Alibaba offers to buy Chinese video service Youku Tudou for $4.4B

Alibaba agreed Friday to pay around US$4.4 billion for the 81.7 percent of Youku Tudou it doesn't yet own -- it bought the rest last year for $1.2 billion. Alibaba plans to leave Youku founder Victor Koo in charge of the company, it said when it made its initial offer on Oct. 16.

It hopes that engaging with the video site's viewers will enable it to sell them more physical goods -- and it intends to push more users of its many e-commerce operations to watch videos on Youku Tudou too.

Alibaba spans a wide range of e-commerce operations, including online retail (Taobao), online storefronts (Tmall), wholesale (Alibaba.com and 1688.com), logistics, finance and payment services.

The acquisition of Youku Tudou will allow Alibaba to add new marketing channels, as Youku Tudou plays host to a number of well-known Chinese video bloggers. The power of social media stars to promote consumer products is being tested by many businesses around the world -- and is also testing regulators' and viewers' abilities to distinguish between unbiased content and paid promotion.

The deal will also give Alibaba the perfect online outlet for its own entertainment products as it develops its content production activities.

The company has recently begun investing in movies, including the recent "Mission: Impossible - Rogue Nation," and earlier this year launched its own Netflix competitor, Tmall Box Office (TBO), just as Netflix itself is hoping to move into China.