5G in Beijing.

"The mapping service acts as a 'bond' that glues Alibaba's online platforms, payment systems and offline layouts," said Hong, who regards the purchase as one of "strategic importance" to the company.

Alibaba, home to 7 million separate online stores, controls 80 percent of China's e-commerce market.

But its dominance is being eroded by rival Tencent, as the latter leverages its hit mobile messaging app WeChat for even greater revenue.

WeChat has drawn more than 600 million users in just two years. Its newly integrated payment function aims to turn a solid user base into substantial earnings.