Alibaba’s record-breaking US IPO may give the impression that the company has the e-commerce market in China sewn up, but there are plenty of fast-growing competitors with an eye on disrupting the top dog. Koudai Gouwu (known as Pocket Shopping in English) is one such company, and it just announced a significant $350 million Series C funding round, as Technode first spotted.
Notably, the round was led by Tencent, Alibaba’s biggest rival, which put in $145 million. Other investors included Tiger Fund, H Capital, Vy Capital, Falcon Edge, and Yuri Milner’s DST Group. Koudai Gouwu did not reveal what valuation the round was made at, or how much equity was exchanged.
Koudai Gouwu is a mobile-focused shopping marketplace that lets merchants sell direct to buyers, it earns revenue from fees for lead generation and sales commissions. It also integrates with WeChat, Tencent’s mobile messaging services that dominates China and claims 438 million monthly users worldwide, to enable retails to set up accounts and use the service to market their products.
That WeChat hook-in provides a potentially huge platform for sales, and is no doubt the reason Tencent has keenly backed the company. While it has dominated the Chinese internet space with its QQ messaging service for desktops and WeChat (known as Weixin in China) on mobile, Tencent has struggled on e-commerce, that explains its 15% investment in JD.com earlier this year, and now its interest in Koudai Gouwu.
Tencent integrated JD.com into WeChat this summer, super-charging its potential reach and sales. JD.com listed on the Nasdaq in May and is the nearest challenger to Alibaba, so grabbing equity in Koudai Gouwu in addition furthers Tencent e-commerce position with a focus on mobile and a company that already plays nicely with WeChat.
Interestingly, as Tech In Asia points out, there’s been speculation in China that Koudai Gouwu actually generates more traffic on mobile than Alibaba’s flagship Taobao service. While that may not be accurate, the fact that the service is laser-focused on mobile plays on Alibaba’s biggest weakness.
Alibaba’s gained supremacy in China’s e-commerce space through PC internet users, but, as is the case with Google, Facebook, Twitter and others, it was born before the mobile era and has had to roll out new initiatives and programs to adapt to changing times. Tardy to the mobile messaging race, Alibaba launched its WeChat-rival Laiwang last year, while it led a $250 million investment in US-based chat app Tango and has put resources into building its own mobile operating system, a smart TV platform, a mobile gaming platform and — most recently — Amazon-like services for developers.
All of these investments are works in progress — with differing levels of success so far — but the idea is generally to connect Alibaba’s e-commerce empire to entertainment and communication platforms that people use daily. Channeling these services can help deliver traffic, users and sales, in theory at least.
Having established WeChat — which has become the de facto social network in China — and other daily touch points with internet users in China, Tencent is coming from the opposite angle: it needs e-commerce services to plug into its platforms. Hence this investment in Koudai Gouwu is an important marker for its retail ambitions.
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