Alibaba and its Ant Financial group are reportedly heading up a $1 billion round of funding for Ele.me, a fast-rising player in China’s highly competitive market for mobile food ordering and delivery, according to a Bloomberg report.
Alibaba didn’t comment to Bloomberg about the Ele.me funding round, but the company is an existing investor in Ele.me, having helped contribute more than $1 billion in funding in April 2016, Bloomberg reports.
The new financing puts Ele.me’s total market value between $5.5 billion and $6 billion. The company’s biggest competitor is Meituan Dianping, which is backed financially by Tencent Holdings, which is also a minor investor in Ele.me.
News of this funding round comes not long after Ele.me and Meituan Dianping were rumored to be discussing a possible merger. If that was the case, this whopper of an investment likely would end any such discussion. It also would seem likely that Tencent would gradually back out of the picture as an Ele.me investor, though who knows?
If the food delivery market in China is both lucrative and competitive — Bloomberg noted it is one part of a potential $1.1 trillion market for mobile smartphone-initiated services — there may be a chance the huge rivals may not always be in competition.
The funding environment for food delivery startups in China certainly seems to be healthy. Ele.me's reported round dwarfs the $141 million that Postmates got last year in a round which reportedly was a slog for the company to close. In both the U.S. and in China, the food delivery market seems too clogged by competition for anyone to rise to dominance — for now.
In China, though, Alibaba might be looking beyond Ele.me's core market opportunity, with a different strategy in mind. Food delivery, and really, delivery of any product or service initiated from a mobile smartphone, is an opportunity for Alibaba to pump up its own Alipay payment platform. Expanding Alipay and boosting Alipay usage is the bigger, broader goal here.