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$3B For Alibaba’s As The Delivery Market Keeps Heating Up

Illustration of delivery boxes outside a door. [Li Anne Dias]

Morning Report: Alibaba announced that its local-delivery service is now $3 billion richer.

Shares of Alibaba are up this morning in pre-market trading after the Chinese Internet giant reported better-than-expected growth for the quarter ending June 2018.

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Alibaba disclosed revenue of $12.23 billion, just ahead of street estimates. The firm’s 61 percent revenue growth in aggregate was matched by  61 percent revenue growth in its “core commerce” group and surpassed by 93 percent growth from its cloud computing group. Alibaba recorded $710 million in cloud computing top line in the period.

Tucked into the numbers, however, was a startling note regarding one of its recently-acquired components., Alibaba’s self-described “on-demand delivery service,”  is flush with new investment, some from outside the company. Alibaba notes in its earnings report that it “completed the acquisition of” in May of this year, calling the service “one of the leading online food delivery platforms in China.”

Alibaba describes the “local services” work that executes “core” to its business.

And that’s not idle chat. Alibaba goes on to detail that has picked up $3 billion in new funding, including capital from its parent company:

We have established a company to hold and Koubei as our combined flagship local services vehicle, which we plan to separately capitalize with investments from Alibaba, Ant Financial and third-party investors. As of the time of this announcement, we have received over US$3 billion in new investment commitments, including from Alibaba and SoftBank. As a result of this reorganization, subject to closing conditions, we will consolidate Koubei, which would result in a material one-off revaluation gain when the transaction closes.

So, Alibaba has created a new company that it will partially own, along with external investors. And, the new company has picked up $3 billion in new investments, including money from the ever-present SoftBank.

That’s a lot of cash, and that’s an impressive investor list.

The global local-delivery market is huge. Uber is in the space. Didi is in the space. Meituan-Dianping is in the space. Postmates and PedidosYa and Rappi and Mercadoni and Caviar and DoorDash and Deliveroo and others are in the space, too.

Of course, is pitted mostly against domestic competition like Meituan, but it’s working a crowded global market all the same. And it’s an expensive race, likely replete with heavy burn rates and slim margins. Happily, for Alibaba, it has now moved impending losses to a separate company that it won’t have to report in its operating results.

These are wild times replete with unlimited money and zero fear. What a time to be alive.

Top Image Credit: Li-Anne Dias

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