Google chooses Alibaba’s rival to invest in e-commerce

6 years ago - Published in Finance

Google said Monday that it will invest $550 million in Alibaba’s main rival JD.com as the U.S. tech giant seeks to expand in fast-growing Asian e-commerce markets.

Under the partnership, JD.com products will appear on Google’s shopping service, giving JD.com access to consumers outside Asia, while Google can apply the Chinese e-commerce company’s supply chain and logistics expertise to its technology.

Google continues to play the long game for Southeast Asia (SEA) and wants to ensure that they have partners that can assist them access wallet share from daily activities like ride-hailing (it has a shareholding in Go-Jek) through to shopping. Southeast Asia has seen the Chinese behemoths like Tencent, Alibaba and to a lesser degree, JD.com go head to head with Amazon and Google for investments as well as partnering with startups from the SEA region.

Google is not a prolific e-commerce investor and this JD.com partnership is aimed at their largest competitor, Amazon. Google is not the place where customers start their e-commerce search or a place where customers can easily purchase products in a frictionless manner. According to Survata, 49% of customers start their product searches on Amazon, which means that those searches are off Google’s search index and thus they cant monetize it.

It was not clear if the partnership was the American company’s latest attempt to make a foray into China, where its major services, including email and its search engine, are blocked.

The two companies, however, will jointly develop retail solutions in Southeast Asia, the latest battlefield among global online commerce giants such as Alibaba, JD.com and Amazon. Southeast Asian consumers are forecast to spend $88.1 billion online by 2025, according to Google.

JD.com provides Google’s Shopping with products in markets in which Amazon is either market leader (the U.S., Europe) or a follower (in Southeast Asia). Google is in a position in that it makes billions from advertising so this partnership won’t move the needle for Google’s topline revenue. On the other hand, this partnership is increasingly becoming important for JD.com.

JD.com is China’s second-largest e-commerce company after Alibaba. It counts Tencent Holdings, the developer of the WeChat messenger app and a key rival of Alibaba, as its investors.

Google will receive 27.1 million newly issued JD.com Class A ordinary shares as part of the deal.