Alibaba Acquires NetEase Kaola for $2 Billion

(Source: Fantastic Graphics)

The case regarding where NetEase‘s cross-border e-commerce platform Kaola will end up has been closed, as Alibaba acquired the branch for $2 billion, according to the company’s press release.

Kaola will continue to operate independently under its current brand, with the general manager of Tmall, Taobao’s own cross-border branch, appointed as its new CEO. This move will likely create the largest e-commerce platform of its kind.

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“Alibaba is confident about the future of China’s import e-commerce market, which we believe remains in its infancy with great growth potential. We welcome Kaola to the Alibaba family and value NetEase’s contributions in incubating an e-commerce platform with strong import capabilities. With Kaola, we will further elevate import service and experience for Chinese consumers through synergies across the Alibaba ecosystem,” said Daniel Zhang, CEO of Alibaba Group.

Kaola and Tmall Global are China’s largest and second-largest cross-border e-commerce platforms, with a market share of 27.1% and 24.0% respectively, according to Iimedia. The union of the top two players will create a formidable opponent for competitors like JD Worldwide and Amazon China, challenging them in terms of size and market share.

“We are pleased to have found a strategic fit for Kaola within Alibaba’s extensive ecosystem, where Kaola will continue to provide Chinese consumers with high-quality import products and services. At the same time, the completion of this strategic transaction will allow NetEase to focus on its growth strategy, investing in markets that allow us to best leverage our competitive advantages. We remain fully committed to offering our users best-in-class and differentiated online content born from our relentless drive for craftsmanship and innovation,” said William Ding, CEO of NetEase.

Apart from the cross-border industry, Alibaba and Yunfeng, an investment firm backed by Alibaba’s founder Jack Ma, will invest $700 million in NetEase Cloud Music in its latest round of funding. Although the completion of this transaction is subject to certain closing conditions, this will give Alibaba a minority stake in the music streaming business while NetEase will remain as the controlling shareholder of NetEase Cloud Music.

“As the controlling shareholder of NetEase Cloud Music, we will continue to fully support the growth of this business, helping it to realize its strategic goals in the music industry,” Ding said.