Alibaba Invests US$294 million for 28% of AutoNavi, Becoming Its Biggest Shareholder

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AutoNavi (NASDAQ: AMAP), a Chinese digital map and navigation solution provider, announced that Alibaba has invested approximately $294 million in newly issued preferred and ordinary shares for about 28% of the company’s total shares on a fully-diluted basis. Thus Alibaba becomes its biggest shareholder.

The two parties will work together on the infrastructure for location-based and lifestyle services. On top of that they’d cooperate in data collecting, maps engine, product development, cloud computing, cross-marketing and monetization, states Alibaba. “The parties plan to share certain data, including AutoNavi’s map data and location-related information of the merchants on Alibaba’s e-commerce platforms, including Taobao Marketplace and Tmall.com”, according to the press release by AutoNavi.

Maps seem to have become a must for every company who is expanding, or has to expand, to mobile Internet market. But most big players, such as Tencent, Baidu and Sohu, chose to develop it on their own. Last October Taobao released a map-based service for consumers to search for information about local businesses and deals, with map content being provided by AutoNavi.

From last year, AutoNavi planned to build a Taobao on top of maps, aiming to make revenues from paid services and CPS-based revenue shares. That must be what Alibaba also wants to do on the mobile end.

AutoNavi started in 2002 as a business-facing service that sold digital map content and navigation solutions to enterprises such as vehicle manufacturers. Later it added consumer-facing services like maps app Amap and shifted focus onto the consumer market. It announced 100 million Amap users earlier this year. Now it offers end-users free mapping apps and paid professional navigation services.

The company made US$159.7 million in net revenue, a 25.8% year-over-year increase,  in 2012, with 58% from automotive navigation, 30% from mobile and location-based services and the rest from enterprise apps and other offerings. Although the automotive navigation still accounts for more than half of the total revenues, consumer-facing mobile services see much higher a growth rate, 73.5%, than 7.3%, that for the automotive navigation.

Currently the biggest challenge to AutoNavi must be Baidu who has gained considerable users with quality mapping and navigation services and offer everything for free. Baidu is also eyeing the location-based online-to-offline service market. It merged Shenbian, its location-based sharing and review service, into Baidu Maps to form Baidu’s LBS division at the beginning of this year.

In Q1 2013, AutoNavi recorded $34.3 million in net revenue, a 4% decrease year-over-year, 45% from automotive navigation and 41% from mobile and location-based services, according to the latest earnings release. Its mobile app has 116 million users and 56 million are monthly active users.