NetEase Kaola and Alibaba Group made a thrilling announcement that could change the cross-border e-commerce landscape in China.
A multi-million-dollar acquisition
NetEase Kaola has been acquired by the Alibaba Group for a whopping $2 billion. The platform will now be integrated within Tmall, the international-focused e-commerce platform from Alibaba, which will now become the largest such business in China. Media reports have been suggesting a possible acquisition between the two companies for weeks and today’s announcement cemented the deal. Reports also suggested that talks were sabotaged last month when the two companies couldn’t agree on the transaction details.
According to the terms of the deal, Kaola will continue to work as an independent business. However, its CEO Zhang Lei will be replaced by Alvin Liu, the Import and Export general manager at Tmall. Note that Tmall Global is the largest cross-border e-commerce platform in China holding 31.7% market share, followed by Kaola, which commands 24.5% market share. With this deal, Amazon China, VIP International, and JD Worldwide will be left far behind in the competition. Interestingly, Amazon China was reportedly trying to woo NetEase to merge Kaola with its local business.
Good news for NetEase
Alibaba founder Jack Ma will be investing $700 million into NetEase Cloud Music via Alibaba and his investment firm Yunfeng. With the latest fundraise in the music streaming service, NetEase will continue to be the controlling shareholder while Alibaba will hold a minority stake.
William Ding, the CEO of NetEase wrote in a press release that Kaola was a strategic fit into the Alibaba ecosystem. With this deal, Kaola will continue to bring their import services to the users, while NetEase will find space to grow. Alibaba Group CEO Daniel Zhang also commented on the acquisition and said that the import e-commerce market is still in its nascent stages and comes with explosive potential for growth.