POV: Google Invests In JD.com
Alphabet’s Google announced its agreement to invest $550M in Chinese e-commerce giant JD.com in efforts to broaden and expand its retail presence.
Details and Implications:
Google and China’s second-largest online retailer have agreed to form a strategic partnership whereby Google will invest $550M in exchange for 27 million newly issued JD.com Class A ordinary shares at an issue price of $20.29 per share.
As part of the partnership JD.com products will be included in Google’s shopping ecosystem, helping the e-commerce firm expand its presence into US and European markets.
JD.com’s investors include Chinese social media company Tencent Holdings, the rival of Chinese e-commerce leader Alibaba Group Holding.
Tencent operates China’s largest social media platform, WeChat, as well as offering digital payments and gaming services. JD.com sells direct to consumer via WeChat amongst other channels.
With JD.com’s supply chain/logistics skills, coupled with Google’s shopping service, product visibility and tech offerings, the two companies will work together to better personalize the shopping experience in a breadth of new markets and aim to create: “next generation retail infrastructure solutions, with the goal of offering helpful, personalized and frictionless shopping experiences."
The deal will allow JD.com to reach foreign consumers and businesses by seeing JD.com products listed through Google services and the deal gives Google a way into the Chinese market to offer ad services to the 170,000 merchants on the JD.com platform, who will now be able to advertise via the Google ecosystem in American and European markets
This partnership works both ways. It helps Google in its battle for online shopping presence against Amazon’s and it also enables JD.com and its merchants to reach new consumers outside China.
With Google recently unveiling Shopping Actions, which is now being used by Walmart, Costco and Target and has a revenue model based on taking a cut from transactions rather than ad clicks, access to JD.com’s portfolio of merchants is attractive and in time should definitely boost commerce revenue for Google outside traditional ad clicks.