Business / Industries

Chinese internet titans see revenue growth from O2O platforms: Moody's

(Xinhua) Updated: 2016-05-25 17:15

BEIJING - Online-to-offline (O2O) investments by China's three internet titans, namely Baidu, Alibaba and Tencent, collectively known as "BAT," have begun to contribute to revenue growth, global rating agency Moody's said Wednesday.

"We expect a 15 percent to 30 percent year-on-year revenue growth for all three internet companies that we rate over the coming 12 to 18 months, driven in part by their O2O efforts, which have in turn led to increased consumer engagement and higher monetization potential," said Lina Choi, a Moody's Vice-President and Senior Credit Officer.

However, Moody's also noted that the three companies are not generating meaningful revenue from their O2O platforms, which are still in an early stage of development.

"Most O2O initiatives are loss-making because of the high marketing expenses and subsidies needed to encourage consumer take-up," Moody's pointed out in a report.

Moody's expects the three companies' investments in O2O platforms to remain high as they establish or acquire end-to-end logistics capabilities.

Given their ample cash holdings and strong cash generation, the three companies' financial and credit profiles can support such strategic investments, Choi said.

China's O2O market is gaining steam thanks to government policy support encouraging innovation and entrepreneurship.

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