Billionaire Jack Ma Adopts ‘Moneyball’ Approach to China Sports

(Bloomberg) -- Think of it as “Moneyball” for e-commerce.

Just as professional sports teams have used reams of data to maximize performance, Chinese billionaire Jack Ma is turning to analytics to get the most out of fans and change the way athletic events are managed and people shop for gear.

After getting its start with a service allowing users to track their workouts, a unit of Ma's Alibaba Group Holding Ltd. is now moving onto organized sports. Using marathons as a guinea pig, it's scooping up broadcast rights and collecting information on participants and viewers to sell them everything from running shoes to health insurance. Fans watching the event on the company's Youku streaming service can even send virtual gifts and tips to their favorite runners.

The strategy will then be replicated to other fields, including e-sports, soccer and basketball, as Alisports carves a share of a Chinese sports industry the government estimates could be worth 5 trillion yuan ($728 billion) by 2025.

“We are a platform that records big data on sports,” Zhang Dazhong, chief executive officer of Alisports, said in an interview. “Viewers watching sports on our sites now are directly connected with the e-commerce stores, something that couldn't happen in the past.”

Zhang's goal is to expand the three-year-old business to more than 100 million users by November next year, triple the current level. Alisports has brought in cash to help reach that target, raising more than 1.2 billion yuan in a series A financing round in April at a valuation of more than 8 billion yuan.

Read about how Alibaba wants to build China's sports industry

Headquartered in Shanghai, rather than at Alibaba's base in Hangzhou, Alisports sits in a Mao-era styled sports center. The company retrofitted its office with rows of open desks and spaces that encourage staff to work out. It also features studio booths and blue screens for its video production team.

While fitness apps and efforts to monetize sports aren't new in China, Alisports is counting on its position in Ma's ecosystem to give it an edge. Alibaba has expanded beyond e-commerce to include cloud computing, logistics, travel and entertainment. Its digital payments affiliate Alipay has more than 700 million active users in China. Using the parent company's facial recognition technology, it was able to bolster the integrity of events such as the Hangzhou marathon in November by rooting out 11 people who used fake identities.

Alisports has had early success in selling to users, most of which access its service via the Alipay app. The company has already sold insurance policies to more 770,000 customers as of the end of November, without taking a commission.

“Alibaba's breadth and reach would allow them to make this more profitable than any other business trying the same thing,” said Mark Tanner, founder of Shanghai-based research and marketing company China Skinny.

Instead of doling out small fortunes to buy rights to expensive tournaments, Zhang is starting with less prominent events, such as marathons. That's especially important now that the economy could be slowing, he said.

“Right now isn't a great time to explore futile experiments, instead we should leverage our strength,” he said. “Winter might be arriving soon for the economy, it might be fierce.”

Read more: Jack Ma's Ant Financial Makes a Big European Play Via Soccer

That's why Zhang is focusing on connecting back-end data with other units in Alibaba's sprawling empire. That's become a selling point for the Alisports ad business when it pitches to brands like Adidas.

“The extra data will provide additional context into users allowing them to provide deeper, more tailored personalized profiles for users, which obviously helps every aspect of their business's profitability,” said Tanner. “So in short, I think it is a smart move.”

A key difference for sports viewing in China is that many more watch on computers or mobile devices compared with markets such as the U.S., where viewing on a TV is far more common. That means the audience can be more interactive with the event and advertising. About 600 million people in China watched videos online as of June, roughly 95 percent of them via mobile devices, according to the China Internet Network Information Center.

With more precise targeting, brands can also save on their spending, which in turn can be distributed back to consumers in the form of discounts and coupons to drive sales, Zhang said.

“When you watched sports events on the TV in the past, as a viewer you wouldn't know how to buy products you liked from the advertisement,” he said. “Now viewers can go straight to Adidas's store on Tmall as they watch the games on our site.”

To contact Bloomberg News staff for this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net;Allen Wan in Shanghai at awan3@bloomberg.net

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Edwin Chan

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With assistance from Editorial Board