Chinese internet companies Baidu, Tencent and Alibaba are all vying for dominance in the content space in China. Selling hardware is seen as the key way for them to push out software and services such as app stores and ecommerce channels. This has been key for Xiaomi which sells high spec mid-range phones to get scale with the aim of monetizing through its software.
Alibaba's YunOS has been around since 2011 but has made no real strides in terms of penetrating smartphone users and moving them away from Google's Android OS. Alibaba started a partnership with Meizu in October to run its OS on the company's devices in a renewed effort to push consumers to its numerous services.
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The strategy is not new for major content providers. Google acquired Motorola in 2012 to drive users to its Android services, but later sold the company to Lenovo. Amazon decided to go its own route when it unveiled its Fire Phone last June, but this has been met with poor take-up.
Alibaba's stake in Meizu will help it quickly get the scale without having to build smartphones from the start, analysts said.
"It is much better for Alibaba to acquire a company that knows the business and knows the market and then use that expertise rather than trying to build that all from scratch," Francisco Jeronimo, research director for European mobile devices at IDC, told CNBC by phone.
And Alibaba is unlikely to stop here, according to analysts, who said the Hangzhou-based company will look to take further stakes in small domestic smartphone players.
"They won't focus on one vendor. Right now Alibaba has deep pockets to be able to invest in other companies and grow a quality user base," China research director at Canalys, told CNBC by phone.
"It is only just the beginning."