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  • Aug 28, 2014
  • Updated: 9:04pm

Alibaba

Alibaba is the world’s biggest e-commerce group. Founded by Jack Ma, it owns Tmall.com and its consumer-to-consumer business Taobao.com.

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China's online giants Alibaba and Tencent go head to head

PUBLISHED : Saturday, 18 January, 2014, 1:30am
UPDATED : Saturday, 18 January, 2014, 1:30am

The rivalry between mainland internet giants Alibaba and Tencent is heating up and could lead to a shifting of tectonic plates in the world's largest internet market.

E-commerce leader Alibaba owns Taobao Marketplace andTmall.com the two main online retailing platforms. Tencent, which has 272 million active users monthly on its wildly popular three-year-old instant messaging app WeChat, dominates the social media market.

Each firm is looking to expand into each other's traditional business, with the latest move by Tencent to launch its first financial services product on WeChat, putting it in direct competition against Alibaba's Yu E Bao personal finance product.

"We've seen both companies increase investment in the territory dominated by the other," said Guosen Securities analyst Bill Fan. "Competition between them can be expected to be more intense in the next phase."

Competition between them can be … more intense in the next phase
BILL FAN, ANALYST, GUOSEN SECURITIES

Alibaba launched its Laiwang smartphone messaging app at the end of 2012, with functions similar to WeChat. It remains little known. The company also bought an 18 per cent stake in Sina Weibo, the mainland's answer to Twitter, for US$586 million last year.

Fan said it showed that Alibaba founder Jack Ma Yun was feeling the heat from Tencent.

"He bought into Weibo, an existing platform, because it is impossible to establish a mobile networking platform in the short term that is strong enough to compete with Tencent," Fan said. "Social networking apps users usually develop strong attachment."

When that loyalty is combined with services such as online games and e-commerce, "it will be extremely powerful".

Weibo is losing its lustre as users migrate to WeChat. A report issued by the China Internet Network Information Centre yesterday said the number of Weibo users dropped 9 per cent last year to 281 million.

It was the first decline in the platform's user numbers, amid competition from WeChat and Beijing's crackdown on "internet rumours".

The report said 37.3 per cent of the people who cut time spent on Weibo moved to WeChat.

The report said the mainland had 618 million internet users at the end of last year, with four out of five accessing the internet through mobile phones.

"Where people spend their time is where there is opportunity," Fan said. "These days we all have a smartphone that is inseparable from us."

Tencent founder and chairman Pony Ma Huateng said in Hong Kong this week that in the era of mobile internet, a smartphone could do more than a computer did before. "The smartphone is a person's electronic organ," he said.

The two Mas are not related.

For Alibaba and Tencent, online finance is a new sector to explore in the mainland's strictly regulated finance industry. "It is a new market where everyone is newcomer. Competition is not intense," Fan said.

Although Yu E Bao already has deposits of 250 billion yuan (HK$320 billion), he said the penetration rate of online finance was very low. "It is a small number when you put it in the perspective of China's total deposits," he said.

Wang Weidong, an analyst at consultancy iResearch, said competition between the two firms would increase this year.

Wang said that while the size of the market was tremendous, the entrance was narrow. "Like going into a huge shopping mall, you need to go through a door," he said. "Alibaba and Tencent will fight intensely to attract customers."

Alibaba might launch a highly anticipated initial public offering this year, which could raise HK$100 billion. Tencent listed at HK$3.90 in Hong Kong in 2004. It closed at HK$529 yesterday.

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