M&A

Parent trapping

Alibaba’s latest investment targets babies

Babytree-w

The “Facebook for parents”

Terrified that an aging population might derail its economic ascent, in late 2015 China eased its decades-long policy limiting most couples to only one child, hoping three million additional births a year through 2020 would add more than 30 million workers to the labour force by 2050.

Instead, the country’s new births fell by 3.5% in 2017, with many complaining about the high cost of raising and educating children. Many young urban women are also choosing to delay starting a family. Shanxi province has even tried to offer cash subsidies to newlyweds to “promote the healthy development of marriage and family”.

If two is already too many, will raising the limit to three have any impact? There have been rumours that policymakers now want to up the two-child limit to three in an effort to jump start the birth rate. Bloomberg also reported last month that the central government is considering scrapping all birth limits by 2019.

But no matter, Alibaba is already anticipating a baby boom. Last week the e-commerce giant announced that it has snapped up what some believe to be a 10% stake in Babytree, valuing the online parenting platform at Rmb14 billion ($2.2 billion).

Founded in 2007, Babytree calls itself “Facebook for parents”, with a website and a mobile app targeting both expectant and new parents. Over 200 million monthly active users share and discuss pregnancy and parenting advice from childcare experts. Babytree also runs an e-commerce platform for baby products, including its proprietary childhood education programme (featuring story books and DVDs according to age groups).

The company already counts conglomerate Fosun and cosmetics group Jumei among its shareholders. Alibaba will now provide e-commerce solutions to Babytree in terms of business operations, technology and logistics. The tie-up will “empower Babytree’s business development on various fronts and unleash its potential,” says chief executive Wang Huainan, who was an executive at Google before founding Babytree.

Data from market research firm iResearch shows as many as 90% of Chinese families now use online parenting websites and apps. Compared to other social media platforms, parents are a highly engaged demographic (hardly a surprise, as new parents are up at all hours), often checking apps like the Babytree one multiple times a day.

One statistic shows that over 78% of users open Babytree’s app at least once a day and 45% of users check it more than 5 times a day. Users spend between 5 to 30 minutes on the app, which rivals some of the most popular short video apps at the moment like Kuaishou (27.9 minutes) and Miaopai (17.4 minutes).

“Babytree has 10 years of operating experience, a large number of loyal users and high user engagement. So instead of trying to replicate Babytree’s business model, these are the factors that have propelled Alibaba to invest in the company,” says news portal Hexun.

Tech-savvy grandparents have also contributed to the growth of online parenting platforms. “Inter-generational parenting has become a thing. While each family has a different dynamic, more often than not, it follows this pattern: the baby’s mom will play different roles; the dad will be involved in education planning; while the grandparents will be responsible for taking care of the child’s everyday lives. All of them interact with each other through the parenting apps,” Quanjing Net, a finance portal, comments.

Rival QianBaoBao (which means ‘kiss baby’)is another app with cross-generational appeal. It allows users to share pictures and videos and to document milestones so that grandparents can be involved. Over 23% of its users are grandparents and relatives, says Quanjing Net.

Investors are interested in the sector. The founders of Fosun and Xiaomi both own stakes in QianBaoBao. Other maternity and childcare platforms like Mia and BeiBei have seen their valuations soar to Rmb10 billion. And with Alibaba putting cash into Babytree, many reckon that it won’t be long before Tencent makes its own infant investment…


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