Alibaba Group Holding Ltd share price down, to create a $163-billion loans marketplace, focuses on mobile advertising

Alibaba Group Holding Ltd, the largest e-commerce company in China, will use its finance arm to create a marketplace for 1 trillion yuan ($163 billion) of loans. The company is stimulating more Chinese citizens to borrow and lend money and is planning to bring its idea to life in as soon as two years.

The platform Zhao Cai Bao, which is oriented towards small businesses and individuals and provides them with the opportunity to acquire loans directly from investors, was created by the Chinese e-commerce group in April this year. The General Manager of the financial arm of Alibaba – Mr. Yuan Leiming, who also runs Zhao Cai Bao as Chief Executive Officer, revealed in a statement that the marketplace has already expanded to 14 billion yuan.

As reported by Bloomberg, Mr. Yuan Leiming said at the Hong Kong Institute of Bankers conference: “There was a strong demand for investment products that provide higher returns. Think of us as an exchange for loans.”

According to information on the companys website, Zhao Cai Bao has listed about 11 000 products, with a minimum annualized return on a 6-12-month loan of 5.5%.

Apart from its push into the financial sector, Alibaba faces a serious expansion. The company is not only the biggest e-commerce company in China, but also manages one of the largest online-based advertising businesses there. According to iResearch estimates, advertising currently generates more than half of the total revenue of the company. Now, after carrying out its Initial Public Offering that turned out to be the biggest one in history, Alibaba faces the challenge to shift its ad platform from personal-computer websites to mobile applications in order to expand its reach among larger number of customers.

Alibabas ad revenue is generated through its Taobao marketplace, which has an incorporated search engine that operates similar to Googles AdWords. The search engine allows users to look for a certain product by typing keywords and the results are visualized in four columns. However, an additional, more visible, column is displayed on the right and highlights the products of merchants who have paid Alibaba to list their products there. Positions in the paid column are auctioned and the item that appears on the top belongs to the merchant who paid the most. Bid prices vary depending on how much merchants are willing to pay per click on their products.

Apart from its positions in advertising and the recently founded loan marketplace, the e-commerce group already owns a small-business lending division called Yu’E Bao, a payment service similar to Paypal dubbed Alipay, and is near to submitting an application for a banking license.

Alibaba Group Holding Ltd fell by 3.03% on Tuesday to close at $87.17 per share in New York. The company is valued at $214.87 billion. According to CNN Money, the 6 analysts offering 12-month price forecasts for Alibaba Group Holding Ltd have a median target of $97.50, with a high estimate of $125.00 and a low estimate of $80.00. The median estimate represents a +11.85% increase from the last price of $87.17.