What's going on?
On Monday, Google announced it’s investing $550 million in JD.com, helping the stock of China’s largest online retailer to rise by 2% (tweet this).
What does this mean?
Google’s been shopping for… shops. Last year, it teamed up with Walmart to allow customers to order via voice. And last week, it announced a deal with France’s Carrefour, which lets customers buy groceries online using Google Home.
Now, Google’s planning to put JD.com’s merchandise on its shopping sites, which will help the retailer expand in Southeast Asia and beyond (most of Google’s services are blocked in China so it won’t be much help there). In the US, Google may hope JD.com will help it compete more effectively against Amazon: once upon a time, most shopping searches happened on Google – but nowadays over half begin on Amazon.
Why should I care?
For markets: Investors like JD.com’s global ambitions.
JD.com’s issuing new stock for Google to buy at a discount to the current share price – Google will be paying close to $40 per share while investors buying stock in the market would get a price closer to $45. Investors often enjoy a discount to the prevailing market price when a “block” of stock is sold, which usually causes the share price to fall – partly because it can suggest to investors that a stock was previously too expensive. Despite this, JD.com’s stock rose on Monday – investors were possibly encouraged by the company’s accelerating global ambitions.
The bigger picture: Google’s going big in Asia.
In February, Google invested in an Indonesian ride-hailing service, GO-JEK, as it raised $1.5 billion. Earlier in the year, it backed a trio of Chinese businesses: an esports company, a biotech firm, and a voice recognition startup. Then, last month, it launched an app that helps Chinese residents manage their online storage space. The company’s betting big on a growing Chinese middle class that’s likely to drive up consumer spending in the coming years.