Dive Brief:

• Alibaba Group Ltd. says it’s planning a major global investment though its Aliyun cloud computing and web services unit, to take on Amazon.

• The company is planning to spend $1 billion, which CEO Daniel Zhang called “just the beginning,” to establish data centers in Europe, Japan, and the Middle East, adding to centers in Silicon Valley and China.

• The push will also include expanding its network of tech and telecommunications partnerships, the company said.

Dive Insight:

One of the main reasons Amazon has largely been able to shrug off its retail competition has been its willingness to forgo profits in order to compete on price, Prime benefits like free two-day, same-day shipping, and other amenities for its Prime customers, like its streaming entertainment services.

There's a reason for Amazon's attention to its Prime customer: According to Consumer Intelligence Research Partners, a Prime customer spends an average of $1,100 annually compared to the $700 average of non-Prime members. Prime members also convert 74% of the time when on the site, compared to 13% for non-Prime members.  

Amazon has been able to invest in its Prime program and on innovation because of the patience of its investors, and, especially in recent quarters, the financial performance of its AWS web services unit. The stability of AWS could be challenged by this major push by Alibaba, though. 

“We see that Amazon took 10 years to get to where it is today,” Aliyun president Simon Hu last week. “Aliyun is just past its sixth year and we hope to match or outperform Amazon within three or four years.”