Seeking Alpha
Foreign companies, long only, tech
Profile| Send Message|
( followers)  

E-commerce leader Alibaba (ABABA) is back in the headlines with its purchase of a stake in a Singaporean parcel delivery company, continuing its hyperactive acquisition spree that seems increasingly lacking in focus. Meantime, another e-commerce tie-up that I wrote about earlier this week has formally happened, with word that a new series of e-commerce channels run by JD.com (NASDAQ:JD) has begun to appear on one of the top screens for users of Tencent’s (OTCPK:TCEHY) popular WeChat mobile messaging service.

I had an interesting chat earlier this week with one of my tech contacts that nicely illustrates how the market sees the differing acquisition strategies of Alibaba and Tencent, China’s 2 largest Internet companies. In the case we discussed, Tencent was rumored to be on the cusp of a major acquisition of another Internet firm. But then days later Alibaba announced it was the actual buyer in the deal. My contact said that market watchers were probably hoping that Tencent would emerge as the buyer, reflecting its growing status as a preferred acquirer compared with Alibaba.

I’ve said before that Alibaba’s acquisition strategy is more lacking in focus than Tencent’s, which once again seems to be the case with Alibaba’s announcement that it will buy 10 percent of Singapore Post Ltd (OTCPK:SPSTF) for $250 million. (English article; Chinese article) Alibaba’s purchase price of S$1.42 per share is actually 8 percent less than the last closing price for SingPost’s shares before the deal was announced.

In terms of size, this is actually one of the smaller deals for Alibaba over the last year, as the company runs out of major attractive targets. Alibaba has also made purchases in the US, and across a wide range of Internet firms in its home China market. It previously said it was eying targets in the logistics and mobile spaces, and media companies also seem to be a recent new focus.

This Singapore purchase looks relatively logical, at least superficially. Singapore has emerged as a favored launch point for Chinese tech companies to expand abroad due to its wealthy consumers, good infrastructure, and proximity to other promising Southeast Asian markets. But the market’s small size means Alibaba probably won’t be able to build much of a business there. Singapore’s logistics are already quite advanced, meaning Alibaba probably wouldn’t even need this kind of asset even if it did decide to make a big push into the market. Thus all things considered, this deal doesn’t look too exciting and probably won’t bring much benefit to Alibaba.

Next let’s look quickly at JD.com’s latest development in its own tie-up with Tencent. The pair formed an equity tie-up earlier this year that saw Tencent buy 15 percent of JD, and the 2 companies merge their e-commerce business to create a major B2B player with about a quarter of the market.

Last month media first reported that Tencent was preparing to launch a series of JD e-commerce shopping channels on one of the top pages of its WeChat service, and new media reports say that that development has now occurred. (English article; Chinese article) The shopping channels appeared on WeChat users’ smartphones in Beijing and Shanghai, and look set to go live by the end of this month.

We’ll have to wait and see if users embrace these new shopping channels, since Alibaba hasn’t had much success to date using a similar tie-up with microblogging leader Weibo (NASDAQ:WB). But unlike Weibo, Tencent has a much better record for monetizing its social networking (SNS) assets. If this new JD tie-up proves equally successful to some of Tencent’s past similar initiatives, we could see the new shopping channels generating tens or even hundreds of millions of dollars in monthly sales by the end of this year.

Bottom line: Alibaba’s Singapore acquisition is unlikely to be very helpful to the company, while Tencent’s new WeChat shopping channel could generate significant monthly sales by the end of this year.

Editor's Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.

Source: Alibaba Eyes Singapore, JD Launches On WeChat