Chinese Firm Alibaba Bought NetEase’s Koala

Chinese e-commerce firm Alibaba recently bought NetEase’s Koala e-commerce platform. And the e-commerce giant acquired it for approximately $2 billion. Also, it invested in its music streaming service, forming a rare partnership between two of the largest Chinese internet giants.

After the deal, Alibaba hands as the biggest Chinese online marketplace for foreign brands after its Tmall Import and Export. Koala will now run independently. However, it will have a new chief executive officer Alvin Liu who was from Tmall. Separately, Alibaba and Jack Ma’s Yunfeng Capital will put $700 million into NetEase Cloud Music. Still, NetEase will stay as the controlling shareholder of its music app.

In addition to that, both firms compete with social media titan Tencent Holdings Ltd. across several fronts. Then, for Alibaba, the emergence of Tencent-backed rivals like Pinduoduo Inc. is testing its longstanding dominance of Chinese online retail. On the other hand, NetEase has always been the closest competitor of Tencent when it comes to gaming. And it expanded into music streaming, another area where Tencent leads. Then, Alibaba has its very own music app Xiami.

Alibaba and NetEase

Meanwhile, Koala is a cross-border e-commerce platform of NetEase. And the acquisition of Alibaba will make it as the go-to-channel for Chinese consumers looking for high-quality foreign products.

On the other side, NetEase selling its low-margin Koala platform will let the company concentrate on its bread-and-butter business.

Aside from that, the deal will make the Chinese multinational conglomerate the go-to place for consumers seeking imported goods. Alibaba and Koala together hold nearly 60% of the whole transactions on China-based platforms for foreign brands in the second quarter.

In November, NetEase Music raised $600 million after Baidu Inc., General Atlantic, and Boyu Capital participated. Also, its latest capital injection came following China’s antitrust authority launched a probe for its much larger rival, Tencent Music Entertainment Group. And it was over its content relicensing process.