Alibaba just threw $1 billion into the battle for China’s local services

Ecommerce titan Alibaba announced this morning that it’s forming a RMB 6 billion (US$970 million) joint venture company to focus on web-connected on-demand services, such as food delivery.

Alibaba is forming this joint venture, called Koubei, with its affiliate company Ant Financial, which operates the Alipay epayments system that’s integral to Alibaba’s ecommerce sites. Each firm will put in half of the capital and hold a 50 percent stake. The joint venture is “aimed at capturing opportunities within China’s local services market, with an initial focus on the food and beverage segment,” said Alibaba’s statement today.

Food ordering as it appears in Alibaba’s Taobao app.

The move seems designed to ensure that Alibaba’s large lead in ecommerce in China isn’t eroded as the concept of “ecommerce” broadens out to anything from ordering a pizza online to hailing a cab from an app. An array of startups have flourished in this online-to-offline (O2O) space in the past few years in China, such as Ele.me for food, or Didi Dache and Kuaidi Dache for taxis. Alibaba took a stake in Kuaidi Dache in order to have skin in the taxi-hailing app game, but the company is weaker in other O2O areas that are growing fast in the country, like on-demand beauticians, manicurists, cleaners, or car repair mechanics. The big investment in Koubei is designed to fix this.

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The Koubei site has in fact been running since 2004, initially as an independent startup that served as a search engine for local services in cities across China. Then it was snapped up by Yahoo China – which is actually operated by Alibaba. In 2009, Koubei was merged into Alibaba’s Taobao marketplace, where it remains to this day.

“The Koubei brand will be revitalized under this JV as a platform for local services,” Melanie Lee, a spokesperson for Alibaba, tells Tech in Asia. “Alibaba’s food ordering and delivery business operating under the Taodiandian brand [the on-demand section of Taoabao] will be injected into Koubei while Ant Financial’s merchant services in the areas of offline retail, healthcare, and vending machines will be gradually consolidated into the joint venture.”

Koubei will be accessible from the Mobile Taobao and the Alipay Wallet apps, Lee adds.