Tencent, one of China’s largest Internet services companies and the maker of WeChat, and JD.com have formed a strategic partnership. The deal can potentially boost Tencent’s competitive position against rival Alibaba Group, which dominates China’s fast-growing e-commerce market.
Though it’s much smaller than Alibaba Group, JD.com is China’s second-largest e-commerce company, and made a total of $16.5 billion in sales last year. As part of the agreement, Tencent has agreed to take a 15% stake in JD, formerly called 360Buy.com, and also subscribe at its IPO price for an additional 5% when JD goes public. JD’s SEC filing says it plans to raise up to $1.5 billion with its IPO.
As part of the deal, Tencent president Martin Lau will join JD’s board of directors, JD will acquire Tencent’s QQ Wanggou B2C and PaiPai C2C marketplace businesses and a minority stake in Yixun. It also has the right to acquire the remaining stake of Yixun in the future. In return, Tencent will support JD’s e-commerce growth by offering access to users on Weixin, Mobile QQ, and other platforms it owns. Both companies will also work on an online payment service.
Its new access to Tencent’s resources and users is a huge boon for JD.com. Though JD.com has grown very quickly over the past year, it still trails behind Alibaba, with a 17.5% market share compared to the 51.1% held by its larger rival, says iResearch.
The two companies said in an announcement that Tencent will be able to leverage JD’s e-commerce services to enhance its user experience, while JD in turn will be get access to Tencent’s mobile and Internet user base.
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