Alibaba Purchases NetEase Kaola For $2 Billion To Expand Cross-Border Commerce Business

Alibaba Group
A logo of Alibaba Group is seen at an exhibition during the World Intelligence Congress in Tianjin (Photo: Reuters / Jason Lee)

Chinese e-commerce giant Alibaba Group Holding is expanding its cross-border online commerce platform capacity with the purchase of a domestic competitor.

The company, founded by Chinese business mogul Jack Ma, announced that it has acquired NetEase Kaola for $2 billion.

Alibaba's purchase of NetEase Kaola is part of the company's plans to bolster its ability to serve local demand for products imported overseas. Alibaba's Tmall Global and NetEase Kaol were the country's first and second-largest cross-border e-commerce platforms.

The acquisition will essentially ensure that Alibaba controls the majority market share. Prior to the acquisition, NetEase Kaol held an estimated 24.5 percent of the market, while Alibaba held around 31.7 percent. With the acquisition, Alibaba essentially now holds more than half of the entire cross-border e-commerce market share in China.

According to a statement released by Alibaba, NetEase Kaola will still operate independently and will not be absorbed into the company.

However, the company will be assigning Tmall import and export general manager, Alvin Liu, as NetEase Kaola's new chief executive officer. Allowing NetEase Kaola to operate independently should allow it to focus on its already working strategy of leveraging its competitive advantages in the Chinese market.

NetEase's founder and CEO, Ding Lei, mentioned in a statement that he was pleased to have found a fitting partner for NetEase Kaola. Lei further elaborated that Alibaba's extensive ecosystem should help Kaola improve its ability to provide Chinese customers with high-quality import products and services.

Apart from the acquisition, Alibaba and NetEase also signed a separate deal that will involve a $700 million investment into NetEase's music streaming service NetEase Cloud Music. Private equity firm Yunfeng Capital, which is partly owned by Alibaba's Jack Ma, will also be participating in the investment.

Under the deal, Alibaba will become a minority stakeholder in the music streaming firm, while NetEase will remain as its controlling shareholder.

Alibaba Group's CEO Daniel Zhang mentioned in a statement that the acquisition of NetEase Kaola should allow the company to elevate its import service, resulting in a better experience for its Chinese consumers.

The Zhang believes that China's import e-commerce market is still in its infancy and there is still a lot of growth potential in the coming years.

Referencing the NetEase Cloud Music investment, Zhang stated that Alibaba is excited to be part of the future development of the service. The executive explained that Alibaba does have a lot to offer in terms of innovative collaboration to further develop the company and to make it a major player in the digital entertainment space.

© 2019 Business Times All rights reserved. Do not reproduce without permission.
Sign Up for Newsletters and Alerts