Alibaba Bets on Social Commerce With Snapchat Investment

Alibaba, China’s biggest e-commerce company, will invest $200 million in Snapchat, a move that is expected to boost the ephemeral messaging service’s value to $15 billion. But the investment may also help Alibaba gain a foothold in the U.S., and delve into the social commerce space.

The Alibaba-Snapchat deal follows similar moves by other major players in the social media and commerce industries, and may be a way for Alibaba to catch up to the rest of the field.

“This has already happened with WeChat in China,” says Jinal Shah, global digital strategy director at J. Walter Thompson Worldwide (JWT). “Plus, there aren’t that many independent messaging platforms left that have both scale and potential: WeChat is owned by Alibaba’s rival Tencent, and Facebook acquired WhatsApp. So it is a clever and an obvious investment decision for Alibaba to bet on Snapchat.”

Additionally, the investment will help the Chinese company move more seamlessly into Western markets, according to Shah. “Betting on Snapchat is a surefire way for Alibaba to secure an audience and solidify its footprint in the [U.S.],” she says.

But Alibaba is not the only beneficiary under this partnership. For Snapchat’s part, the platform can leverage Alibaba’s investment to further unlock its potential in the peer-to-peer payments and social commerce space, according to Tom Buontempo, president of Attention Global, a social media marketing agency.

“Though [Snapchat] doesn’t share metrics publicly, there’s no doubt people are spending more and more of their time on the mobile-first platform and they’re cautiously balancing revenue growth with user value,” he says. “Snapcash, Discover, and Sponsored Stories are all great examples of this.”

Looking forward, Snapchat’s value could even surpass Facebook’s, predicts Marco Hansell, chief executive (CEO) of marketing platform Speakr. “Snapchat has gained 100 million users in just a few years. That is incredible,” he says.

He adds that the conversion value from Snapchat purchasing remains to be seen, but the ephemeral messaging service’s real-time nature and “disappearing” value could enable the platform to become a powerful driver of purchase in the future.

For the time being, both Alibaba and Snapchat have refused to disclose more details about this investment, so it’s unclear where their partnership will head.

“I don’t know how large the audience is in Asia for Snapchat comparatively,” Hansell says. “So it would be interesting to see if Alibaba is going to capitalize on Snapchat’s existing inventory, or create some other businesses with Snapchat.”