Alibaba, Ant Financial form JV to invest in China’s O2O service
Alibaba Group and its financial affiliate Ant Financial plan to invest nearly $1 billion in a joint venture that will tap into China’s local online-to-offline (O2O) services market, initially focusing on the food and beverage segment.
The JV, called Koubei, will receive contributions of RMB3 billion ($483 million) from each of the companies and they will hold 50% apiece of the business. Samuel Fan from Ant Financial's payments unit will become CEO of the JV.
Koubei start out by targeting offline food and beverage businesses, with Taodiandian, Alibaba's food ordering and delivery online platform, being moved under the Koubei brand. Ant Financial's offline merchant resources will become a core part of Koubei's operations, Alibaba said in a statement.
Over time, Ant Financial's merchant services in the areas of offline retail, healthcare and vending machines will be added to help Koubei expand into other service segments.
"Consolidating our resources under Koubei allows us to capture opportunities that navigate both the offline and online markets," Fan said.
Koubei will only serve as a platform to connect merchants and consumers. Users can access Koubei through Ant Financial's Alipay Wallet and Alibaba's Taobao mobile apps.
Food-ordering and restaurant-booking platforms enjoy a prominent position in China's O2O universe. According to consultancy iResearch, food will represent one of the largest vertical segments of the O2O market by 2015, with 300 million customers and a value in excess of RMB270 billion.
Alibaba's rival Tencent Holdings has built up strong alliance in this space. Earlier this year, Tencent participated in a $350 million Series E round of funding for food-ordering platform Ele.me. Other investors included CITIC Private Equity and Sequoia Capital, as well as online retailer JD.com.
Tencent is also a significant strategic investor in Dianping, one of China's most popular sites for restaurant reviews and group-buying services. Dianping, which raised $850 million round of investment two months ago, has also committed capital to Ele.me and its industry peer Meican.com.
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