Company / division: Alibaba
Chinese e-commerce giant Alibaba has announced that it will double its R&D spending over the next few years, with the main focus of its $15 billion investment in three areas: AI, the Internet of Things, and quantum computing. Though the Bloomberg piece here suggests this is another front in its competition with Amazon, the reality is that the two compete for very little business, mostly competing against other western and Chinese companies respectively in their major markets, with Alibaba dominant in China but negligible in the US. Rather, this is part of a much broader competition between big tech companies in aiming for leadership in several key new research categories, AI chief among them. That’s a competitive dynamic that has now taken on geopolitical overtones, with the US and China emerging as the likeliest leaders in AI, itself considered critical to future competitiveness in not just business but cyber warfare and other areas. Alibaba is, of course, already growing dramatically as a company, and the increase in planned R&D spending is therefore not wildly out of whack with its overall growth, but it makes for a great press release as the company seeks to burnish its innovation credentials.
Amazon Runs Big Kindle Sale on Rival Alibaba’s Site in China (Sep 22, 2017)
Amazon is running a big sale of its Kindle hardware on rival Alibaba’s site in China, a concession that it’s way behind its domestic competitors and needs to leverage their platforms in the country to achieve meaningful hardware sales. It’s a useful reminder that, for all Amazon’s dominance in e-commerce in the US and a handful of other markets around the world, it’s largely failed to break into China in a meaningful way. One big reason is the same of localization that’s plagued other big US tech companies in China, something that Apple has recently been trying to fix. Amazon has arguably done much better with localization in India, which this Recode piece suggests is going rather better for Amazon at this point than its foray into China. It certainly isn’t giving up on China just yet, but does seem to be more willing to acknowledge its failures there and pursue other strategies to achieve at least some of its objectives there.
Stripe Partners with Alipay, WeChat Pay (Jul 10, 2017)
Alibaba Announces $73 Voice Speaker (Jul 5, 2017)
Alibaba is launching a program to help US businesses sell to Chinese consumers through its website. It’ll hold a conference in June at which it will offer training on all the ins and outs of doing business both through Alibaba specifically and in China generally, and all this is by way of fulfilling a promise CEO Jack Ma made to Donald Trump back in January. The US currently has a massive trade imbalance with China – exports from the US in 2015 were $161.6 billion, while imports were $497.8 billion – so rectifying that balance is a key priority for the US administration. But much of the current export volume to China is in categories that would be a poor fit for a platform like Alibaba – soybeans come top, both consumer and commercial vehicles are also major contributors, and much of the rest is made up by other commercial and industrial products. The US sells very few small consumer goods of the kind well suited to a platform like Alibaba, so any contribution made by Alibaba to reducing the trade deficit is going to be far more symbolic than material. In addition, the complexity of selling into China, where foreign-owned businesses are severely limited, will make it a fairly unappealing proposition for most US-based businesses relative to selling into the massive market on their own doorstep. I suspect this will be just another example of a Chinese tech company struggling to bring its model to the US (just as almost all US tech companies struggle going the other way).
via USA Today
I’ve commented a couple of times in the last week or so on payments-related stories, and have talked abbot the relative immaturity and fragmentation that characterize mobile payments. But those comments were referring to Western markets, and the situation in China is very different, with massive adoption of mobile payments across several major platforms, and Alibaba has been one of the largest players. It has separated its payment activities into a separate entity, Ant Financial, which has been becoming more and more like a bank in its own right, and is now about to buy MoneyGram, a large global person-to-person payments provider. This is a rare example of a Chinese company buying a global player to extend its reach into other markets – it’s been much more common for Chinese companies to expand organically, and generally that hasn’t gone well.
Alibaba promises Trump it’ll create a million U.S. jobs, but don’t believe it – MarketWatch (Jan 11, 2017)
This is a great bit of analysis on the latest job creation claim from an industrial leader after meeting Donald Trump. In this case, Jennifer Booton points out that Alibaba is talking about indirect job creation in the US through a Chinese-based entity, not employing people in the US directly. But it’s another sign of both he need major tech firms seem to feel to engage with the incoming administration, and their understanding that they can ingratiate themselves with it by talking about job creation. I suspect we’ll see a lot more shaky claims about job creation made by big tech companies in the coming months and years.
This is a great overview of some of the significant investments the four major Chinese Internet companies have made in the US over the past few years. A few things stand out: Tencent has invested significantly more than the others, both in dollar terms and in the number of individual investments; California has received 79% of the total investments made, with most other states only capturing a small number of deals or none at all; investments appear to have peaked in 2016 and dropped in 2015 (though this analysis doesn’t capture the whole of 2016). A lot of the investments are in tiny companies you’ve never heard of, but there are some exceptions: Alibaba and Tencent in Lyft and Snap; Alibaba in ShopRunner, MagicLeap, and Jet.com; Baidu in Uber; and Tencent in Cyanogen. Most of these are small minority investments, but the overall number is significant – the big Chinese companies have been far more able and willing to invest in US properties than vice versa.
via CB Insights