Confirmed: Alibaba Group Takes $294M, 28% Stake In China’s Navigation/Location Services Specialist AutoNavi, As It Gets Down To Business On Mobile

Alibaba Group is reportedly now the largest single shareholder in AutoNavi, a Beijing-based maker of electronic navigation tools and location-based services. The Chinese Internet giant has formed a strategic alliance with AutoNavi, on the back of a $294 million investment. This gives it a 28% stake in the navigation company, which is China’s largest, with 116 million users of its free mobile app and 56 million monthly active users and providing mapping data for iOS, Google Maps and Baidu, among others.

Before the news got confirmed by AutoNavi itself, the story was reported first by Sina Tech (link via Google Translate).

An Alibaba spokesperson told us earlier, “as a matter of company policy we do not comment on rumors and speculation of this nature.” Update: It looks like this was just a holding tactic. John Spelich, a spokesperson for Alibaba, has also confirmed the deal to TechCrunch now that AutoNavi has released its news.

AutoNavi notes that this deal will cover location-based e-commerce services but will also involve other navigation offerings that will be used to build out the Internet giant’s mobile ambitions.

“The parties plan to share certain data, including AutoNavi’s map data and location-related information of the merchants on Alibaba’s e-commerce platforms, including Taobao Marketplace and,” it writes in a statement announcing the news. “AutoNavi and Alibaba will also cooperate in the areas of map engine, location search, navigation and cloud computing services and will cross-promote their respective products and services, with a goal of developing new location-based business models.”

Both Joseph C. Tsai, executive vice chairman of Alibaba, and Eddie Wu, president of Alibaba’s mobile products division, will join AutoNavi’s board of directors when the deal closes “in the near future.”

Make no mistake that this is part of Alibaba’s bigger mobile play: “This new alliance reflects our vision for the future of the mobile Internet,” Jack Ma, executive chairman of Alibaba and the company’s figurehead, said in a statement. “We’re pleased to work with partners such as AutoNavi to develop terrific applications and services that bring more convenience, fun, and joy to our users. We’ll continue to work toward this goal with tireless enthusiasm.”

But it is also an important step for AutoNavi as it looks for more ways of commercialising its popular but only somewhat profitable technology. In quarterly results released at the same time as the news of the Alibaba investment (not a coincidence, I suspect), AutoNavi noted that revenues declined 3.8% to $34.3 million, net income was down 38% to $9.3 million, and EPS declined by 2 cents to $0.03.

“Our new alliance with Alibaba highlights the importance of map applications as a key entry point for mobile services in the age of smartphones,” said Congwu Cheng, AutoNavi’s chief executive officer, in a statement. “With Alibaba’s support, AutoNavi will be able to establish a massive platform of points of interest (“POIs”) related to the kinds of services our users seek every day. The alliance will also enable us to create an innovative monetization model by providing consumers with a one-stop service application that integrates merchant information with POIs search, data mining, payment, and other e-commerce activities.”

[Original story continues below.]

If the report is accurate, it would mean that Alibaba has displaced AutoNavi CEO Jun Hou as its largest shareholder. According to a SEC filing, Hou held 16.7 percent stake of the company’s shares as of Dec. 31, 2012.

AutoNavi is the most widely used mobile mapping service in China, with 45 percent market share according to Analysys International. Its mobile mapping app surpassed 100 million users in January.

The company provides data for iOS 6 and Google users in China, as well as Baidu’s mapping services.

The report of the Alibaba’s investment comes three months after AutoNavi vice president Qie Jian-jun said that his company wants to build a “map-based Taobao” by turning its maps service into an online-to-offline gateway for brick-and-mortar vendors. Taobao is Alibaba’s C2C e-commerce platform.

If it’s true that Alibaba has taken a majority stake in AutoNavi, that means it has filled a hole in its product roster. Unlike competitors Baidu and Tencent, Alibaba does not have its own standalone map service (the company’s Taobao map search service, which quietly launched last year, relies on merchant information from other Alibaba properties).