Much China technology press coverage of late centers on the struggle between Alibaba and Tencent for mobile preeminence. A sober look at the mobile assets of both, and their place in China’s Internet ecosystem, reveals some mild overlap in the e-commerce sector, that will most likely resolve into separate, but not necessarily conflicting verticals of China’s metastasizing mobile space.
Some context should help put things in proper perspective. The word best describing China’s overall Internet trend is “consolidation”. The acronym to remember is BAT: Baidu, Alibaba, and Tencent. Baidu rules search and content, Alibaba e-commerce, and Tencent social and gaming.
Of course, each giant company is omni-integrated, and more than moneyed enough to take healthy pokes into each other’s main territory, especially to stay competitive in the emerging promised land of mobile. For example, Baidu bears were briefly silenced last year when the company acquired China’s largest third-party app platform, 91 Wireless, for $1.9 billion, which included game developer NetDragon’s majority stake. In other words, Baidu dispensed with the innovative approach, and bought its way into the forefront of China mobility.
As for Alibaba, founder and chairman Jack Ma has long been aware that his customers are multi-device, increasingly mobile first, and has developed accordingly. His twin commerce engine Tmall/Taobao is fully responsive, as demonstrated by the 21% of mobile sales contributing to Alibaba’s $5.75 billion 2013 Single’s Day bonanza [Nov. 11, 2013], up from 5% the year before. Alibaba’s mobile GMV (gross merchandise volume) for Q4 2013 was a corresponding one-fifth of total, at $16.7 billion.
Alibaba is also filling out the vertical with complementary products. Besides Tmall & Taobao apps, there is Wei-Tao, a social app created specifically for vendors to interact with shoppers when the latter are in the mood to do so, with 50 million having proved in the mood shortly after its release last year. Another Alibaba asset lies in eTao, an ecommerce search engine seamlessly providing best prices and purchase options. It’s a joy to the Chinese shopper and a bane to brick-and-mortar retailers, as well as to Baidu, whose earlier, less mobile-adapted version of the same product, Weigou, is outclassed by eTao.
Another Alibaba challenge to Baidu comes from its majority stake in UCWeb, maker of mobile browsers. As more and more users adopt these browsers, tailor-made for fast mobile access and downloads, Alibaba will increasingly own the point of contact between a user’s phone and the Internet. Search will be just one of the resultant advantages.
The last card in Alibaba’s mobile full house proves the most instructive to those considering the case for WeChat—Sina Weibo. Almost a year ago, Alibaba invested close to $600 million in Weibo and launched capabilities for users to buy directly on the social platform. It’s fair to wonder if this initiative didn’t hasten the exodus from Weibo to WeChat, where market driven, interruptive messaging has been heretofore more difficult. There’s certainly no press claiming Taobao integration has benefited Sina Weibo, or driven revenues for either company.
A trifle puzzling, then, why Tencent’s WeChat is being hailed as a worthy model for mobile commerce, the David to Alibaba’s Goliath, unless one is only gauging the “how many” without considering the “why so many?” WeChat’s popularity hinges on its paradoxical blend of intimacy and random public access. Friends can audio message and text each other, but they can’t see a third party’s response to a friend’s wall post, unless they are also friends with that third party. On the other hand, they can “look around” and find people in their vicinity to make friends with. The aforementioned wall is where WeChat junkies spend the most time, posting and commenting on friends’ links and pics, Facebook style.
As to monetization, Tencent was squarely in its groove with WeChat’s nominally-priced stickers. Gamification is Tencent’s strong suit, and games are the chief source of its revenue. This is not to discount its ownership of QQ, whose messenger app, with over 700 million users, is arguably the most popular tool on the Chinese Internet.
But case studies for selling on WeChat have proven tenuous. The most publicized case was WeChat’s e-version of traditional Chinese New Year’s money envelopes, which is a transfer of money, not the promotion and sale of a product. Online retailer JD, WeChat’s partner in the plan to unseat Alibaba via mobile commerce, opened on the platform with a huge discount promotion, but has since doubled down by resurrecting Paipai, Tencent’s ill-fated clone of Taobao. Cited examples of successful campaigns on WeChat are all of established brands doing giveaways and deep discounts, airline sweepstake tickets and the like.
Not that WeChat has no future in mobile commerce. Rather, that future seems to be in local services. One success story almost unreported in western media was of a Chinese hotel chain that claimed to have sold RMB10 million ($1.61 million) in bookings solely via WeChat in Q12014, by savvily employing the platform’s geolocation capabilities, and offering discounts to travelers closest to their many hotels. Weimob, a WeChat-focused CRM solution, has raised $4.8 million in funding, evidently on the founder’s promise that it will develop “products focused on different verticals like catering, food delivery, hair dressing, and beauty.”
It serves to consider that the half-lives of Chinese SNS [social networking services] platforms have proven decidedly short-lived, at least in comparison to dedicated Chinese ecommerce sites, and understandably so. Social is where people gather and share viewpoints unavailable in official media organs, and the Chinese Communist Party has a decided conflict of interest with unofficial viewpoints.
As the hottest place to share unofficial news and views, WeChat drew harsh government reprisals this March, when dozens of politically active accounts were suddenly deleted, including a newsletter with over 200,000 subscribers. Most recently, China’s government stepped up the pressure, with a typically understated admonition for WeChat and other apps to “monitor and self-censor”. Time, Renren, and Weibo have proven that the Chinese audience is very agile in adopting new platforms when the old ones have lost their core appeal.
In the final analysis, sound marketing starts with the customers. There is no evidence that WeChat users are on the platform to shop, whereas Alibaba built its empire to that purpose. Betting that because China is going mobile, Chinese people want to shop on the most popular social app, is shaky logic at best.
Web Presence in China is a Beijing-based digital marketing firm that specializes in helping Western companies enter China.
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