Alibaba vs. Tencent: China's Growing Internet Turf War Two of China’s richest men are intensifying their rivalry in the world’s biggest Internet market. The country’s largest e-commerce company, Alibaba Group Holding, led by Executive Chairman Jack Ma, is under assault from top Internet player Tencent Holdings (700:HK), chaired by Pony Ma. (The two aren’t related.) Tencent, a megaportal and China’s version of AOL (AOL), got a jump on Alibaba in mobile apps. Its chat software WeChat, released two years ago, has more than 300 million users. Alarmed by the incursions, Alibaba is ready to rumble. On Aug. 1 the company blocked merchants selling goods on its sites from using rival WeChat apps. The ban limits Tencent’s ability to draw users to its own payment systems, which it introduced for WeChat on Aug. 5. Alibaba said in a statement that it imposed the ban because some sellers were using WeChat to solicit off-site transactions, and gave no timetable for ending the blackout. Instead, it promoted logins with Sina Weibo accounts. Tencent declined to comment. Fencing off payment platforms will complicate the battle for online market share in China, where Internet retail sales will hit $395 billion by 2015, triple the 2011 total, McKinsey estimates. That’s a market that hasn’t been ignored by Jack Ma, who’s worth $3.6 billion, and Pony Ma, whose fortune is valued at $9.6 billion, data compiled by Bloomberg show. Shares of Tencent have surged 51 percent this year, the biggest gain on Hong Kong’s benchmark Hang Seng Index, pushing its market value to almost $90 billion. Goldman Sachs (GS) estimates that an Alibaba initial public offering, expected as early as this year in Hong Kong or New York, would value the company at about $105 billion. The two companies may next butt heads over financial services online. Alibaba spokeswoman Florence Shih says subsidiary Alipay has reached agreements to handle electronic payments for 37 fund companies. Tencent announced a partnership this month with leading investor China Asset Management to offer investment accounts to WeChat users with as little as 100 yuan ($16). Tencent has also signed deals with 10 other funds, according to its disclosure in July to China’s securities regulator. “Tencent is still in the land-grabbing phase,” says Billy Leung, an analyst at RHB Research Institute in Hong Kong. “Alibaba is trying to defend its territory.” Alibaba hasn’t kept up with Tencent’s WeChat in mobile development, Jack Ma said in March, even though his company began developing its mobile business three years ago. Tencent also has a major source of revenue that Alibaba lacks: video games. More than half of Tencent’s 44 billion yuan ($7 billion) in 2012 revenue came from games; in the first quarter of this year the company boasted that as many as 15.6 million players were online at once using its games, including the popular monster-filled title League of Legends. Tencent’s mobile advantage makes a further shift toward gaming much easier than a move into other areas, such as location-based e-commerce, says Alex Wang, a Beijing-based analyst at consultant IResearch. When it comes to helping users find restaurants and shops, says Wang, “I think Alibaba has the greater chance of winning” given its first-mover advantage on payment systems, user base, and marketing. Among its deals in July, Tencent announced plans to buy about 15 percent of gaming company Activision Blizzard (ATVI), which owns such hits as Call of Duty and World of Warcraft. lnkd.in/FZWg36
Posted on: Fri, 23 Aug 2013 11:04:53 +0000
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