China's Qutoutiao Gets Alibaba Backing Amid Spending Spree

(Bloomberg) -- Qutoutiao Inc., the Chinese news and video aggregation app backed by Tencent Holdings Ltd., just obtained a money line from Alibaba Group Holding Ltd. as it continues a spending spree to vie for users and their time spent on smartphones.

Alibaba is providing a $171 million loan that is convertible into Qutoutiao Class A shares at a rate equivalent to $15 per ADS, Qutoutiao said Thursday. Upon full conversion, new shares issued to Alibaba will represent about 4 percent of Qutoutiao. Its U.S.-listed shares rose as much as 7.2 percent before paring gains.

Qutoutiao, whose name means "Fun headlines" in Chinese, and PinDuoDuo, an e-commerce platform, are among apps aiming to capitalize on the growing Internet users in lower-tier cities in China. As industry giants such as Alibaba, Tencent and Baidu pay more attention to these regions, they have become a "hotly-contested spot," Barclays analyst Gregory Zhao said earlier this month.

To acquire users, Qutoutiao boosted spending on sales and marketing to 1.4 billion yuan ($199 million) in the fourth quarter, an increase of more than 460 percent from a year ago. The company went public at Nasdaq last September, and its shares have risen 80 percent so far this year.

To contact the reporter on this story: Yueqi Yang in New York at yyang492@bloomberg.net

To contact the editors responsible for this story: Chakradhar Adusumilli at cadusumilli@bloomberg.net, Brad Skillman

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