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The move to let in external investors may set it on a path to be listed as a separate entity

Chinese internet conglomerate Alibaba is seeking US$1 billion to fund the growth of its local services platform Koubei, according to a report by the Wall Street Journal.

This injection of fresh capital could result in an increase of valuation to US$8 billion to the company. The move to open up to external investors could also set a path for Koubei to become more independent and eventually become listed as its own entity.

Alibaba and its financial affiliate Ant Financial each put RMB 3 billion (US$483 million then) into the service when it was officially launched in June 2015 – acquiring 50 per cent stake in the company.

Koubei (which, in Chinese, means “word of mouth reputation”) was designed to be a central hub for Alibaba’s online to offline  (O2O) services including restaurant booking, house rental and travel services.

While Koubei reported huge growth, the business is still in the red. In the second quarter of 2016, it logged US$5 billion in revenue — up 48 per cent from the first quarter — through Alibaba’s online payment platform Alipay. Its losses in the same quarter, however, was pegged at US$37 million.

The local services sector in China is ripe with opportunity: by 2017, it is expected to hit US$1.17 trillion. Major Chinese internet giants are burning huge reserves of cash to become numero uno in this space.

Baidu is reportedly investing up to US$3.2 billion over three years to grow its local services platform Nuomi. Similarly, early this year, Tencent-backed Groupon clone Meituan-Dianping raised US$3.3 billion at a valuation of US$18 billion (Alibaba had previously backed Meituan before its merger with Tencent’s Dianping).

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Image Credit: Alibaba

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