Alibaba Group Holdings returned to the headlines on Wednesday with the announcement that it had finalized an investment in the Shanghai-based online advertising agency AdChina.
Alibaba is now a majority shareholder in the company and, even though it released an official statement, the company did not share the financial details of the investment with the media.
The controlling stake that Alibaba, the world's largest e-commerce entity, now holds in AdChina emerged after a $40-million investment in 2010 by a group that was led by Norwest Venture Partners. The investment group consisted of major names like News Corp. and publisher of high-end media sources like The Wall Street Journal.
According to the official statement, Alibaba will enlist AdChina to work on its online marketing technology platform Alimama. Jack Ma's e-commerce giant is seeking to develop a digital platform that can provide marketing services to businesses, online media clients and third-party service providers.
Research indicates that advertising is responsible for more than 50 percent of Alibaba's revenue, so Wednesday's news is consistent with the Chinese company's business model.
The Wall Street Journal's Gillian Wong explained Alibaba's advertising business after the announcement. According to Wong, search-linked ads form the basis of the company's advertising revenue and gave the example of merchants selling their products on Taobao, an online marketplace owned by Alibaba.
The selling of search-linked ads by Alibaba is described as similar to the manner in which Google operates. Alibaba also sells other advertising spaces on the websites of its e-commerce platforms.