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snapdealSnapdeal reportedly has raised $500 million to take on one of the fastest growing e-commerce markets in the world. The company, which raised money from a consortium of investors, including Alibaba, Foxconn and SoftBank, will create yet another well-funded rival to Amazon in India.

The deal was reported today by Re/Code, but a story earlier this year in the Wall Street Journal, also said that companies, such as Alibaba and Foxconn were interested in investing in the company. The massive investment round will be of interest to Amazon, which likes to talk about its booming business in India.

An Alibaba spokeswoman declined to comment at this time.

Jeff Bezos in October 2010. (Flickr photo by Steve Jurvetson)
Jeff Bezos in October 2010. (Flickr photo by Steve Jurvetson)

In June, Amazon Founder and CEO Jeff Bezos pointed to India as a prime example of how its marketplace model continues to work. For example, in India, Amazon does not own any of its own merchandise, but rather relies on third-parties to sell items in its marketplace. Bezos said at the time that the marketplace was the largest in the country with 20 million items available (In comparison, Snapdeal claims to have 12 million products available).

But that doesn’t necessarily mean Amazon is doing better than everyone else.

According to Morgan Stanley, Flipkart, which was founded by two former Amazon employees, has a 44 percent piece of India’s $6.3 billion e-commerce market. Further, it estimates that Snapdeal is in second place with a 32 percent share, while Amazon India has a 15 percent share. While those numbers are only estimates, all three companies are after the same thing: Getting a foothold in the world’s second-most populous country as e-commerce begins to take off.

flipkart.jpgOf course, that’s why companies, like Alibaba, the Chinese e-commerce conglomerate is interested, too. Alibaba has gone out of its way to say it won’t challenge Amazon’s e-commerce business in the U.S., but that doesn’t mean it won’t in other countries. (As we learned last week, the courtesy also doesn’t seem to apply to the cloud business, after Alibaba announced plans to invest $1 billion into its cloud computing arm.)

With Snapdeal, Alibaba will get a stake in a diverse company, which started off as a Groupon clone, but more recently morphed into a marketplace that sells a wide variety of items. According to Re/Code, over the past year, it’s bought a number of companies, including FreeCharge, a service that lets people reload their prepaid wireless phone cards, and RupeePower, a comparison shopping site for credit cards and loans.

This is not Alibaba’s first investment in the region. In February, it invested in India’s One97 Communications, an online payment and marketplace business. According to several reports, Alibaba received about 25 percent of the company for up to $575 million.

While these are impressive figures, both of these investments don’t necessarily add up to the amount of money that Amazon and others are willing to pour into the country. Last summer, Amazon made a rare financial announcement, disclosing that it plans to invest $2 billion in India, just one day after Indian e-commerce giant Flipkart announced $1 billion in fresh funding.

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