Cash-loaded Internet companies in China are deepening their commitment to online-to-offline deployment as they turn their focus to location-based services.

The latest attempt is that of Alibaba Group Holding Ltd, China's top e-commerce site by revenue, which offered on Mondaya full takeover of AutoNavi Holdings Ltd, a digital mapping company listed in the US that holds rare mapping licenses from the Chinese government.

The tie-up, aiming to woo China's growing legions of mobile users, will enable Alibaba to extend its virtual business to real-world uses.

"Compared with its main competitors in China - Baidu and Tencent - Alibaba is relatively behind in terms of mobile services," said Echo He, senior analyst at Maxim Group LLC. "Getting AutoNavi seems to be a good way to increase its market share in the mobile business."

Last May, Alibaba acquired 28 percent of AutoNavi's shares for $294 million. The current all-cash offer proposes to purchase the remaining 72 percent at $21 per American depository share (ADS), which values the business at approximately $1.58 billion.

The stock surged more than 27 percent at Nasdaq in pre-market trading on Monday and closed at $20.50 per ADS on Tuesday.

Alibaba said in a letter to AutoNavi that the market for navigation as well as map applications and services has become increasingly competitive, so the offer could help the mapping company's shareholders "realize superior value that is otherwise difficult for AutoNavi to achieve as a stand-alone company".

"Chinese companies are following in the footsteps of American companies, many of which have been focusing on mapping services for quite a while," said He, referring to IT giants Apple and Google. "But in China mapping services are still in their infancy."

Although it is still too early to talk about the deal's impact on global markets, Alibaba's taking on of mapping services should be helpful to its much-speculated potential initial public offering this year, according to He.

"It seems now the purchase may only be significant to Alibaba's business in China. But Western investors in fact might not care what the move means globally," said He. "They would like to see Alibaba expand to the mobile market, making it more competitive in China."

Alibaba faces stiff competition from well-capitalized Internet firms. Search engine provider Baidu, which purchased geographical data from NavInfo Co Ltd, made a move for market share by offering a free service last year.

"Baidu promoted its mapping services heavily last year," said He. "Their services should now be on a par with AutoNavi's."

Tencent, another Alibaba Internet rival giant, is leading the mobile market in China thanks to its mobile messaging application WeChat. In just two years, WeChat has drawn more than 600 million users. Its newly integrated payment function aims to turn a solid user base into substantial earnings.

Facing strong competition, Alibaba may gain a boost in extending its reach to catering, logistics and taxi rides through the potential deal, said Hong Bo, an independent information and communications technology analyst who runs consultancy IT5G in Beijing.

AutoNavi holds a number of limited licenses issued by the Chinese government that let vehicles access accurate street maps. It led the domestic digital mapping market with a 31.3 percent share,IT consultancy Analysys International said last August.

"The mapping service acts as a 'bond' that glues Alibaba's online platforms, payment systems and offline layouts," said Hong, who regards the purchase as strategically important for the company.

"It's definitely good news for Chinese customers who are looking for more O2O (online-to-offline) integration so they can quickly convert their stored e-cash into tangible goods and services," said Sun Hongchao, a commentator at Internet company NetEase Inc.

Sun said that Alibaba has always been well aware of the importance of offline market penetration, and it has been building logistics network Cainiao and heavily investing in group-buying site Meituan as well as micro-blogging server Sina Weibo.

Zhang Yang contributed to this story and can be reached at yangzhang@chinadailyusa.com

hewei@chinadaily.com.cn