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September 1, 2015

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Moody’s sees gains from O2O platforms for giants

CHINESE Internet giants such as Alibaba and Tencent are expected to profit from their investments in online-to-offline (O2O) platforms over the next 12-24 months, a new research shows.

The companies are expected to earn from advertisement income and commissions from the offline vendors and service providers that are keen to access China’s mass Internet user base, Choi, a senior analyst at Moody’s, said in a note yesterday.

Marketing expenses and new product launches would add pressure on Alibaba, Tencent and Baidu’s margins in 2015 and 2016, but won’t affect the companies financial. Credit profiles would also remain stable, Choi claimed.

The Internet companies aren’t generating meaningful revenues yet from the O2O platforms as the platforms are still at an early stage of development. But Moody’s noted that revenue growth through 2017 would remain stable for Baidu, Tencent and Alibaba.

Capital and operational investments to expand user base and broaden services will remain high, with Moody’s estimating 20 billion to 30 billion yuan (US$3.14 billion) annual investment for Alibaba and Tencent. Baidu said in June this year it was investing 20 billion yuan in its O2O and group buying service Nuomi.

Revenue from consumers accessing their platforms through mobile devices will also climb higher next year with easier mobile platform accessibility.

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