This is a Guest Post by AK of Fallible
Google (GOOGL) recently invested $550 million into Chinese online retailer JD.com (JD). But what’s the reason for this? How does it benefit the two companies? We explain it in the video above!
JD.com is basically China’s Amazon (AMZN), but it’s a supercharged version. JD owns its entire logistics chain, unlike Amazon, and is able to deliver packages must faster than Amazon can. JD is also the number one most trusted e-commerce website in China. In addition, it’s undervalued with a price to sales ratio of close to 1, whereas its nearest competitor, Alibaba (BABA) has a price to sales ratio of almost 14!
The CEO of JD.com, Richard Liu, is also a big factor in the company’s success. Richard came was born into a family of poor peasant farmers and built JD from the ground up. His work ethic has pushed the company forward since day one.
The partnership with Google helps JD because the company will be able to sell their products directly through Google Shopping. JD has been trying to expand out of China and into the US and Europe and this partnership with Google should help. And of course JD’s products will now show up higher in Google’s search now that they are partners.
The partnership also helps Google because it gives them a way to compete against Amazon. The recent trend of companies has been to move their advertising dollars away from Google and towards Amazon. The reason for that is because Amazon is in a powerful position by being directly at the point of sale for the customer. And when a customer is already looking to buy, ads have a much larger impact on them.
To learn more about why Google is making this investment in JD, watch the video above!
And as always, stay Fallible out there investors!
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