The competition among China’s biggest internet firms – Baidu, Alibaba and Tencent, known as BAT – is taking on global proportions.
China’s top three internet firms are not to be underestimated, either in their vast home market or increasingly, worldwide. Online gaming and social media giant Tencent is now worth around $275 billion, making it one of the world’s most valuable public firms. Alibaba, China’s top ecommerce group, handles more transactions per year than eBay and Amazon combined. Online search firm Baidu is a distant third, however. As it continues to lose ad revenue to social media networks and mobile-commerce platforms, its revenue growth has fallen – from 54% in 2014 to 35% in 2015, and just 6.3% in 2016.
Tencent is currently leading the pack. Its revenues and profits have surpassed Alibaba’s, and its value is set to rise with increased advertising on WeChat. Last year its revenues reached $37.5 billion, up from $28 billion the previous year. Its share of China’s B2C market rose to 25% in 2016, from 18% at the end of 2014. Since acquiring a 15% stake in JD.com, China’s second-biggest ecommerce firm, Tencent is now competing directly with Alibaba.
Alibaba still has a 70% share of the domestic ecommerce market, and last year it invested $1 billion in Lazada, Southeast Asia’s biggest ecommerce firm, extending its reach in Singapore. However, Executive Chairman Jack Ma’s main tactic for going global is Ant Financial, which has grown impressively. In China, where it has 450 million customers, Ant offers services ranging from online banking to investment products and consumer credit-scoring. It is rapidly growing abroad, with investments in online payments firms in Thailand, the Philippines, Singapore and South Korea. In the US, Ant is competing with American rival Euronet to buy MoneyGram International.
Tencent is also making bold acquisitions outside China. Last year it led a consortium which purchased Finland’s Supercell, making it the world’s biggest online game company. In Europe, Tencent started a service that allows companies to sell in mainland China via WeChat. Tencent also invested $1.8 billion in US carmaker Tesla, and was an early investor in America’s Snapchat.
All three BAT firms are jockeying for position in India. Tencent invested heavily in Indian messaging app Hike Messenger. It also joined forces with eBay and Microsoft to invest $1.4 billion in Indian online retailer Flipkart. Alibaba, with Ant, has reportedly invested nearly $900 million in Paytm, India’s top online-payments firm, which launched an ecommerce portal to compete with Flipkart and Amazon in India.
While pursuing their global ambitions, the BAT firms should take care not to neglect their profitable domestic market. As The Economist notes, Goldman Sachs estimates that China’s ecommerce market will more than double in size by 2020. Duncan Clark, the author of a book on Alibaba, points out that whatever headlines Chinese internet executives make with their overseas ventures, “it takes a lot to get away from the sheer gravity of China.”
