In 2014,58 Tencent invested around HK$1.5 billion dollars ($193.5 million59) in the logistic firm, China South City Holdings. The investment allowed…

In 2014,58 Tencent invested around HK$1.5 billion dollars
($193.5 million59) in the logistic firm, China South City
Holdings. The investment allowed Tencent to obtain around 9.9
percent stake in the logistics firm. The company also had an
option to increase its stake up to 13 percent by 2016. Soon after
the deal, the shares of Tencent rose more than 5 percent on the
Hong Kong stock exchange. Analysts said the China South City
deal would support Tencent’s plans to expand its e-commerce
business. “Chinese small-to-medium-sized enterprises have
huge demand to expand their businesses online. . . . Cooperation
with China South City enables us to jointly facilitate such enterprises
migrating online, utilising China South City’s physical
locations and logistics capabilities,”60 revealed Martin Lau
Chi Ping, president of Tencent. Besides, both Tencent and
China South City were planning to work on online payment
services, warehousing, and delivery services.61 Critics added
that until early 2014,62 Alibaba and Tencent were working
closely to develop their own area of expertise such as Alibaba
on the e-commerce sites and Tencent on the instant messaging
services sites. However, during 2014, both Tencent and Alibaba were trying to encroach on each other’s traditional
boundaries.63 Bryan Wang, an analyst with Forrester Research,
while commenting on Tencent’s alliance with China South City
Holdings, stated that, “Tencent is absolutely trying to get more
aggressive in the e-business space, challenging Alibaba, as
most of their services are now overlapping.”64
The battle between the Internet giants Tencent and Alibaba
to capture the emerging mobile payment market of China became
more intense with the cab-calling services.65 Wang Ran,
founder of China eCapital, quoted the rivalry between the two
web giants as the “the first battle in the first world war of the
Internet.”66 The two popular cab-calling smartphone apps, Didi
Dache (Didi) supported by Tencent and Kuaidi Dache (Kuaidi)
of Alibaba, were competing with each other to provide cab services
through their online booking facilities. Didi proclaimed
12 yuan (US$1.96) price subsidy to the passengers if the taxi
fare was paid by WeChat. Within a few hours, Kuaidi publicly
announced that it would reduce the price one yuan more than
its rival if the payment were received by Alipay. Alipay was
a dominant player in the mobile payment market with almost
300 million registered users. In 2013, Alibaba had earned
around 900 billion yuan (US$147.7 billion) through mobile
payments from 2.78 billion transactions.67
Further, analysts felt that the warfare in the mobile Internet
market might be unavoidable due to the increasing demand of
the consumers to be connected all the time. Around 81 percent
of the country’s Internet population had browsed the net through
mobile phones in 2013. Hu Yanping (Hu), Director of Data
Center of China Internet68 (DCCI), further justified that, “Most
Chinese neti zens are not satisfied in using the Internet sitting
down at a table. They want to use it anytime anywhere. . . . This
is the reason why the two firms are promoting mobile Internet
products. Mobile Internet services will make people’s lives more
comfortable and convenient.” Both Alibaba and Tencent were
adopting different approaches to lure the customers to use mobile
payments. Money transfer and credit card payment were the main
attraction of Alipay, whereas Tencent drew the customers for mobile
payment with its mobile social-networking and game apps.69
The m-commerce market in China was still at a nascent
stage and upon maturity the m-commerce market would be
almost four times the size of the e-commerce market. Besides
the cab-calling services, there would be huge competition in
associated services such as personal finance products, maps,
meal-ordering, social-networking apps, mobile gaming platforms,
e-commerce, and so on. In 2014, Tencent also acquired
20 percent stake in Dianping, a lifestyle and group buying
platform to provide services from online to offline. Alibaba
also acquired AutoNavi, a digital mapping entity that would
offer various navigation and location-based solutions to the users
through the Net. It would also help the smartphone users in
locating their favorite services and products.70
In a sudden turn of events in March 2014, the People’s
Bank of China banned the use of QR codes and virtual credit
cards due to security concerns.71 The suspension of mobile payments
through the QR codes and virtual credit cards created a
further new hurdle for both Tencent and Alibaba. “This seems
to be a knee-jerk reaction by China’s central bank in response
to rising payment security concerns worldwide. . . . Certainly this
announcement is a big deal for mobile payments and represents
the first time the QR code has been thrown into the security
spotlight on such a large scale,” remarked concerned Jordan
McKee (McKee), an analyst for Yankee Group. However,
McKee added that, “I don’t anticipate the QR code ban will be
long-term. . . . Rather, I suspect the government will investigate
the procedures of companies like Alibaba and Tencent and lift
the ban, permitted there are no blatant security flaws.”72
Industry analysts predicted that the battle between Alibaba
and Tencent would have a significant impact on China’s
m-commerce market and would facilitate a rapid expansion
of the mobile Internet market in the country. “Companies will
seek ways to integrate all mobile services to make profits and
even change people’s lifestyle,”73 added Hu. Besides, Deloitte
released a report74 and mentioned that, “The adoption of mobile
payment is low and application scenarios are limited. The players
are very active, but the majority of mobile payment services
and products are still in the pre-commercial phase.”75 However,
Hu added that the various acquisitions by Alibaba and Tencent
were only the first steps toward the development of the mobile
Internet market.76 “It’s too early to say which will top the mobile
payment market as two thirds of the market has not been developed
yet,”77 emphasized Hu.
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