Dangdang Links With Tencent 当当网和腾讯联手

By newsdoug on July 1, 2012

Dangdang in Tencent book tie-up China’s overheated e-commerce wars are quickly becoming a game of musical chairs that has seen many top names form partnerships with other big players, including an interesting new tie-up between top-tier operator Dangdang (NYSE: DANG) and leading Internet company Tencent (HKEx: 700). This new tie-up looks quite interesting and significant, though I should also point out that it’s just the latest in a steady string of recent initiatives for Dangdang, which has also just announced the launch of a more dubious move targeting the wedding market.

Let’s look at the Tencent deal first, as it’s clearly quite interesting and has potential to lead to much bigger tie-ups. Under the deal, Dangdang will become the exclusive book seller over the e-commerce channel on Tencent’s wildly popular QQ instant messaging service. (company announcement) News of this tie-up looks particularly interesting because Tencent, despite its status as China’s biggest Internet company, has yet to find a successful formula in the lucrative e-commerce space.

Dangdang, by comparison, is a pure e-commerce company that began its life as an online book seller, much like US e-commerce giant Amazon (NYSE: AMZN). Investors were initially excited about the tie-up, bidding up Dangdang shares by nearly 8 percent in early Friday trade on hopes for a big boost in its online book selling business. But that rally gradually fizzled later in the day, reflecting the fact that competition will still remain tough in the space, especially with the entry to electronic book selling earlier this year by Jingdong Mall, China’s second largest e-commerce company. (previous post)

From my perspective, I actually like this new deal because it will not only give Dangdang a huge new platform for selling its books, but could also pave the way for future tie-ups with Tencent in the e-commerce space.

Both Tencent and online search leader Baidu (Nasdaq: BIDU), China’s top 2 Internet companies in terms of market size, have had surprising difficulty in the e-commerce space, with neither making major headway in the area despite a number of major initiatives. Baidu shuttered a major initiative with Japan’s Rakuten earlier this year, marking its second major failure in the area. (previous post)

Tencent may have learned from Baidu’s mistake by choosing a major domestic player like Dangdang as its partner, and could easily decide to expand the tie-up if this partnership is effective.

Meantime, I won’t devote too much space to discussion of a new plan by Dangdang to sell customized wedding dresses over a new online channel called Yeesha. (English article) This particular plan looks quite dubious to me, since expensive items like wedding dresses aren’t really something that women like to buy online and, in fact, many woman actually quite enjoy the long and detailed process of trying on many dresses before they make their final purchase. Accordingly, don’t look for too much excitement from Yeesha, which I suspect will struggle and quietly be shuttered within a year.

Bottom line: Dangdang’s new tie-up with Tencent could pave the way for a broader e-commerce alliance, providing a major boost for Dangdang.

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