Tencent takes a 15% stake in JD.com to take on Alibaba

Tencent takes a 15% stake in Chinese online retailer JD.com to take on Alibaba

Chinese Internet giant Tencent, which is best known for its wildly popular messaging service WeChat (known as Weixin in China), has officially combined its e-commerce operations with online retailer JD.com, after rumors last month hinted at such a move.

The two companies have inked a strategic partnership that will see JD tap on Tencent's significant mobile and Internet user base — WeChat, for example, has 272 million monthly active users– and Tencent will be able to leverage on JD's e-commerce services. As part of their cooperation, Tencent will support JD in its e-commerce business by offering priority access points in its chat platforms, WeChat and mobile QQ, as well as provide support from other key platforms.

Tencent will initially hold a 15 percent stake in JD upon the completion of this deal, which Bloombergpins at $214.7 million, and it will further subscribe at IPO price for an additional 5 percent of JD on a post-IPO basis. JD just filed for a $1.5 billion IPOin January this year.

In the meantime, JD will acquire 100 percent interests in Tencent's e-commerce businesses — including QQ Wanggou and Paipai marketplace, logistics assets and personnel, as well as a minority stake in Tencent's e-commerce site 51Buy.com(known as Yixun in China).

Both companies will also cooperate on online payment services, as they seek to improve the online shopping experience of customers. WeChat in China has already integrated payment options, and the partnership will no doubt give more emphasis to that.

Martin Lau, the president of Tencent, says: "Our strategic partnership with JD will not only extend our presence in the fast-growing physical goods e-commerce market, but also allow us to better develop our enabling services such as payment, public accounts and performance-based advertising network to create a more prosperous ecosystem for overall e-commerce activities on our platforms."

Tencent has been thirsty for success in e-commerce as it seeks to tap on its large userbase from its social platforms, especially WeChat, seeking to come up against Chinese e-commerce giant Alibaba.

A combination of Tencent and JD's e-commerce businesses will no doubt lead to a stronger push for e-commerce on WeChat. It's still an early start to the year, but Tencent has already been taking steps to boost its e-commerce presence on WeChat via a $50 million investmentin 'China's Yelp' announced yesterday, as well as a logistics deallast month.

Tencent and JD's partnership can be viewed as waging war on China's e-commerce stalwart Alibaba — and it will pose a huge threat to the latter, which is already stepping up its mobile social efforts. Alibaba's CEO Jonathan Lu has pledged to continue the e-commerce giant's string of big investmentsas it continues focusing on improving its services for mobile – and the company has launched mobile gamesand upped efforts to promote its chat app, woo mobile shopperswith free data and even give away free smartphonesto retailers in China.