Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

A Chinese consortium's buyout of Playtika, the online gaming unit of Caesars Entertainment, looks at first blush to be a move into the world of internet gambling. It's not.

In fact the group, which includes Alibaba chief Jack Ma's Yunfeng Capital, is paying $4.4 billion to get into the more pedestrian business of social games. Don't be fooled by the name Caesars and the catalog of gambling-type titles such as Slotomania, Bingo Blitz and Caesars Casino. Players can't get cash back out -- a limitation the buyers say won't change after the acquisition  -- so Playtika looks more like Zynga than Paddy Power.

The difference is important, and given how Macau's casino industry has fared in recent years, it may be a good thing for everyone involved, especially Alibaba.

To be sure, Yunfeng is only one of at least six consortium members. The private equity firm is distinct from Alibaba, yet both are under the roof of The House that Jack Built --and let's remember that even payments business Ant Financial isn't actually owned by the e-commerce giant. To bring the relationship full circle, the consortium buying Playtika is Shanghai Giant, a co-founder of Yunfeng.

Game Engine
Tencent's revenue growth overtook Alibaba's in recent quarters as its gaming-focused business withstands a slowing Chinese economy
Source: Bloomberg
Note: Period is for calendar quarters. Alibaba's financial year ends March 31.

Ownership structure aside, it's hard not to imagine Ma wanting to link Playtika to Alibaba's business.

In China's internet industry, the three S's have been neatly and cordially divided up by the BAT triumvirate of Baidu, Alibaba and Tencent. Baidu has search, Alibaba has shopping and Tencent took social, which includes games. There is, of course, some overlap: They each have exposure to ride-hailing, payments and deliveries. 

Yet, I'd argue that Alibaba has ventured outside its turf a little more than the other two. It's already made a play for sports with a $192 million investment in Guangzhou Evergrande Football Club. And as Bloomberg Intelligence analyst Michelle Ma points out, that move could flow on to ticket sales, ads and even its entertainment business Alibaba Pictures. Given that neither Baidu nor Tencent has clearly staked a claim in sports or movies, that field is ripe for the pickings.

An area where Alibaba is clearly moving in on Tencent's territory is in its formation of an eSports tournament with $5.5 million in total prize money. For a company that gets 95 percent of its revenue from retail and wholesale e-commerce, muscling into Counter-Strike competitions is well outside Alibaba's comfort zone. For Tencent, which gets about 78 percent of its revenue from online games and social networking, Ma's move can't be too comfortable either.

Investors who staked money on Tencent's gaming-focused business reaped better winnings on its shares than its two Chinese internet rivals over the past year
Source: Bloomberg

But Alibaba needs to start taking ground where it can. Its heavy reliance on the shopping and consumption habits of Chinese consumers is already a gamble in the face of a slowing economy. On the other hand, online games have proven surprisingly resilient for the likes of Netease and Tencent, although the latter is facing some risks as it pivots to mobile.

For all its acquisitions and investments in the past few years, most of Alibaba's forays have stayed within its allotted square mile of retail and e-commerce. The Playtika deal, being a games investment and not a gambling one, clearly crosses the street into rival territory. But then, as a former English teacher Jack Ma may well proclaim that all's fair in love and war.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Playtika offers limited offline rewards such as meals, show tickets and merchandise through Caesars' Total Rewards loyalty program.

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Tim Culpan in Taipei at

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Matthew Brooker at