Tencent Flexes Its Muscles and Targets Alibaba

The news that Tencent will both take a stake in and partner with fellow Chinese company JD.com will probably not spark too much interest in the West but it is emblematic of the zeitgeist of the new technology-enabled business world.

Tencent runs a huge web portal and has holdings in e-commerce, advertising, messaging, entertainment and mobile telephony. JD.com is China’s second largest online retailer. Their combination is based on a simple strategy: Get Alibaba. That is, create a pincer movement around the Chinese colossus that is changing the way that selling and distribution works locally and, increasingly, across the world.

The synergies are obvious. Tencent can give JD.com star billing on its services that include the mighty WeChat messaging service that some experts believe is worth considerably more than WhatsApp, which sold to Facebook recently for an eye-popping $19bn.

Alibaba with its unfathomable reach into Chinese retailing and consumer-to-consumer exchanges remains the 800-pound gorilla in this space but its dominance will only encourage others to gang up on it. And its rivals are not small, even if their reputations in the West are. Tencent is valued at about $140bn, for example.

Also, Alibaba’s pending IPO is likely to reveal more about the company and the value of its properties, sparking more interest from the West. Alibaba has been quietly building up its international interests for some time now but the float will undoubtedly spark far more media coverage and comparisons with US giants like Amazon, eBay and Etsy.

A successful market debut will obviously provide Alibaba with the wealth to invest more in international operations. Tencent also has ambitious plans here. Taken together, as China’s internet stars flex their muscles we might well be set for huge coming together that demonstrates to even the dumbest observers that true globalisation, aided by internet ubiquity, will have a seismic effect on e-commerce and beyond.


Martin Veitch is Editorial Director at IDG Connect


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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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