In the search for new growth in the world’s biggest internet market, China’s three tech titans are spending billions of dollars on dozens of fronts to find the next big thing.
The latest battleground is China’s lifestyle trends, with companies investing in apps that offer a variety of services including food, facelifts, child care and bike sharing. E-commerce giant Alibaba, social-media champion Tencent and search engine Baidu are betting that one-stop shops that match merchants with consumers represent the next wave of consumption.
China’s internet giants have been on a tear. Alibaba said yesterday that revenue in fiscal 2018 could grow as much as 49 per cent, sending its shares higher. Both it and Tencent have notched stock-price gains of more than 40 per cent this year, with analysts predicting even more growth.
Still, the country’s market of 731 million internet users is peaking, with several times the number of people accessing the web and shopping on smartphones as in the US. As growth opportunities narrow, the big three internet companies are increasingly cutting across each others’ businesses, including online video streaming, cloud computing and internet finance.
With deep pockets and a powerful influence on day-to-day Chinese life, the companies have amassed a tangled array of investments, becoming kingmakers for start-ups and contributing to a funding glut that has created more than 100 billion-dollar start-ups in China, surpassing the number in the US.
Tencent, China’s most valuable company by market capitalisation, is a global gaming giant and owns China’s largest social network, WeChat. The app is prevalent in the lives of its more than 900 million monthly users. In recent years, Tencent has accelerated its push into mobile payments. According to research firm Analysys, it had 40 per cent of China’s mobile-payments market, snatching some of that from Alibaba, whose affiliate Ant Financial at one time monopolised the industry.
Alibaba — which runs China’s most popular e-commerce websites, Taobao and Tmall, and has more sales than Amazon and eBay combined — chronicles the spending habits of more than 450 million customers through its payments affiliate. It competes neck and neck with Baidu on internet mapping services in China.
Baidu, whose market capitalisation has lagged behind that of its two rivals of late, dominates internet searching in China and is often referred to as China’s Google. It has bet heavily on artificial intelligence and driverless cars, a field that Tencent is moving quickly into.
The frenzy to invest means the three tech giants sometimes overlap. Tencent and Alibaba are both investors in China’s ride-hailing app, Didi Chuxing. Baidu and Tencent also jointly back electric-car maker NextEV, which will start production of an electric SUV in China this year.
Currently, these three companies are fighting over the untapped segments of Chinese consumer lifestyles such as booking real-world services through the internet, referred to in the industry as online-to-offline services.
China’s internet-driven lifestyle-services industry is forecast to grow to 7.8 trillion yuan ($1.5 trillion) by 2020, from almost 5 trillion yuan in 2015, says Sanford C. Bernstein, dwarfing that of the US.
Alibaba has backed Koubei, a lifestyle search engine that is the newest entrant into the field. Koubei in February said it had raised $US1.1 billion from investors, giving it a valuation of $US8bn ($10.6bn). Weeks later, Tencent-backed Meituan-Dianping said it had raised 1.5 billion yuan to start a venture-capital fund to help restaurant- and leisure-related merchants.
Koubei’s funding salvo may delay profitability in the sector, but Meituan-Dianping’s investors aren’t perturbed.
By Liza Lin
The Australian | Wall Street Journal