How Alibaba's $200M investment in Snapchat could pay off

A $200 million investment by Alibaba in social network Snapchat could help the Chinese online retailer's own growth as it develops worldwide, according to one expert.

"This isn't just about an investment. Snapchat [has] tremendous reach, almost 200 million active users, and this will give Alibaba a great learning experience as they invest deeper in their own mobile services in China, the U.S. and beyond," said Jag Bath, senior vice president of product at RetailMeNot.com.

Snapchat

Read MoreAlibaba to invest in Snapchat at $15B valuation

With Alibaba "sitting on huge piles of cash," it's got to put that cash to work in investments or acquisitions, Bath said.

As a result of Alibaba's investment, the photo sharing site will likely ramp up how it mines and puts to work its user data for targeted advertising, Bath said.

The challenge for Snapchat is tailoring ads that don't turn off its users.

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A source familiar with the deal confirmed that it's worth $200 million.

The Wall Street Journal and Dow Jones VentureSource named SnapChat one of the most valuable start-ups, with a $15 billion valuation as of earlier this month.

Alibaba declined to comment on the deal.