The two Chinese tech giants are reshaping the game, with deep pockets and access to funds on a platter of Gold. The two Chinese tech giants are proving to be the two deadliest strikers in the tech world. Their market capitalizations and share prices total nearly a trillion USD.
Both companies are like two prolific strikers playing in different teams both with the aim of outscoring from one another to take home the trophy of the best scorer. While Alibaba is notable for dominating the e-commerce sphere, Tencent is dominating the games tech world and social media platforms.
However, the two companies are also competing fiercely and trying to outbid one another for investment opportunities around the world. Recent findings reveal that from 2012 to date, Tencent has had 25 private placements and acquisitions while Alibaba has 28. Besides the billions of acquisitions, the two companies are also undergoing multiple takeovers of start-ups, making it a case of big fish swallowing the small fish. From 2013, Tencent has splashed about USD $780 million to acquire a bunch of start-ups while over the same period, Alibaba has acquired around 50 start-ups in excess of USD $1.72 billion
Alibaba has also bet big on Tokopedia, Indonesia’s largest e-commerce firm. Tokopedia’s founders considered Lazada their main rival and were expected to join forces with Tencent. They had held extensive discussions with Tencent executives and even completed a term-sheet with JD.com, one of Tencent’s key strategic allies. But in August 2017, thanks partly to the aggressive intervention of Softbank’s Masayoshi Son, an early Alibaba backer, Alibaba pre-empted a Tokopedia deal with Tencent by swooping in and leading a $1.1 billion funding round.
Revenue is rising at SEA, but so are losses, thanks largely to its investment in its mobile e-commerce platform, Shopee.com. In the three months to March, SEA reported revenue of $155 million, up 65% from the same period a year earlier. But net losses during the quarter exceeded $215 million, triple the previous year. In February, SEA group president Nick Nash announced that he would retire at the end of the year.
Tencent’s other major investment in the region is Go-Jek, an Indonesian startup that began as a motorbike-on-demand service and has expanded into ride-hailing for four-wheeled vehicles. Tencent, which led a $1.2 billion funding round for the venture last summer, has encouraged Go-Jek to transform its ride-hailing app into an all-purpose platform similar to Tencent’s popular WeChat app.
Alibaba is reportedly in talks to invest in Grab, the Singapore-based ride-hailing venture that is Go-Jek’s nemesis. But other funding rounds have been making headlines: Earlier this month, Grab secured a $1 billion investment from Toyota, which valued the company at more than $7 billion, making it the region’s most valuable startup. Grab, co-founded by Harvard Business School classmates Anthony Tan and Hooi Ling Tan, operates in eight Southeast Asian markets and dominates ride-hailing in the region with daily orders of over 6 million.
Grab scored another victory this March when San Francisco-based Uber announced plans to withdraw from Southeast Asia and sell its entire operations in the region to Grab for $1.6 billion and a 27.5 percent equity stake. That acquisition has drawn the scrutiny of anti-trust regulators in Singapore, the Philippines and Thailand.
Immediately afterwards, Go-Jek announced plans to invest $500 million to expand into those three markets along with another where Grab operates, Vietnam. In early June, according to Bloomberg, Go-Jek investors including Tencent and Warburg Pincus offered the company an addition $1 billion in funding to compete with Grab.
Turn Special Holidays Into Sales:
Chinese pay attention to special holidays, to every holiday or special day. Tencent Holdings WeChat has special features called WeChat red packets where users could send either a random or fixed amount of money to someone. WeChat Red Packets originated from their own management team trying to give one another red packets after their Chinese new year as it is a broad part of the Cantonese tradition. What started as a solution for its own expanding team problem led to a widely used form of gifts during Chinese holidays and special days like birthdays and weddings. In the Chinese new year holiday of 2015, 1 billion red packets were sent.
11.11 also known as Chinese singles’ day or Guanggun Jie (Mainland Pinyin) is a day when young Chinese people in the mainland celebrate each other as being single. The e-commerce giants, particularly Alibaba use this special day to rake in billions in sales and turn it into the world’s largest online day in the world
Using Big Data As a Tool:
With millions of active users monthly, the two giants hold an incredible amount of big data on their users and customers, and they have been able to utilize this data to optimize their customer experience and understand their consumer’ behaviors.
According to Jack Ma, the founder of Alibaba, “We think data is going to be so important to human life in the future,” he says. “Tomorrow [with the Internet of things], everything will be connected.” Jack Ma further added, “The world is going to be data, I think this is just the beginning of the data period.”
Tencent has been able to use data to analyze how users on its WeChat platform engage daily, the features its users spend the most time on and at what particular time, the tasks its users use WeChat to undertake at a specific period of time in a day (as shown in the image below).
Softbank-Alibaba vs Google-Tencent: Examining the head-on clash
It seems that two camps are forming: Softbank and Alibaba vs Google and Tencent. Which side will win is hard to tell since both parties are resourceful and have solid financials. It’s more likely that both will be in the market for the long run, shaping the region’s tech ecosystem.
Softbank + Alibaba
Eighteen years ago, Softbank founder Masayoshi Son made a bet on Alibaba, which turned out to be a huge success. Despite some skirmishes over the ownership of Ant Financial, Softbank remains Alibaba’s biggest shareholder at IPO.
The two did not stop there. Perhaps influenced by Softbank’s bold yet incisive decision-making culture, Alibaba is more courageous than most of its Chinese counterparts. In April 2016, the company officially acquired a controlling stake in Lazada, starting a spree of major investments by Chinese tech giants into Southeast Asia.
Afterward, Softbank allowed Alibaba to invest in Tokopedia (and prevented JD.com from doing so), and Alibaba firmed up its stake in Lazada to 81 percent. Now, there are rumors of a potential Alibaba investment in Grab, where Softbank and Didi jointly hold a controlling stake.
Google + Tencent
Being the world’s leading technology heavyweight, Google is also keen on procuring seats in the Chinese and Southeast Asian markets. We previously wrote about Google’s recent investment into JD.com, a Tencent portfolio company that has a decent presence in Indonesia and a big joint venture in Thailand.
Both Tencent and Google also invested in Go-Jek, Grab’s major rival.
It is hard to believe that there is no synergy between the two.
Online ecommerce platform and payment solution provider: Lazada and Tokopedia vs JD.com and Sea (Shopee)
Softbank and Alibaba are using Ant Financial to get a grip on Southeast Asia’s payment gateways. The strategy is clear: Alibaba re-branded Lazada’s HelloPay and invested largely in Thailand-based Ascend Money and Philippine-based Mynt. They are also boosting their brand in the region while simultaneously educating the market on payment services.
But obstacles in the region, like political instability, differences in culture and religion, and economic development maturity, may deter services from becoming widespread.
Grab vs Go-Jek
After Uber backed out from Southeast Asia, the tension between Grab and Go-Jek has escalated.
Objectively, the two enterprises possess similar strengths: flexibility, strong backers, notable market capitalization value, and huge successes in their original niche markets.
But there’s no guarantee who will dominate or monopolize Southeast Asia for ride-hailing. Though Grab has more market share, ride-hailing companies throughout Asia have relied heavily on discounts and promotions to attract riders and drivers. In the long run, this situation will spoil customers’ appetite toward service fulfillment and drive down profit margins.
Further, Go-Jek’s services are more diversified, ranging from ride-hailing, courier services, food delivery, housekeeping/cleaning, and grocery delivery. All these are effective at keeping supply and demand parties closely in the business loop.
In the fast-growing market of logistics, companies should pace themselves to overcome legislative and technical hurdles and cater to local needs.
Overall, the two teams have different methods to penetrate Southeast Asia: Softbank and Alibaba are more ambitious, active, and diametric when picking targets, while Google and Tencent chiefly counter-attack the former’s decisions.
For tech conglomerates, be courageous and active to secure collaborative partners. According to Momentum Works’ previous talks and experience in Indonesia’s business operations, knowing the leads in various industries is the key to success.
As for local startups, besides perfecting your current services and products, pick the most beneficial backer. Additionally, make necessary diversifications to widen your influence on the market, create more business opportunities, and broaden your network.