Google, Facebook, Amazon, and Apple are vying for dominance of the developed world’s internet industry, but it’s becoming clear that in China there are only two contenders: Alibaba and Tencent.
Tencent, China’s biggest internet company, carried out a complicated—if not unexpected—maneuver today with the purchase of a 15% stake in online retailer JD.com. As part of the deal, Tencent will essentially outsource its e-commerce operations to JD, which will take control of Tencent’s QQ Wanggou and Paipai e-commerce units, gain a minority stake in Tencent’s Yixun unit, and collect $215 million in cash.
Tencent’s deal means that Alibaba, China’s e-commerce market leader, now faces a beefed-up competitor to its dominant Taobao and Tmall marketplaces. Tencent-owned companies will also have the advantage of seamless integration with WeChat, a popular messaging app, which already offers everything from taxi-booking to banking services. Here’s how the Chinese market is divvied up:
Both factions in China’s internet war are looking for more funding to bolster their positions; both Alibaba and JD are planning initial public offerings in the next year. After JD’s IPO, Tencent has the right to acquire an additional 5% stake.