The Battle Lines Are Drawn for Alibaba and Tencent

December 20, 2013 Leave a comment

11.29.2013 15:30

Closer Look: The Battle Lines Are Drawn for Alibaba and Tencent

The Internet giants enter the mobile Internet industry with different strengths but a similar determination to come out on top

By staff reporter Zhu Yishi

(Beijing) – The war between the country’s two Internet giants, Tencent Holding and Alibaba Group, in the mobile Internet arena has escalated. Alibaba recently blocked WeChat’s access to two of its e-commerce apps. Users who click on links to products and shops on Taobao and Tmall through WeChat, Tencent’s popular messaging app, will be directed to the download page for the Alibaba apps. They are unable to browse or make purchases.Returning fire, Tencent’s app store removed the app for Alibaba’s payment service, Alipay, from its rankings.

The battle between Alibaba and Tencent has heated up since August, when the former blocked some visits directed from WeChat. WeChat has also blocked traffic from Alibaba’s messaging app, Laiwang.

Zhang Yu, president of the consumer-to-consumer site Taobao.com, said Alibaba’s move is aimed at better protecting user privacy, as many users complained about clicking on fake links on WeChat and were worried about losing their personal information.

Zhang also said the move would not affect Taobao store owners much. “In fact, many vendors don’t use WeChat as their main marketing platform,” she said. Further, WeChat has been only a minor driver of traffic, Zhang added.

WeChat said Alibaba’s actions have hurt the overall user experience.

Alibaba’s moves reflected growing competition between the two. Several other websites owned by Alibaba have also blocked access to WeChat, including the Weibo app and the music site Xiami.com.

All of this echoes statements made by Alibaba Chairman Jack Ma in late October, when he called on the company to unify its efforts to fend off Tencent and WeChat.

Alibaba is determined to strike with full force, regardless of how big a threat WeChat really is. Alibaba wants to prevent it from growing into a mature online marketplace. Also, Alibaba says the migration from PCs to tablets is an unstoppable trend, and it must enhance its capacity in mobile Internet as preparation for its plan to list.

But will Alibaba’s efforts to block WeChat be successful?

After Taobao prohibited vendors from marketing on WeChat, it needed to launch an equivalent service. In early November, Weitao was launched for vendors on Taobao and Tmall as a way for them to promote their products and communicate with buyers. Alibaba says its apps now have about 400 million users, and more than 1 million have opened Weitao account.

Laiwang, on the other hand, is aimed at WeChat’s forte: instant messaging. From October 21 to November 20, the number of registered users on Laiwang climbed to 10 million.

Ma said in today’s Internet world it would be very difficult to build another large, PC-based Internet company. Hence, Alibaba must embrace the changes brought by mobile Internet and learn to innovate.

Alibaba CEO Jonathan Lu said that mobile Internet was only just starting and WeChat is far from representing its future. Many innovations are yet to come, and Laiwang will not follow in its steps, he said.

The plans for Laiwang remain unclear. Not long ago, Netease’s CEO, Ding Lei, rated WeChat a 5 out of 10. He gave Yixin, the messaging app developed by China Telecom and Netease, a 0. Laiwang got a negative score in Ding’s scoring, which was found in a company email. Ma was not pleased.

Ma’s strategy is to recruit celebrities to set up fan groups on Laiwang. Ma himself opened a chat group where he regularly shares management tips. The group attracted over 30,000 members in two days.

But there are questions as to how Alibaba can connect its e-commerce business with the mobile messaging.

WeChat has tried the offline-to-offline (O2O) approach, connecting people with people, people with products, and people with services. Developing a good payment service will help, and WeChat recently offered users 5 yuan to open WeChat payment accounts and link them to their bank cards. They also cooperated with leading smartphone maker Xiaomi to allow WeChat users to make a reservation to buy the newest model.

So the battle lines between Tencent and Alibaba have been drawn and it seems likely the fight has just started.

Filed under TMT Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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