Here’s why an old-school web browser is worth billions to Alibaba

June 11, 2014
Obsession
Mobile Web
June 11, 2014

Alibaba announced this morning that it had acquired the final third of UCWeb, a browser in which it previously owned a two-third stake. Jack Ma, Alibaba’s CEO, did not reveal numbers, but said that the deal was worth more than the $1.9 billion Baidu spent last year on 91 Wireless, a smartphone app distribution platform. According to Ma, it is “biggest merger in the history of China’s Internet,”

Why would anybody pay so much for—or care so much about—a lowly web browser? Why not just build one and set it loose on the market, as Google did with Chrome, which is now the world’s dominant web browser?

The answer to the second question is quite simple: UCWeb is already dominant in China, according to Alibaba. It is also big in other emerging markets, including India, where it is among the top two browsers for mobile phones—a number that will only grow as more people get online in India. It’s easier to acquire an already successful browser than build a new one.

But the answer to the first question is more complex. And to understand it, a bit of background on Asia’s browser market is necessary. In the West, a handful of browsers dominate the market: Chrome, Firefox, Internet Explorer, and Safari. China, on the other hand, has one of the world’s most dynamic and competitive browser markets, says Karl Mattson, the boss of international business at Maxthon, a browser company from Singapore that serves a third of its 140 million customers in China.

The majority of the world’s electronic devices are made in China, not just for Samsung or Apple but also for a wide variety of smaller companies unfamiliar in the West. And that is where lesser-known browsers thrive. Device manufacturers are happy to pre-load their phones and tablets with smaller browsers for a fee. It is one more revenue stream for manufacturers. Since phones from smaller brands tend to be cheaper, they are used by people coming onto the web for the first time. Mattson says that 80% of people polled by Maxthon in the markets it operates in say they use a browser because it came pre-loaded. (The other 20% use a particular browser because their husband or son told them to.)

This is great for a company with deep pockets, such as Alibaba. It can assure that its browser is on a bevy of devices, ensuring that hundreds of millions of people who get online for the first time will use its software. But it gets better. People don’t just use the browser that comes pre-loaded with their device, but they often use the default search engine and home screen as well. That allows the company to direct searches to its own search engine (paywall), allowing it to compete with its rival, Baidu.

And there’s more. Browsers have by now ranged beyond desktop or laptop computers, but it’s not just mobile that Alibaba and its ilk are thinking about. Browsers are so ubiquitous in our experience of the internet—and so versatile—that we use them multiple times a day without even noticing. The navigation on your smart TV isn’t an operating system; it’s a browser. The same goes for interactive displays in automobiles.

As more and more devices on the ever-expanding internet of things start to ship with screens, internet connections and interactivity, the browser will be central to all of them. Alibaba’s buyout today may seem anachronistic, but it is a bet on the future.

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