BEIJING -- E-commerce giant Alibaba Group is expanding its online entertainment presence by investing $1.2 billion with a partner in video website Youku Tudou.
Alibaba will gain a 16.5 percent stake in the company and its partner Yunfeng Capital will get 2 percent, Youku Tudou Inc. said Monday.
China's major Internet companies have invested billions of dollars over the past year to expand beyond their core businesses by creating or acquiring entertainment, consumer finance and other services.
They are trying to retain users as Chinese Web surfers shift rapidly to going online via smartphones and other mobile devices, which is shaking up the traditional Internet markets.
"This is an important strategic initiative that will further extend the Alibaba ecosystem and bring new products and services to Alibaba's customers," Jack Ma, Alibaba's founder and executive chairman, said in a statement.
The investment will "strengthen Youku Tudou as China's largest online video platform and further differentiate our services and user experience," Youku Tudou's chairman, Victor Koo, said in the statement.
The most intense rivalry is between Alibaba and Tencent Holdings Ltd., an online games service.
Alibaba has been the biggest spender in the acquisitions race. In February, it offered $1.1 billion for the 72 percent of map service Autonavi that it doesn't already own. In March, it paid $804 to acquire control of ChinaVision, a Hong Kong producer of movies and TV programs.
Also in March, Alibaba invested $215 million in Tango, a mobile messaging service in Mountain View, California.
Tencent has invested in JD.com, China's No. 2 e-commerce service, taxi-hailing app Dididache and other services. The operator of China's most popular search engine, Baidu Inc., also has spent heavily to expand into online video and e-books.
Youku's smartphone app allows users to download movies and TV programs and has attracted millions of users.
Alibaba, based in the eastern Chinese city of Hangzhou, is one of the world's biggest Internet companies and says more than $150 billion worth of merchandise changes hands on its online platforms each year, more than Amazon and eBay combined.
The company announced March 17 it will have an initial public stock offering in the United States. It has given no other details but analysts say it could raise as much as $15 billion in the biggest IPO since Facebook.
Alibaba is privately held and doesn't release financial data. But Yahoo Inc., which owns 24 percent of Alibaba, said in its latest regulatory filing that the Chinese company's revenue for the first nine months of last year rose 60 percent over a year earlier to $4.9 billion.
Ma, the Alibaba founder, stepped down in March 2013 as chief executive but stayed on as chairman. He said at age 48 he was "a bit old" for the Internet.