(Yicai Global) March 29 -- E-commerce behemoth Alibaba Group Holding plans to invest USD171 million in Qutoutiao, an artificial intelligence news service that operates in China's third-tier or lower cities, via a convertible loan.

Alibaba will issue a three-year loan to the Shanghai-based firm, Qutoutiao said in a statement yesterday. At the end of the term, Alibaba can choose to waive the 3 percent interest and swap the principal for equity in the content provider at USD15 per American depositary share, giving the investor a roughly 4 percent stake.

Qutoutiao lost over CNY2 billion (USD300 million) last year, extending a CNY95 million loss from the previous year despite nearly sextupling revenue to CNY3 billion, according to its unaudited report for 2018. More than 70 percent of Qutoutiao's users live in small- and medium-sized Chinese cities, and women make up around 60 percent of those users, according to public data, which many believe is a sign of low spending power among its target audience.

But Chief Financial Officer Wang Jingbo thinks otherwise. Their spending power is not as low as some may imagine, he told Yicai Global in an earlier interview. They seem poorer because they have less daily pressure -- they have plenty of time to read and money to spend, he said.

The platform was built in 2016 and already has backing from gaming and internet giant Tencent Holdings, smartphone maker Xiaomi and state-backed news agencies The Paper and People's Daily Online. Tencent holds a 7.2 percent share while the others hold less than 1 percent each.

Qutoutiao was also one of only three companies with over 10 million users to triple its user base last year, Wang added, naming the others as rival Jinri Toutiao and Pinduoduo, an e-commerce platform.

He also said the firm will be focusing on content, algorithms and social factors as keys to success in 2019. Qutoutiao believes improvements in these areas will help the firm expand and strengthen its market position, he added.

Editor: James Boynton