China’s Great Wall of e-Commerce Just Got a Whole Lot Bigger with Wanda Deal

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Three Chinese billionaires are partnering to take on Alibaba as it prepares for what may be the largest IPO ever. 

Wanda Group, China’s largest commercial land developer, Tencent Holdings and Baidu, will create a 5 billion yuan ($813 million) joint venture e-commerce company, “Wanda E-Commerce Company” that Wanda will control 70 percent of. The venture marries Tencent’s WeChat social messaging network, Baidu’s search engine prowess and Wanda’s 40 hotels, 49 commercial holdings and 40 department stores in a Chinese market that is already home to the world’s biggest e-commerce operations, which are projected to hit $395 billion by 2015

“It’s a very interesting battle to watch—three top rich people join hands to challenge another bigger billionaire,” Cao Lei, director of the China E-Commerce Research Center, told Bloomberg. “The new venture will not be an immediate challenge to Alibaba. Rome can’t be built in a day.”

Indeed, Alibaba is a lot to reckon with. In the last quarter, the company’s income rose to $1.1 billion, 42 percent higher than Amazon and eBay combined for the same period. Jack Ma, Alibaba’s founder, is China’s richest person with $21.8 billion, according to the Bloomberg Billionaires Index.[more]

The new joint venture, which will be headed up by Dong Ce, co-founder of online shopping site Jiapin.com, will become the world’s largest O2O (online-to-offline) e-commerce platform. “O2O is the biggest pie in e-commerce … this is just the beginning,” said Wang Jianlin, chairman of Wanda. 

“The three partners will further deepen collaboration on initiatives such as traffic sharing, media and advertising resources sharing, membership benefits, payment and internet finance, big data, etc.,” Tencent said. And while e-commerce may be the main focus, all brands involved have their hands in several major industries, from film and entertainment to gaming and publishing. 

In 2012, Wanda paid $2.6 billion for AMC Entertainment and last year brought A-list Hollywood celebs Nicole Kidman, John Travolta and Leonardo DiCaprio to China to announce plans for a massive $8 billion movie theme park in the city of Qingdao. However, Alibaba remains the one to beat with 29 deals totaling $16 billion since 2012, including a 10 percent stake in Singapore Post, Youku Tudou, Intime Retail Group and TangoMe. In July, the company struck a deal with Lions Gate Entertainment for a Chinese video streaming service.

“Alibaba still has huge potential for making money, mostly because of its mobile platform,” Li Muzhi, analyst at Arete Research Service, told Bloomberg. Smartphone users rose to 188 million in June, up from 163 million in March and mobile transactions accounted for 32.8 percent of Alibaba’s total in the June quarter, up from 27.4 percent in the previous three months.

—Sheila is a New York-based writer/producer, co-founder of Third Eye Media and an avid believer in the power of the media for change. Connect with her on Twitter: @srshayon

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