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Alibaba, Baidu’s Li Mount High-Stakes U.S. Forays

about_alibaba_logo1Two of China’s biggest Internet names are making interesting new moves into the tough U.S. market, with word that Alibaba has launched an American e-commerce website and Baidu founder Robin Li is helming a major new Hollywood animation studio. Both moves look cautious but relatively well conceived, even though each carries a degree of risk due to intense competition in the U.S. e-commerce and animation sectors. Still, I have to admire both companies for at least trying, even if their chances of success could be around 50-50.

Between the two moves, the one by Baidu founder Robin Li looks like the biggest but also riskiest investment. According to media reports, Li, one of China’s richest men, is heading a group of investors behind the newly established Aquamen Entertainment, a Los Angeles-based animation studio. The studio will be led by Korean filmmaker Jeongjung Kim and Chinese producer Gary Zhang.

The venture’s first title will be a 3D, computer-generated animation feature titled “Kong,” based on the adventures of China’s famous Monkey King from the “Journey to the West” novel. We can get a good idea of the venture’s ambitions by looking at the film’s budget, which is tentatively slated at $40 million—making it one of the most expensive projects of its kind to come out of Asia.

Locally made Chinese animated films have a fairly solid track record for mediocrity, despite Beijing’s best efforts to promote the industry. Many films sport good enough animation and other special effects, but often lack the powerful storytelling skills seen in many Hollywood productions. In a nod to that shortcoming, Beijing has recently approved major new animation joint ventures between local partners and U.S. giants DreamWorks Animation and Disney. The latest media reports say Aquamen will also hire a local Hollywood director to make “Kong.”

This new venture could have a reasonable chance for success by specifically making films for the China market. If it does well, I wouldn’t be surprised to see Li eventually transfer some or all of his stake to Baidu, possibly to the company’s iQiyi video-sharing site.

Meanwhile, let’s look quickly at Alibaba’s new U.S. foray, which comes in the form of a niche-oriented online store called 11 Main. Descriptions of the new site are rather vague, saying only that it will contain “interesting, quality products” from “hand-picked shop owners”.

The venture looks like a boutique-oriented proposition, rather than one designed to compete with industry heavyweights like Amazon and Walmart. It will be run by Alibaba’s Vendio and Auctiva unit, which it purchased in 2010. Launch of the new platform also follows Alibaba’s purchase last year of a minority stake in U.S.-based e-commerce site ShopRunner. These smaller plays in the U.S. look like a smarter approach after less successful moves into Japan, though they probably won’t become major contributors to Alibaba’s core e-commerce businesses anytime soon.

These latest moves by Alibaba and Baidu’s Li both represent interesting and relatively focused approaches to the U.S. market by two of China’s biggest Internet names. The other big player, Tencent, is taking its own different approach through its purchase last year of a stake in leading U.S. video game maker Activision Blizzard. I personally think all three approaches look reasonably well conceived for different reasons, with Li’s foray offering the biggest potential for major rewards but also major losses if it fails to perform.

Doug Young lives in Shanghai and writes opinion pieces about tech investment in China for Techonomy and at www.youngchinabiz.com. He is the author of a new book about the media in China, “The Party Line: How the Media Dictates Public Opinion in Modern China.

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