Google to invest $500m in JD.com and help it launch products outside China

Google headquarters in Mountain View, United States / Photo credit: bennymarty / 123RF

Most of Google’s services are still banned in China, but the US tech behemoth is trickling into that market in various other ways. Today, it announced that it’s pouring US$550 million into ecommerce powerhouse JD.com as part of a “strategic partnership” between the two.

Under the deal, Google and JD plan to jointly develop a range of online shopping solutions in regions outside China – specifically, Southeast Asia, the US, and Europe. JD will start selling products through the Google Shopping platform, an aggregator for ecommerce sites based on product search.

The duo said they will leverage each other’s expertise – JD’s supply chain and logistics network and Google’s tech clout – to build these services.

Ker Zheng, marketing specialist at Azoya, a Shenzhen-based cross-border ecommerce solution provider, thinks that the deal can boost Google’s search revenues, drawing more users away from platforms like Amazon and JD’s Chinese rival Alibaba. “Ecommerce is a big contributor to search revenues for Google and Baidu,” he says.

He points out that the longer users spend searching within sites like Alibaba and Amazon, the less they use search services by Google and Baidu. Working with JD could be a way for Google to get some increased search traction from ecommerce customers.

The similarity of JD’s model to that of Amazon makes JD a safer bet for Google, observes Benji Lamb, director of ecommerce agency GMA. Having its own inventory and logistics network allows for better quality control.

“JD has higher operating margins than Alibaba. And in an evolving market, emphasis will naturally be placed on quality control. Google evidently values this highly – it signifies greater confidence in JD’s stock holding model as a competitor to Alibaba,” he says.

Lamb also thinks that Google is interested in learning from JD’s success when it comes to building its own shopping platform.

Valued at US$65 billion, JD has made some headway into Southeast Asia, specifically Thailand and Indonesia, extending its competition with Alibaba.

It has also partnered with Walmart to sell products by the US retailer on its online platform. “JD, Walmart, and Google working together would be a good combination against Amazon because they can probably source goods at a lower price,” notes Zheng.

Back to China

Among its other forays in Southeast Asia, Google invested in Indonesian ride-hailing unicorn Go-Jek earlier this year, joining its US$1.2 billion round in which JD also participated.

In China, Google has nowhere near the reach it has elsewhere with its suite of services, which range from search to maps to Android phones, and so on. However, it has been increasing its presence in the country through other avenues.

China is still a significant growth market for Google, and the company is investing major resources in this, says Daniel Ives, chief strategy officer and head of technology research at GBH Insights.