Alibaba's acquisition of NetEase - Koala.com

Recalling the original words of Ding Lei: "I hope that in the next three to five years, Netease kaola overseas shopping can reach 50 billion to 100 billion, and create a NetEase in the e-commerce battlefield." This dream is finally shattered. Although many Koala users said it is difficult to accept, it is still coming. The price tag has been negotiated, 2 billion US dollars, Alibaba wholly-owned acquisition of NetEase Koala, another transaction, Alibaba investment of 700 million US dollars investment Netease cloud music also finalized at the negotiating table.

The Koala was sold to Ali, the giant of cross-border e-commerce, and the pattern of cross-border e-commerce in China began a profound change from this Friday. "If the Netease Koala is bought more and more, the future battlefield is another scene..." Cui Dabao, the founder of the node finance, commented. What will happen in the future, the three ellipsis following this sentence are meaningful. "Concealed for a month, and finally hammered." A Baidu employee commented on the dust of the acquisition.

"Friday official announcement, Zhang Lei walked, Liu Yiman took over as CEO." For the news of Ali's acquisition of Koala, the media circle has been rumored, everyone knows before the official announcement. Who is the new coach? Disclosed that insiders said that the future CEO of Koala may be Liu Yiman, who is currently the senior director of Tmall International Commodity Center. The report is directed by Liu Peng, general manager of Tmall Import and Export Division.

Recalling the original words of Ding Lei: "I hope that in the next three to five years, NetEase Koala overseas shopping can reach 50 billion to 100 billion, and create a NetEase in the e-commerce battlefield." This dream is finally shattered. Zhang Lei used to be a heavy responsibility for Ding Lei. He is optimistic about the new dividend of cross-border e-commerce. Zhang Lei is the CEO of Koala. “From decision-making to research, the whole process is one week.” With an e-commerce stormtrooper, Zhang Lei ran out of the bonded warehouse in a week, and the product began a beta test three months later. Zhang Lei, who can take the lead, has not waited for Kollah’s 100 billion-scale tomorrow, and 2 billion US dollars will be sold to Ali. This means that Zhang Lei’s mission may also depend on one paragraph.

In addition to the high-level changes, the entire Koala has long been heart-wrenching. “What about options? How many people will be cut?” The workplace social platform is discussed every day. Ding Lei once promised on August 20th that he would appease the employees of NetEase Koala employees. The layoffs will not happen in a short period of time. In the future, the Koala will remain independent. According to sources, the price of 2 billion US dollars is not a cash transaction. Ali may pay in part of the stock plus some cash. Therefore, the options held by the Koala employees may be converted into Ali stock.“Congratulations to the official upgrade of the Koala staff to become Ali employees.” In the anonymous area, someone responded: “I might be optimized if I didn’t sit hot,” and others said, “They won’t cut you, it will make you feel uncomfortable. Go." However, the personnel changes have been laid down before the acquisition of the case. According to "China Entrepreneur", since the beginning of this year, there have been people leaving the middle and high level of various departments of Koala. In addition to the newly recruited employees this year, the managers at the management level have already left.

A new wave of looting and job-changing wars has also begun. In the meantime, Koala employees have switched to other big factories. One of the Koala employees has exposed the offer of Microsoft: "No matter what the Koala is, it has nothing to do with me. Netease will never see you again!" Some colleagues at NetEase have a better affiliation. One employee of Netease said that he cried when he was cooking in the cafeteria, saying that he was very envious and blessed to his colleagues. A number of HRs have thrown olive branches for Koala employees. The HRBP of the future market, Hu Zhenzhen, released the status on the pulse: "Want to marry the Koala's classmates!! How can I summon it??", the poisonous HR Chen Gong is also promoting for himself: "The Koala's classmates are It is not possible to see it, Fan Trends is a unicorn poison."

On the one hand, the news of colleagues leaving, on the one hand, the invitation of headhunting and HR, there are still many Koala employees who choose to wait and see and wait. After all, it is a place where youth and blood have been paid. An internal employee who is still working revealed that the Koala is already changing the LOGO and copywriting. Investing in the network asked NetEase public relations, the other party did not explicitly respond to the LOGO and copywriting issues, but stressed that the Koala will not be renamed: "Koala will continue its brand independent operation." "Can you be a little bit faster, just like Ling Chi." An employee has been appreciating the acquisitions that have been twists and turns, and nowadays, the acquisition has finally been nailed, and wherever the future is going, many people are still thinking about it.

The second child ate the boss, and the cross-border e-commerce changed dramatically. Under the catastrophe, how the turmoil at the grassroots level cannot prevent the determination of the top. "Netease's philosophy is that we don't chase the wind, but we must take advantage of the trend and seize the right time." Ding Lei summed up the style of Netease, and the "potential" of cross-border e-commerce is also in the eyes, the pit of Koala Ding Lei is also very clear in his heart. It seems that the Koala has a beautiful transcript. According to the report of China's cross-border e-commerce market research report published in the first half of 2019, NetEase Koala ranked first in the domestic cross-border import market with a market share of 27.7%, ranking first in the market for the fourth consecutive year. Tmall International, Haicang Global, and Vipshop will be followed by 25.1%, 13.3%, and 9.9%, respectively. During the 618 period, Koala also became the most popular Haitao platform for users, and the reputation index of Internet word-of-mouth also occupied the first place.

In fact, the Koala has dragged down Netease's revenue. In Q2 2019, the gross profit margin of NetEase's e-commerce business was only 10.9%, which was 10.2% and 10.1% in the previous quarter and the same period last year. Looking at Ali's other businesses, the game business has a gross margin rate of 63% and an advertising business of 55%. Koala has significantly lowered the overall gross profit margin. The net interest rate considered is not only low but also has been falling. From 2016 to 2018, Netease's net profit showed a sharp decline in the curve: 11.605 billion yuan, 10.708 billion yuan, 6.152 billion yuan. Net profit in 2018 decreased by 42.5% year-on-year and returned to the level of 2015. The growth rate is also declining. From 2018, the growth rate of e-commerce business continued to decline in the sixth quarter, falling from 25% in 2017 to 20.2% in Q2 this year.

CFO Yang Zhaoyu said clearly before: "The e-commerce business needs to strike a balance between growth rate and e-commerce profit model. Netease's business philosophy does not support the use of no loss to exchange for rapid growth." The implication is that you won't sit and watch the Koala continue to burn. The problem is that Koala has spent a lot of money and still lacks control over the supply chain, especially in cross-border supply. In global sourcing, Koalas do not have the ability to talk directly with some brands, and can only negotiate with local authorized marketers. Once a marketer is working on a product for self-interest, the platform is generally not directly discoverable, and can only wait for consumer complaints.

Koala occupied the first place in cross-border e-commerce in China, Tmall International took the second place, and the boss sold it to the second child. After the acquisition, Ali’s cross-border e-commerce accounted for more than 50% of the domestic market, and it occupied half of the country. . Some analysts said that Ma Yun is making a big move in the next step. In recent years, Ma Yun has been pushing eWTP's global e-commerce platform. For this year, he flew dozens of countries and visited heads of state and business leaders. The acquisition of Koala is also one of the steps to improve Ali's cross-border e-commerce strength in China. In addition, one of the biggest value of the acquisition is the defense of the fight. Earlier, it was revealed that there was a lot of effort and cooperation with Koala, but it was not realized. Once Ali acquires Koala, it can integrate the industrial chain, improve the Koala's ability in the supply chain and logistics, and input more traffic support for the Koala. Once the Koala is backed by Ali, there is hope for a further step in the acquisition of flow and utilization and the expansion of categories.

In the cross-border e-commerce field, instead of investing more money and arranging for Ali, playing a game with no chance of winning is worse than a strong alliance to find a good destination for the Koala. Ding Lei calculated an account and finally decided to sell. With Ali’s $2 billion acquisition of Koala and a $70 million news report from Netease Cloud Music, the intergenerational alternation and pattern changes in China’s Internet have emerged from the water. On the morning of September 6, a senior e-commerce reporter sighed on social media after learning that the Koala trading rumors turned out to be true. I really didn't expect to see a day when Ali and NetEase joined forces in my lifetime.

On the one hand, Ali does not actually need Koalas at all – the first cross-border import retail e-commerce market is very small, and the second ali has been hungry for traffic rather than e-commerce. It must be pointed out here that the Koala is not a traffic asset that some viewpoints think, but cloud music is. In 2013, after Ali acquired the shrimp music, he once invited Gao Xiaosong + Song Ke's industry luxury lineup to want to do something for himself. However, it is hard to say that the way to do entertainment products and content industry is still difficult to say. By 2019, after the recent organizational restructuring, Shrimp Music was moved out of the big entertainment system and entered the innovative business group, which is almost equivalent to listing. But this is not to give up the music track. On the contrary, Ali has always been interested in the business that can contain Tencent. Music and the traffic behind it are obviously an important part of it. This is what Ali really wants.

On the other hand, many TMT reporters and observers who continue to track Ali, NetEase and other Chinese Internet giants have said that this transaction rumor first appeared. Because Ma Yun and Ding Lei have complaints, eBay, VIE, Yahoo China and other events have made Ali and Netease even different in their main business. In the past decade, the two giants have hardly reached strategic cooperation, let alone investing in shares.

However, during the Wuzhen Summit in 2018, I never participated in Ding Lei's dinner. In 2017, I still said that "(Ding Lei dinner) no one invited me, invited me not necessarily have time", Ma Yun, but in front of many media shots Ding Lei sat down to talk about Jin Yong, and also ate the snacks carefully selected by Netease, and was willing to "stand the platform" for Ding Lei's competing e-commerce business. Now it seems that the Wuzhen dinner of a year ago is enough to prove the easing of the relationship between Ali and Netease, which paved the way for the highest level of today's Koala transaction. Although Ma Yun was older than Ding Lei, Ding Lei became famous as the richest man in China by the Internet. This was before Ma Yun, when Taobao had not yet opened the printing machine model. Over time, Ali has become one of the best in China's Internet, and Netease's market value today is not as good as the four years since its establishment. Ding Lei's own angel investment has been much more, let alone Netease's biggest rival in the game business, Tencent. Netease's second quarter earnings report for 2019 shows that the game still contributes 60% of the company's revenue.

As the main business of Netease games, although "Wild Action" in Japan and other overseas markets performance is acceptable, but since the "Yin Yang Shi" burst in 2016, Netease games have not yet succeeded in the most important domestic market. Explosive works. In fact, the game industry's stagnant growth in recent years has made Tencent Netease quite difficult. However, Tencent's diversified business structure and strategic advantages make it more tolerant of the downside environment and regulatory tightening risks than NetEase, and it is a strong attack on the to B business based on the to C content industry.

On the other hand, after Netease entered the mobile era, the pioneering innovation direction outside the main business of the game chose e-commerce that not only invested heavily, could not be profitable in the short term, and the competition was already fierce. More importantly, the game itself is not a purely forward traffic service. It consumes traffic itself in the process of continuous realization, and the e-commerce is most lacking in traffic. If the carefully selected NetEase mailbox business can continue to provide traffic, then the logic of e-commerce is established. However, the development experience of the mobile Internet era proves that it is good for the mailbox to hold the existing traffic for NetEase. In the face of video and other modes, it is impossible to snatch new traffic.

Tencent's games and music are more than twice the size of NetEase's benchmarking business. Under these strong pressures, Ding Lei chose to take advantage of the cloud music to Ali's attractive home Koala, and said that "will continue to promote the focus strategy, Focus resources on areas of strength." The next thing how things will develop is obvious: after the transaction is completed, Cloud Music will have more funds to buy content copyright, while Ali, which has a commercialization capability, will help cloud music. One wants to sell off-risk assets to focus on the main business, and one is eager to focus on every opportunity to acquire flow assets. From this perspective, Netease sells Koala "Lian A Anti-Teng". For Ali, on the occasion of the 20th anniversary of Ma Yun’s retirement and Siqing, if the commercial old-fashioned grievances can be settled, this investment and merger case is also a gift.

Two key points worthy of attention are that the Koala brand will continue to operate independently, and Netease still enjoys the absolute controlling interest in Netease Cloud Music. NetEase official explained to Tiger Sniff: "The two investments are independent of each other and are not preconditions for each other." NetEase official said to the "Blue Hole Business" that the Koala brand will not be renamed. In the future, it will operate in parallel with Tmall International and implement dual-brand operation. The new CEO of Koala will be concurrently served by Liu Peng (flower name: Owen), general manager of Tmall Import and Export Business Unit. At the same time, it is revealed that the new office of Koala is in the Alibaba Riverside Park. "Across the road, you can get through a zebra crossing."

"This is in line with Netease's strategic choice in the new era, which is conducive to the long-term development of all parties." Netease CEO Ding Lei said. The trading rumors began on August 15th and reached its climax on August 20th, at the sunset on September 6. On the afternoon of August 20th, a conference was held at the Netease headquarters in Hangzhou. The level of participants was above the director level and no mobile phones were allowed. It is precisely at this meeting that Ding Lei once said that the Koala will continue to operate independently.

After that, it was a ten-day negotiation wheel battle, and it was also a time to witness Ding Lei’s ability to trade. Ding Lei, the trader, is a little childish, and a baby face often laughs. He has a lot of interesting stories with his own sub-attributes. People who have read the paragraph often smiled, neglecting Ding Lei’s business vision and mobility, forgetting that he reached the top of China’s richest man at the age of 32, and even underestimated this “invisible champion”.

At this moment, it may be timely to look at Ding Lei’s “Celebrity Evergreen”. He believes in the theory of books - the ability to beat competitors is because they constantly ask themselves: how to improve themselves and make tomorrow better than today; forward-looking companies often do not have great ideas from the beginning, but must have core values and A sense of mission that transcends money. In the 22 years of starting a business, Ding Lei never pursued the trend, and did not rely too much on dividends. The products follow the ingenuity and strive to follow the trend and do the right thing at the right time.

The decision to sell Koala is like Ding Lei, who resolutely resigned from the Ningbo Telecom Bureau more than 20 years ago. As Ding Lei’s former entrepreneurial partner commented: “Ding Lei is a person who knows where the money is, and has a strong inner heart that the outside world cannot imagine.” In the Tao Te Ching, "the good is the water," and the water is shaped by the shape. Perhaps a few years later, even a dozen years later, it will prove that for Ding Lei and NetEase, this is a smart choice.