Alibaba's Achilles' Heel: Why mobile may be a problem

Alibaba Group Holding Ltd. apps are displayed on an Apple iPhone 5s in this arranged photograph.
Brent Lewin | Bloomberg | Getty Images

Investors, beware. Alibaba has a blind spot—and it's potentially a big one.

"Alibaba is behind in mobile," said Crid Yu, vice president and managing director of InMobi's North American business. "They still have a very strong desktop presence, but they don't have a big mobile presence."

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Most of Alibaba's growth has come from sales made on its desktop platform, but as more users shift to smartphones and tablets, the company needs to catch up, say analysts.

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"If there is one thing investors should be worried and concerned about, it's how will Alibaba as a website owner capture the website user in that specific moment from browsing to messaging to payments," said Trip Chowdhry, managing director at Global Equities Research. "And I think that's the biggest inefficiency investors are not thinking about right now."

Alibaba's mobile competition

Tencent, Asia's biggest listed Internet company, actually has a leg up in mobile on the e-commerce giant, said Edith Yeung, who is head of marketing for mobile browser company Dolphin Browser and an angel investor.

"Alibaba isn't very strong in mobile e-commerce," Yeung said. "Their mobile strategy compared to Tencent is still very weak. In fact, it's a pre-emptive strike against Alibaba that it doesn't have this."

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Tencent Holdings is composed of various Internet companies involved in messaging, social media, payments and e-commerce. Two of the company's assets—mobile messaging app WeChat (or Weixin as its known locally), and payment service TenPay—in particular could threaten Alibaba.

Those two services have been integrated over the last two years, so that users of the messaging app can pay vendors with their mobile phone—a capability that gives the company an edge, Yeung said.

Naturally, the company is using its mobile leverage to go after Alibaba.

Losing messaging battle

Why Alibaba matters
Why Alibaba matters

In March, Tencent made a large investment in, the second-largest online retailer in China and Alibaba's biggest rival in e-commerce. Tencent invested $215 million in for a 15 percent stake in the company. And it will get an additional 5 percent stake when goes public, which is expected sometime this summer.

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"It doesn't take a lot of imagination to see that if Tencent has a way to reach a lot of people in messaging that it also have a way to reach a lot of people in commerce," Yu said.

While Alibaba also has a messaging app called Laiwang, it has nowhere near the reach as WeChat or other competitors in the region like Line, which says it has over 400 million registered users. (Liwang has about 10 million users.)

The company's weakness in mobile no doubt has its founder Jack Ma worried, Yu said.

Earlier this year, Ma even took to threatening his more than 20,000 employees to sign up 100 users each or they wouldn't get their bonuses. Ma has also been on an acquisition and investment spree during the last year in attempt to beef up the company's mobile market.

"They understand that their mobile reach hasn't been very good and they are making investments to increase their mobile reach," said Jeff Papp, a senior analyst at Oberweis Asset Management.

Mobile spending spree

During the last six months Alibaba has spent $4 billion in deals, including several key mobile investments.

Last month, it purchased the Chinese digital mobile mapping and navigation firm AutoNavi. Alibaba, along with a private equity firm co-founded by Ma, also poured $1.2 billion into YouKu Tudou, an online video business.

And given that Alibaba made a $804 million investment in the film and TV production company China Vision Media group last month, Ma may be aiming to create a Netflix-like service where original content is sold on YouKu's platform, Yu said.

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Most recently, Alibaba also took an 18 percent stake in China's Twitter-like service Weibo, which had 46.2 million daily active users at the end of 2012. Social media is increasingly seen as a mobile play by many analysts.

One way the company might integrate its e-commerce business with Weibo is by using features similar to promoted tweets where different goods or sales can be promoted in users' feeds, Papp said. Alibaba could also integrate its payment service, AliPay, to increase its reach in mobile payments.

The company also announced on Monday that it has partnered with the mobile browsing company UCWeb to launch a mobile search engine.

Still, how Alibaba will tie all of these investments to its core e-commerce business remains to be seen, Yu said.

By CNBC's Cadie Thompson.