Alibaba sizes up Facebook, Amazon with R&D splurge

HANGZHOU—Chinese e-commerce giant Alibaba Group Holding Ltd. BABA 0.57% says it will nearly triple spending on research and development, to more than $15 billion over the next three years, as it seeks to keep pace with Western rivals such as Alphabet Inc. and Amazon.com Inc.

 

Alibaba started as an online marketplace but has since moved into cloud computing and artificial-intelligence initiatives. In the previous three years, its spending on research and development was about $6 billion—a fraction of what major U.S. tech companies spend.

 

As part of the spending initiative, Alibaba chief technology officer Jeff Zhang will lead a new research unit called the DAMO Academy—an acronym for discovery, adventure, momentum and outlook—that will establish research and development labs world-wide, including one in cooperation with the University of California, Berkeley.

The academy, which will also include advisers from universities including the Massachusetts Institute of Technology, Princeton University and Peking University, will fund research into areas such as data analytics, quantum computing, and machine learning.

 

“For any major internet company to remain competitive in future, they will have to invest in these technologies,” said Mark Natkin, managing director at Beijing-based consultancy Marbridge Consulting.

 

Alibaba’s investment comes as the competition to attract the best talent globally ramps up.

 

Google parent Alphabet, Amazon.com and Facebook Inc. are increasing spending and racing to find and retain researchers in search of the next big breakthrough.

 

According to corporate filings, Alphabet spent $13.9 billion on research and development in 2016, about 16% of its revenues. Amazon spent $16 billion in the same period.

 

In contrast, Alibaba spent 17.1 billion yuan ($2.6 billion) on research and development in its last financial year ending March 2017, or about 11% of its 158.3 billion yuan in annual revenues.

 

Alibaba said it plans to hire 100 researchers for its new academy, which will open in seven locations, including two in the U.S.—San Mateo, Calif. and Bellevue, Wash.

 

In a speech in its headquarters city of Hangzhou, Alibaba chairman Jack Ma paid tribute to the tech giants that he’s trying to outdo. “We’ll learn from the work of IBM, Microsoft and Dell—but we’ll walk our own path.”

 

“Alibaba has lasted 18 years; It should last another 84 years,” Mr. Ma said. “That means DAMO should last at least 85 years,” a reference to his oft-repeated hope that Alibaba, founded in 1999, would span three centuries.