China’s big 3 internet companies are Baidu, Alibaba, and Tencent, also known by the acronym “BAT” for the first letters of the three. The competition for building a better business “Ecosystem” is intensifying, and China is now building one of the world’s biggest Ecosystems over the internet. I would like to summarize the current market situation as of 2015.
What is “Ecosystem”?
“Ecosystem” is a widely adopted buzzword in the high tech industry, meaning a coexisting business world built by a company with platform services and other players such as suppliers, distributors, competitors, customers, etc.
Apple has already built this “ecosystem” around the iPhone with music, movies, applications, e-payment, etc., and a similar situation is emerging in China over the internet. As the internet is becoming explosively popular in China, China’s big 3 internet companies, BAT, are developing their own ecosystems.
Comparison of BAT’s Financial Performance
Here is a summarization of the financial data from 2015. (Source: Bloomberg China)
(Red underline: biggest number among three companies)
（As of 18 Mar 2015)
|71.1 Billion USD||212.3 Billion USD||164.1 Billion USD|
（Convert USD to RMB)
|7.8 Billion USD||8.4 Billion USD||12.6 Billion USD|
|Year over Year||+53.6%||+52.1%||+31%|
（Convert USD to RMB)
|2.1 Billion USD||3.7 Billion USD||3.8 Billion USD|
Roughly summarized, we see that although sales of Alibaba are smaller than those of Tencent, but Alibaba is rated as the best in terms of market value because of their well-balanced growth rate and profit rate.
Comparison of BAT’s Ecosystem
The following table compares BAT main service in each business areas (including capital ties)
(Red underline: top service among three companies. Unused services omitted)
|SNS||Sina Weibo [18% stake]||Wechat (Moments)|
|E-Commerce||Taobao (C2C), Tmall (B2C)||JD.com [15% stake]|
|Search||Baidu||Sogou [36.5% stake]|
|E-Payment||Baidu Wallet||AliPay||Wechat Payment|
|Movie & music||iQiyi, Baidu Music||[Youku Tudou [18% stake]||V.QQ.COM，QQ Music|
|Taxi||Uber [stake]||Didi Dache (* Ref: Extra Chap)|
In the Chinese market, Baidu dominates search engine, Alibaba e-commerce, and Tencent messenger. Each company is developing their own ecosystem around their core business by using the M&A strategy.
Comparison of US and Japan’s Ecosystem
The US ecosystem is monopolized by Goggle, Amazon, and Facebook in search engine, e-commerce and messenger and SNS, respectively, more or less like in China. However, companies in the US do not meddle into one another as would the Chinese.
About the ecosystem in Japan, see below:
|SNS||LINE (Timeline)||Google+||Facebook, Mixi|
|E-Commerce||Yahoo! Shopping||Rakuten Mall||LINE Mall||Amazon|
|E-Payment||Rakuten Edy||LINE Pay||nanaco, WAON, Suica, PayPal|
|Movie & Music||GYAO||LINE Music||Youtube||Prime Music|
As you can see, American companies have penetrated the Japanese market, but there is not one sole dominating company as in other markets. LINE is now beginning to adopt the Ecosystem strategy, as is BAT, so it’s interesting to what ensues.
(Extra) Mobile Taxi Calling App in China
Amidst serious competition for building their Ecosystem, BAT are in an exceptional partnership.
Taxi fares in China are relatively cheap, and there are not enough taxi circulating especially in big cities. Therefore, mobile taxi apps are now becoming popular.
In the past, Tencent bought Didi Dache, Alibaba bought Kuaidi Dache, and Baidu took a stake on Uber. They were competing fiercely in the publicity war, but on the Valentine’s Day of 2015, Didi Dache and Kuaidi Dache merged to create one of the world’s largest taxi calling companies, and dominated the Chinese market (with more than 90% market share). I wonder if this could be against the anti-monopoly law. As of 2015, Uber is still in the Chinese market, but it might be difficult to compete with this huge competitor.
Chinese taxi calling apps follow the American “Sharing Economy” business trend, and is also know O2O (Online to Offline) in China. I had a chance to talk to Didi Dache’s manager before, I might write about that on some other occasion.