The competition between Amazon.com, Inc. (NASDAQ:AMZN) and Alibaba Group Holding Ltd (NYSE:BABA) is heating up in China, and it seems China’s state laws are becoming a nuisance for Amazon, and could take a toll on the company’s growth plans in the country. Amazon has announced that it is selling the hardware unit of its public Cloud business to Beijing Sinnet for about $300 million. Amazon.com, Inc. (NASDAQ:AMZN) said in a statement that it had to sell the unit to its local partner to comply with Chinese laws. The government of China is cracking down against foreign Cloud and data services. Earlier this year, Sinnet had to shut down its VPN services which allow users to bypass web restrictions.
The problems of Amazon.com, Inc. (NASDAQ:AMZN) in China means more chances for Alibaba to expand its Cloud footprint. Alibaba Group Holding Ltd (NYSE:BABA) is already running on all cylinders. People around the world bought $25.3 billion worth of items from Alibaba’s website on Single’s day (within 24 hours) earlier this month, making an all time record. Alibaba Group Holding Ltd (NYSE:BABA) is creating an ecosystem around its ecommerce platform, practically integrating AliCloud and AliPay with its business services.
Alibaba Group Holding Ltd (NYSE:BABA) is the third largest Cloud services provider in the world. Alibaba’s Cloud division revenue increased by a whopping 99% year over year in the September quarter to reach $447 million. The company has successfully managed to design a subscription model for its Cloud business. Over one million customers (individuals, companies) pay Alibaba Group Holding Ltd (NYSE:BABA) to use its Cloud services and products. Earlier this month, Oppenheimer analysts Jason Helfstein, Alec Brondolo and Jed Kelly issued a bullish rating for Alibaba shares and increased their price target because they think Alibaba will grow because of its Cloud and payments business.
Alibaba Group Holding Ltd (NYSE:BABA) Cloud President Simon Hu recently said in a conference that given the growth trajectory of Alibaba’s Cloud platform, it will unseat Microsoft to become the second biggest Cloud platform in the world. However, it should be noted that Alibaba poses no threat to Amazon.com, Inc. (NASDAQ:AMZN) when it comes to market leadership and dominance. Amazon’s Cloud platform remains the behemoth, with over $4.5 billion in revenue earned in a single quarter (Q3). Amazon has over 30% share of the Cloud market, more than double its closest competitor, Microsoft. But Alibaba dwarfs Amazon, Microsoft and Google when it comes to growth rate. A latest report published by Gartner says that Alibaba’s growth rate is well above that of Microsoft and Amazon.