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Social commerce, entertainment and AI: how China’s internet giants are expanding their empires


By Danielle Long, Acting APAC Editor

June 26, 2017 | 9 min read

Alibaba founder Jack Ma recently predicted a future where his company could become the world's fifth-largest economy by 2036.


Social commerce, Entertainment and AI: How China’s Internet giants are expanding their empires

In Ma’s vision, Alibaba would no longer be viewed as a company, but instead an economy trailing in size behind the U.S., China, Europe and Japan.

His comments came as Ma, along with Alibaba management, reconfirmed to investors the ecommerce giant’s goal to reach 2 billion customers and sell $1tn in goods by 2020.

While Ma’s vision for Alibaba may sound ambitious, his growing global influence as the founder of the world’s largest retailer means the comments aren’t to be ignored.

Alibaba is just one of the big internet companies from China that have captured the world’s attention as they rapidly – some say aggressively – expand beyond China’s borders.

No longer content with market dominance at home, China’s big three: Baidu, Alibaba and Tencent (BAT) are investing heavily to expand their empires into new markets and new categories.

While China’s big three are usually referred to as China’s Google (Baidu), China’s Amazon and eBay (Alibaba) and China’s Facebook and IM (Tencent), these companies are so much more than the western equivalents.

BAT outweigh their western counterparts, not just in the sheer size of the audiences they control, but also in the depth and scale of their businesses, which continue to expand beyond the core propositions.

For many years BAT have been engaging in partnership deals, mergers and acquisitions both within China and abroad, and these continue to this day. Recent high profile acquisitions and deals include Tencent’s 5% stake in Tesla, Alibaba’s majority stake in Lazada and Baidu’s deal with Netflix, which would finally see the brand launch in China.

Spurred on by the slowing growth of their core businesses as China’s internet market matures, with users expected to peak at the 1 billion mark within the next three years, BATs expansion activity has accelerated in recent years.

The last 12 months has seen a shift in strategies as the companies have sharpened their strategic focus and began to take different, yet at times overlapping, approaches to growing their business.

“While all three are investing in similar things, the core businesses remain very different: Tencent has social at the heart, Alibaba has ecommerce and Baidu has search,” says Christian Solomon, head of digital at MediaCom China.

“They’ve all invested in content through their video platforms, as well as live streaming and entertainment. They are all getting into movies and producing their own content – Baidu to a lesser extent with iQiyi – they are building up their ad platforms, payment platforms, as well as social platforms,” says Solomon.

Meg Chen, EVP of digital development for Dentsu Aegis Network China, agrees: “China’s Internet giant, BAT’s, development strategy are very different from a global model. Not just focusing in one area, they’re good at building up their own eco-system. They are good at diversification, with the key vision to keep increasing users’ stickiness and to hold them in the eco-system: social, game, payment, music, entertainment, travel, shopping, order food… everything you need in your daily life.”

While Ailbaba has focused on building its empire around ecommerce, and Tencent has built its fortunes around social – namely its wildly successful platform WeChat –, Baidu has focused on technology, specifically artificial intelligence and deep learning.

As Alibaba and Tencent’s core businesses have flourished, they have created new business divisions such as mobile payment services, digital media and entertainment, gaming and cloud computing to grow their ecosystems.

However, over at Baidu its core search business has been under threat from changing consumer search habits. In a bid to safe-guard its future Baidu is investing heavily in technology and hardware as it repositions as an AI-first company.

“If you look at Alibaba and Tencent, they are quite similar and they are on the same track,” says Major Lin, managing partner and chief digital officer at OMD China.

“They are doing similar things and have a similar strategy, which is to be the most powerful data company, not only in china but also on a global level. Baidu is a different story, they have been on a downward trend in the last two years. They no longer control the total search power in china, so they have shifted focus from their search engine and media network into AI. They are still a big three but their direction is different,” says Lin.

The shift is leading many observers to question the future relevance of Baidu, as Alibaba and Tencent become ever more omnipresent in people’s day-to-day lives, Baidu is focused on the long game with AI, which is currently a nascent industry.

Solomon says, “Broadly speaking, Baidu are just not seen as being as big and innovative as the other two. That may change with their refocusing for the future as they head towards AI but for the time being we’re more focused on Tencent and Alibaba.”

However, Baidu is not alone in its AI focus, with both Alibaba and Tencent investing heavily in their own AI divisions and labs.

While their focuses are shifting, the big three are still linked by the work they are doing to engage marketers and brands with their ecosystems.

A major area of interest for all three companies is data. Each of these companies is sitting on stacks of data from their vast user numbers and the challenge for the next few years will be leveraging this data to gain greater insights into users and monetise their platforms.

Baidu is focused on mining its data to enhance its AI and deep learning technology, particularly around predictive search but also for its home robot product. Alibaba wants to use its data to connect online and offline retail, enable predictive shopping and logistics and ultimately sell more products across its ecosystem. While Tencent wants to leverage its data to connect its ecosystem and monetise it.

Alibaba and Tencent have been working to break down the silos within their businesses to enable them to cross sell and capitalise on their ecosystems. Both have launched brand DMPs, vast databanks and planning tools which enable agencies and advertisers, to plan campaigns across the companies entire ecosystem to create end-to-end targeting.

Lin says, “Both Tencent and Alibaba are providing marketing automation solutions so that the marketer can easily access the strategy and use the end service technology for advertising and other marketing activity. But, at the end of the day, it’s not about the technology, it’s about what kind of content and unique brand experience you can deliver though their technology.”

Beyond data, the big three companies are also investing heavily in content, both through purchases and licensing deals as well as content creation. All three are investing significantly in these areas as the boost their content channels Baidu’s iQiyi, Alibaba’s Youku Toudu and Tencent Video and content production is thriving in China.

Solomon says, “We’ve seen a shift in advertising dollars moving away from pre-rolls and into content collaboration, such as creating tailored episodes of programmes and sponsorships. We’ve seen a big increase in regards to this area. [The big three] have also been investing heavily in producing their own content, as well as buying content. They are all investing heavily in movies. iQiyi alone invested something like RMB 10bn in producing their own content last year, which is huge.”

All three are focused on better connecting their ecosystems in order to better monetise their empire, although Alibaba and Tencent seem to pulling ahead of Baidu.

Lin says, “The reason Alibaba and Tencent are so successful and so powerful is that they have their own payment tools. AliPay and TenPay. When they introduced the content payment service within their ecosystem it means the end user can easily use the payment to get the service. It unlocks so many things.”

It also helps keep the user within that platform or ecosystem which is, of course, the ultimate aim. With the big three fighting for users and their precious times the main challenges for each of these internet giants is simple: users.

Chen says, “The challenges are similar. Traffic and users are vital. How to have users’ loyalty? In the digital economy, everything changes so fast. Media giants are seizing each and every opportunity to build the empire, develop sustainable product and keep users staying in the system.”

This article is the first in a series about the BAT (Baidu, Alibaba and Tencent) Chinese tech giants. Other articles in the series include:

Is Baidu’s technology bet making it less relevant to marketers?

Alibaba transforms ecommerce into entertainment as it repositions the company as an economy

Tencent’s mission to attract global users to its entertainment ecosystem

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