(Bloomberg)—Alibaba Group Holding Ltd. has struck a deal to become a lead sponsor of the Olympic Games through 2028, betting that greater exposure to a global audience will help it reach online consumers and promote its cloud computing business.
China’s largest online marketplace will become one of a dozen or so “TOP” Olympic partners, joining the likes of Coca Cola Co. and Samsung Electronics Co. in the highest rung of sponsorship at a cost estimated in the hundreds of millions of dollars. The Chinese e-commerce firm will provide online computing services and data analytics for the sporting contest, while creating a marketplace for official merchandise. And it will help develop an online video channel for viewers in China, the world’s largest consumer market.
Alibaba’s partnership with the Olympics adds pressure on the company to fight sales of counterfeit merchandise. In December, the U.S. Office of the Trade Representative added Alibaba to its “notorious marketplaces” list of companies that violate intellectual property rights.
As host to more than 12 million businesses that sell more than a billion items, policing such a vast digital world is difficult, Alibaba’s billionaire founder Jack Ma said in a press conference at the World Economic Forum in Davos, Switzerland, when asked about seemingly counterfeit Olympic memorabilia on the site.
The company has roughly 2,000 people working on the problem and is adding new technology to better scrub its sites, Ma said. “It’s difficult to clean all the dirty things in one night,” he said.
Thomas Bach, the president of the International Olympic Committee, voiced support for the company’s efforts.
Asked about his recent meeting with incoming U.S. President Donald Trump in New York, Ma reiterated his pledge to create a million jobs in the U.S. “We had a very productive meeting,” Ma said. “He’s very open-minded.” Ma declined to discuss U.S.-China trade relations.
Strategic alliance
Alibaba becomes one of the few Chinese sponsors, such as Lenovo Group Ltd., No. 24 in the Internet Retailer 2016 Global 1000, to pay for the right to sport the iconic five-ring logo. The agreement also makes Alibaba the first Chinese company to sign on as a partner for the 2022 Winter Games in Beijing. The company typically eschews costly marketing, but is keen to showcase its nascent cloud computing business on an international stage while reaching out to consumers around the world. For the International Olympic Committee, its involvement spells greater Chinese engagement and, potentially, revenue.
It “will be a clear demonstration of what Alibaba’s innovation platform can deliver,” said the company’s chief marketing officer, Chris Tung. “The strategic alliance will help grow Alibaba’s presence as a global brand.”
It’s been almost a decade since Chinese enthusiasm for the Olympics peaked with the 2008 Beijing Summer Games, when the country emerged as a dominant athletic powerhouse. The nation’s medal showing at the Rio de Janeiro games last year, however, was criticized back home.
Major Chinese businesses have started investing heavily in sports amid a call from the country’s government to grow the sector. A national plan announced in 2015 contains the audacious goal of spurring an industry worth 5 trillion yuan ($747 billion) by 2025.
Since then Chinese companies, led by some of the country’s richest men including Ma and Dalian Wanda Group Co. chairman Wang Jianlin, have secured assets at home and abroad. Wanda in 2015 became the first top tier sponsor of soccer governing body FIFA.
Alibaba will kick off its Olympic tour in Tokyo in 2020. Companies including Canon Inc., Nippon Life Insurance and Fujitsu Ltd. are already paying upwards of 15 billion yen ($125 million) for their own partnerships, according to Japan’s Kyodo News.
The move dovetails with its long-term ambitions. Alibaba wants to get half its revenue from outside its home country, yet as of 2016 three-quarters of sales still come from China. It’s been touting that dominant home-market share to try and get U.S. merchants to use its sites to sell to Chinese consumers—a way to offset slowing growth at home—but Alibaba remains an unfamiliar name to many.
Its cloud business, modeled on Amazon.com Inc.’s AWS, is its most international and, though just a few years old, already close to breaking even. Alibaba has now placed cloud at the heart of its global expansion, eyeing top share in Japan in two years and beefing up its presence from the Middle East to the U.S. The service already hosts more than a third of China’s websites.
“It’s the first company to extend a partnership with the IOC and Olympic movement through 2028,” Timo Lumme, the IOC’s chief marketing officer, said of Alibaba. “Potentially there will be other Chinese partners.”
At the press conference in Davos, Ma discussed encouraging young people in China to play team sports. Because of the country’s one-child policy, he said children are the often the “king” of a household. “We have to make them work as a team,” he said. “We will definitely put more money into sports.”
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