Alibaba's Cloud Monopoly at Paris 2024 Games
Fewer people watch the Olympics every year. So why would a growing company like Alibaba invest $800mm to sponsor and manage its distribution of a declining event?
Highlights
Alibaba will be using cloud technology to broadcast the Olympics, which means you might be able to watch the games in new and different ways.
Alibaba will be using a lot of data and technology to run the Olympics, such as artificial intelligence to track athletes' movements.
Some people are worried that Alibaba's involvement in the Olympics could be a security risk, because they are a Chinese company.
Since its induction as a Worldwide Olympic Partner in 2017, Alibaba BABA 0.00%↑ has been at the forefront of ushering the Olympic Games into the digital age. From pioneering cloud infrastructure to revolutionizing ticketing and e-commerce platforms, the Chinese tech giant has been instrumental in shaping a modern and renovated Olympic experience. As we gear up for the Paris 2024 Olympics, Alibaba's influence is set to reach new heights, promising a paradigm shift in how we perceive and engage with the Games. But, what does this company have to gain from this deal and what does this mean for the future of the Games?
Alibaba and the Olympic Games: From early days to current events
Alibaba's journey as an Olympic partner began in 2017 striking a landmark 12-year partnership agreement with the International Olympic Committee (IOC) and marking the dawn of a new era in Olympic collaboration. Since its inception, Alibaba has been at the vanguard of innovation, testing the waters with cloud-based broadcasting during events like the PyeongChang Winter Olympics in 2018.Â
At Paris 2024, the company achieved its core mission. Picture this: Cloud-based broadcasting, a brainchild of Alibaba's innovation, is primed to supplant traditional satellite infrastructure on an unprecedented scale, and promising spectators a front-row seat to the action like never before. All licensed broadcasters for the Paris 2024 Games will receive live feeds exclusively through a cloud infrastructure built by Alibaba and Olympic Broadcasting Services (OBS).
Sounds like a terrific deal for Alibaba, except for one detail: Fewer people watch the Olympics every year. So why would a growing company like Alibaba invest $800mm to sponsor and manage its distribution of a declining event? Let's try to understand what is behind this strategy.
Alibaba is often called the Amazon 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 affiliated with a massive digital payments platform. But unlike the U.S. company, Alibaba has mainly local business in China and Southeast Asia and does not have the recognition and market penetration of Jeff Bezos' company. In fact, the news coming from the Chinese giant to Western markets is not always positive.
In Paris 2024, Alibaba will have a monopoly on the cloud servers where thousands of terabytes of images and videos of the event will be stored and processed. This represents a breakthrough for the Chinese giant in a region usually dominated by Western companies, such as Amazon Web Services, Microsoft Azure and Google Cloud. This event will allow Alibaba to position itself to the world as a strong technology company with sufficient infrastructure to support a large-scale event and also showcase a range of cutting-edge cloud computing-based technologies. Alibaba Cloud will help the host city optimize logistics planning and streamline behind-the-scenes operations, as well as present camera services equipped with 3D scanning systems and artificial intelligence that will enable the collection of live biomechanical data from athletes.
It’s not all roses for Alibaba
But amidst the dazzle of Alibaba's digital marvels lies a shadow of controversy. Chinese e-commerce leader Alibaba Group's role as a "worldwide partner" of the Paris 2024 Olympic Games has sparked a behind-the-scenes battle to prevent it from hosting and accessing sensitive data. In a global context in which the growing geopolitical tension between China and the West is subjecting its technology companies to increased pressure and scrutiny, Alibaba is no exception.
The prospect that the company will host several critical applications in its cloud have raised eyebrows in the secretive world of French IT security, which clings to digital sovereignty as a standard. The situation is even more tense considering the controversial disappearance of the company's co-founder Jack Ma at the hands of the Chinese government 3 years ago. The fear that the Chinese government has influence in the company plays an important role and there are fears that sensitive data could fall into the wrong hands. After all, it is well known that the e-commerce giants' hunger for data is insatiable.
This is a daunting challenge for Alibaba, which will have to demonstrate its professionalism and diplomacy by quelling doubts in the West while maintaining a pristine corporate image at home in mainland China. Above all, we must not forget that most of Alibaba's business is still domestic, and this opportunity is an important milestone that prepares the tech giant to expand into international markets and prepare for an even more complex scenario when it participates as a sponsor in the Los Angeles 2028 Olympic Games.
What we can take away from this deal
As the countdown to the Paris 2024 Olympic Games begins, Alibaba is preparing to redefine the Olympic landscape. Although challenges and controversies abound, Alibaba remains steadfast in its plan to showcase its cutting-edge technologies on a global stage.
The inevitable question is: Is it worth investing nearly a billion dollars to gain recognition? Alibaba believes it is, if it is to break into the huge Western market.
Despite making a big splash when it went public on the New York Stock Exchange in 2014 with the world's largest IPO, Alibaba’s brand awareness outside China is not commensurate with its size. Joining the ranks of Olympic sponsors like McDonald's, Coca Cola and Samsung is no small feat. Those brands have instant global recognition, something that remains elusive for Alibaba, for now.
So while sports fans won't be catching any Big Mac commercials during the Paris Games, they will see Alibaba's ad campaign, they will pay for their ticket to the stadiums with Alibaba's system, and the event broadcasters will use Alibaba's platform to access the Games. Perhaps a refreshed way of broadcasting the games, more aligned with today's consumer trends such as streaming, on-demand content and digitization is just the partnership the Olympics needs to stay relevant in the 21st century and work for both the Olympic committee and Alibaba.
Financial Outlook BABA 0.00%↑
Despite the macroeconomic headwinds in China, Alibaba grew revenue in the quarter ending on December 21, 2023 to US$36.6 billion (+5% YoY). See latest earnings report.
Increased their share repurchase program by US$25 billion.
Net cash was US$9.1 billion (-26% YoY), and free cash flow was US$7.9 billion (-31% YoY). The decrease in free cash flow was attributed to increased capex and several one-time factors including timing of income tax payments and working capital changes related to several of our businesses.
Revenue from Cloud Intelligence Group was US$3.9 billion (+3% YoY).
