Last February (9th-25th) the 2018 Winter Olympics took place in Pyeongchang. This event was particularly relevant due to the massive effects it had on the worldwide financial and political scenario. For instance, it set the stage for the rapprochement between North and South Korea, for an incoming meeting between Mr. Trump and Mr. Kim Jong-un (North Korean dictator) to relax the tension between their countries and it also boosted the price of Asian firms, Alibaba (NYSE:BABA) in particular.
Alibaba is often called the Amazon (NASDAQ:AMZN) of China and, much like its U.S. rival, the company has expanded well beyond its original e-commerce business. It has a growing cloud computing business, operates a major video site and is connected with a massive digital payments platform.
In spite of the enlargement of its core activities and a market cap bigger than that of Walmart (NYSE:WMT), Alibaba's "brand awareness outside China is not commensurate with its size", said Junhong Chu, a marketing professor at the National University of Singapore. Therefore, Jack Ma (Alibaba’s co-founder and executive chairman), conscious of the difficulties to grow internationally due to the fact that the site is specifically tailored for the Chinese market, desired to leverage as much as possible on the Winter Olympic games, held in one of the countries growing at the highest pace.
The company just made its debut as an Olympic sponsor. Its massive pavilion at the event is a stone's throw from those of Coca Cola (NYSE:KO), McDonald's (NYSE:MCD) and Samsung (Grey Market:SSNLF), which have instant global recognition, something that remains elusive for Alibaba - for now. It joined the club of top sponsors signing an agreement lasting through the LA 2028 Games, for roughly $800 million, even though further financial terms are not public. This step forward comes “at a very critical time” as the company's chief marketing officer, Chris Tung, said in an email to CNNMoney: in June McDonald’s announced is willing to quit its engagement with the Olympics three years early. In addition, China’s domestic online retail market, once dominated by Alibaba, is increasingly saturated, making global expansion an indispensable choice.
For someone who has never heard of Alibaba, its commercials do little to clarify what the company does. But it might stimulate them to find out, according to Chu. Research shows that people often respond to ads with online searches, she said, suggesting that if consumers hear about Alibaba during the Olympics, and their interest is whetted, they will do their own research into the company. Many investors, aware of that, betted on it with a massive buy trend, making the stock surge steadily during those days (roughly 10%) from $175.20 to $193.30 per share, as the graph depicts.
Digging deeper into the Olympics agreement, it is possible to comprehend that there is much more than mere advertising Alibaba was involved to. The company became the official cloud services provider and e-commerce platform for the Games, as well as a founding partner of the Olympic Channel, in a massive attempt to modernize the games. It created the “Alibaba Cloud ET Sports Brain for the Future Olympic Games”: a suite of cloud-based and artificial-intelligence-powered solutions that the company said to benefit fans, spectators, athletes, venues and organizers. The uses of this platform will include:
In order to be directly involved, Alibaba sent between 200 and 300 employees from all its management teams to grasp what modern Olympics are missing and how the operations can be carried out with higher efficiency, effectiveness and security.
The aforementioned strategy, the massive investment and the long-term objectives the company wants to pursue further support analysts’ idea that BABA is an undervalued stock, with low PE (around 44) and outstanding fundamentals it is still very cheap with respect to its potential.
Francesco Baggini
Alibaba is often called the Amazon (NASDAQ:AMZN) of China and, much like its U.S. rival, the company has expanded well beyond its original e-commerce business. It has a growing cloud computing business, operates a major video site and is connected with a massive digital payments platform.
In spite of the enlargement of its core activities and a market cap bigger than that of Walmart (NYSE:WMT), Alibaba's "brand awareness outside China is not commensurate with its size", said Junhong Chu, a marketing professor at the National University of Singapore. Therefore, Jack Ma (Alibaba’s co-founder and executive chairman), conscious of the difficulties to grow internationally due to the fact that the site is specifically tailored for the Chinese market, desired to leverage as much as possible on the Winter Olympic games, held in one of the countries growing at the highest pace.
The company just made its debut as an Olympic sponsor. Its massive pavilion at the event is a stone's throw from those of Coca Cola (NYSE:KO), McDonald's (NYSE:MCD) and Samsung (Grey Market:SSNLF), which have instant global recognition, something that remains elusive for Alibaba - for now. It joined the club of top sponsors signing an agreement lasting through the LA 2028 Games, for roughly $800 million, even though further financial terms are not public. This step forward comes “at a very critical time” as the company's chief marketing officer, Chris Tung, said in an email to CNNMoney: in June McDonald’s announced is willing to quit its engagement with the Olympics three years early. In addition, China’s domestic online retail market, once dominated by Alibaba, is increasingly saturated, making global expansion an indispensable choice.
For someone who has never heard of Alibaba, its commercials do little to clarify what the company does. But it might stimulate them to find out, according to Chu. Research shows that people often respond to ads with online searches, she said, suggesting that if consumers hear about Alibaba during the Olympics, and their interest is whetted, they will do their own research into the company. Many investors, aware of that, betted on it with a massive buy trend, making the stock surge steadily during those days (roughly 10%) from $175.20 to $193.30 per share, as the graph depicts.
Digging deeper into the Olympics agreement, it is possible to comprehend that there is much more than mere advertising Alibaba was involved to. The company became the official cloud services provider and e-commerce platform for the Games, as well as a founding partner of the Olympic Channel, in a massive attempt to modernize the games. It created the “Alibaba Cloud ET Sports Brain for the Future Olympic Games”: a suite of cloud-based and artificial-intelligence-powered solutions that the company said to benefit fans, spectators, athletes, venues and organizers. The uses of this platform will include:
- Enhancing the Games Experience: cloud-driven big data that can revolutionize the way fans engage with the Games. Supporters and athletes would be able to go around the city, find their way to the best events, get updates as far as weather forecasts are concerned and experience the Games in new ways with the latest immersive technology.
- Smart City Planning for Host Cities: When future host cities start planning for Olympic Games venues, Alibaba Cloud can use AI to perform big-data geospatial analysis to choose the optimal locations.
- Safety and Security at the Games: Cloud-based biometric identification at sports venues that can improve access control and security.
- Improving Training Efficiency for Athletes: Deep machine learning can help model relationships between sleep, nutrition and the intensity of training as well as changes in temperature, wind speed, and other natural conditions to support athlete performance.
- Expanding the Reach and Accessibility of Olympic Games Content: Cloud technology can improve storage, search and customization of content, making it easier for rights-holders to cover the Games and for fans to find and share their favorite moments anytime, anywhere.
In order to be directly involved, Alibaba sent between 200 and 300 employees from all its management teams to grasp what modern Olympics are missing and how the operations can be carried out with higher efficiency, effectiveness and security.
The aforementioned strategy, the massive investment and the long-term objectives the company wants to pursue further support analysts’ idea that BABA is an undervalued stock, with low PE (around 44) and outstanding fundamentals it is still very cheap with respect to its potential.
Francesco Baggini