The clash of the Titans: Alibaba, Tencent & Baidu

Chinese government policies – protectionist or otherwise – have ended up creating behemoths like the South Korean chaebols. While Alibaba is the e-commerce giant in China with an 80% share, Baidu is the numero uno of Chinese search with about 60% share & Tencent - the largest internet services company in China - owns Wechat, the undisputed king of messaging.

Interestingly Alibaba’s e-commerce dominance is challenged by Tencent & Baidu to protect their own turf while Alibaba has started to challenge the might of the latter two in their areas of dominance. Each of the players is trying to cut into the other's core business either through acquisitions or sometimes through strange tie ups - of the kind listed earlier. Surprisingly, there was little overlap between the players earlier till China became the largest smartphone market & consumers started using those devices for almost everything: shopping, food ordering & booking restaurants, group purchases, taxi hailing, booking tickers for flights, hotels, cinema etc.  The clash of the Titans was therefore inevitable & is now just unfolding.

Tencent has also bought a 15% stake in JD.com - China’s second-largest e-commerce company - to tighten the screws on Alibaba. It has launched ventures to integrate e-commerce and online finance services with WeChat. Simultaneously it has taken a stake in the 2nd largest Chinese search engine Sohu's Sogou too to take on Baidu, It is an interesting battle where Tencent joins hands with Baidu to challenge Alibaba while simultaneously taking on Baidu on search.

Alibaba is not sitting quiet either; it has picked up a stake in Sina Weibo - a twitter equivalent - to take on Tencent's WeChat. Will Alibaba take a stake in Qihoo 360 technologies - that is currently independent - & which runs the 3rd largest search engine in China & provides security software or push its own search engine Shenma? Only time will tell.

O2O (Online – to- offline)

Online-to-offline is the biggest cake in e-commerce; creating a rebound between offline & online by leveraging tech enablers is the way forward.

Dalian Wanda group is China’s biggest commercial land developer. Wanda, Baidu and Tencent have created a joint venture in the ratio 70:15:15 with the aim to take on Alibaba. The new group melds Baidu’s search capabilities and Tencent’s popular WeChat social messaging network with Wanda’s brick-and-mortar infrastructure & will develop services, including online finance that could pose a challenge to Alibaba’s popular banking service, Yu’ebao. Wanda said it estimates its shopping malls and other outlets will attract 5 billion customers a year by 2020, making the company the “world’s largest offline commerce platform.” Wanda hopes that users of Tencent’s QQ instant messaging service & social mobile platform WeChat will become customers at its shopping malls, movie theatres and hotels through this new e-commerce platform. Wanda thus is trying to protect its offline business.

Complementary technologies

The fight for content is getting competitive & uglier with each passing day. Control over delivery vehicles as well as gaming platforms is also getting hastened.

Baidu fired the first salvo by buying Internet video business PPStream Inc. in June 2013 for $370 million and combining it with IQiyi.com, which it acquired in 2012. It intends to buy distribution rights for about 1000 Holywood movie titles,produce 7 local films, buy TV shows, co-produce content & create Chinese adaptations of US content.

Ma responded, in 2014, by buying a stake in Youku Tudou, a Chinese equivalent of Youtube. He also bought a controlling 60% stake in ChinaVision Media Group Ltd for $804 million, giving it access to TV and movie content & diluting Tencent’s stake from 8% to 3%. He has succeeded to hit two birds with oen stone. Along with Ali TV operating system launched in 2013 & mobile gaming platform in 2014, In 2013, Alibaba released a smart TV operating system with Wasu – an internet TV company in which Alibaba acquired a 20% stake for $1.05billion - and a set-top box while in January 2014 it started a platform hosting mobile games to compete with Tencent. Clearly Alibaba is strengthening its content & delivery platforms to take on both rivals Baidu & Tencent.

Mobile

In 2014 Alibaba acquired UCWeb - a web browser & search company – which it combined with UC Mobile - one of its business units – to oversee its browser, mobile search, location-based services, mobile gaming, app store and mobile reader operations. Baidu, reportedly tried to buy UC web in June 2012. The deal with UCWeb – with more than 500 million users globally - is valued at more than double the $1.9 billion that search engine Baidu Inc. paid last year for app store operator 91 Wireless Websoft Ltd. Surely the titans are helping in skyrocketing valuations.

UCWeb has a 50% market share amongst web browsers in China & holds a 35% market share in India. Though Alibaba currently has a dominant market share in mobile e-commerce, analysts believe that smartphone users may gravitate to its rival Tencent - which runs the massively popular WeChat mobile messaging and social-networking application. Alibaba’s moves are to checkmate such a transition. UCWeb will also be able to develop browsers and other tech it needs for its smart TV ecosystem and e-commerce businesses.

Car Apps

E-commerce firms view logistics as the next strategic lever to gain dominance & therefore are buying stakes in taxi apps; delivery through taxis, perhaps, is the way forward. This is another way of monetizing its “mapping” assets.

Hangzhou Kuaidi Technology Co., a taxi-booking service is backed by Alibaba, while Didi Taxi, is backed by Tencent. Alibaba also has a stake in Lyft; Baidu therefore has invested in the San Francisco based Uber & will connect its map and mobile-search features with Uber’s service.

Current Strategic Matrix

The current status of the category presence of each of the titans - either on their own or through a strategic stake buy- is listed below. The listings in “green” indicate the market leader in the US & China. The blank spaces are indicative of potential areas of conflicts; acquisitions or strategic buys would be a logical corollary.

Category	Google	Baidu	Alibaba	Tencent	Market Leader US/China
Search	Google Search	Baidu Search	Aliyun Search	SOSO/Sogou	Google/Baidu
Mobile O/S	Android	Android	Aliyun O/S		Android/
Web Browser	Chrome	Baidu Browser	UCweb	TT (Tencent Traveller)	Chrome/UCweb
Maps	Google Maps	Baidu Ditu	Autonavi		Google/Baidu Ditu
Video	Youtube	Baidu Video/iQiyi	Youku Tudou		Youtube/ Youku Tudou
E-Mail	Gmail				Gmail/
Cloud Storage	Google Drive	Baidu Wangpan	Aliyun Cloud/Kanbox	Tencent Weiyun	Google/Aliyun
Social Network	Google +	Baidu space		Qzone	facebook/
Microblogging			Sina Weibo	Tencent Weibo	Twitter/Sina
Shopping	Google Shopping	Baidu Shopping	Taobao/Alibaba/Tmall	Paipai/ Stake in JD.com	amazon/Taobao
Music	Google Play	Baidu Music	Xiami		Pandora/Xiami
Augmented Reality	Google Glass	Baidu Eye			WIP
Payment	Google Wallet		Alipay	TenPay / Weixin / Payment	Paypal/Alipay
Gaming	Google Play	Baidu Games/91 wireless		QQ game platform
Messenger service	Google Talk			QQ / Weixin / WeChat	/WeChat