Preamble - Tencent, Alibaba and Baidu dominate China's Internet
According to a Wikipedia analysis
of the world's largest Internet companies based on 2015 revenue and 2013
capitalisation, Tencent, Alibaba and Baidu ranked 4th, 5th and 6th,
respectively, after Amazon, Google and Facebook. Their collective
capitalisations stated in the review added to about the same as No. 2 Google,
although their collective revenue was only just over half of Google's and they
collectively employed about 50% more people. For the moment, the comparison
lacks point since the Chinese and U.S. companies hardly meet commercially.
Amazon, for instance, over more than a decade has struggled to compete with
Alibaba's Taobao and Tmall online e-commerce shopping sites, and according to
analysts still has no more than a 1-3% market share in China and is now much
more interested in India.
Since 2009 Facebook has been mainly
banned in China, although an article of November 2016 in the New York Times ('Facebook
said to develop censorship tool to get back into China') described energetic
efforts by Mark Zuckerberg to solve that problem, including several visits to
China, learning some Mandarin and more crucially developing internal censorship
software that would block certain sites in certain regions. Facebook still
retains an office in Beijing and apparently continues to provide some
business-side services.
Google also quit the Chinese retail
market in 2010 (but still has offices in Beijing and Shanghai housing a mix of
engineers and support staff that help Chinese companies sell ads that reach
foreign Google users, and is said to be continuing to work with Chinese banks
to enable the use of its apps overseas), but equally has been searching for ways
to effectively and honourably return. In early October 2016 at a press
conference in Beijing, a Bloomberg reporter asked Ren Xianliang, deputy
director of the Cyberspace Administration of China (which oversees Internet
governance), if the government would permit the two companies to re-enter the
market, and was told they could do so providing they obeyed Chinese laws (hardly
a surprising reply and one Chinese companies would equally expect to receive in
the U.S.).
For the moment these three Chinese
Internet companies, and several other smaller ones such as JD Com (with a
market cap of more than $36 billion and recently acquired Walmart's e-commerce
business in China), Sohu, Qihoo 360 Technology, Netease, CTrip, VIpshop
Holdings and Suning (which a mid-2016 China Daily report said made up China's
Top 10 in this sector), all compete with each other. Given the Chinese
economy's ferocious GDP growth-rate of 6.5% a year (which if maintained implies
a doubling of an already huge economy within 12 years), that competition is
proportionately ferocious and made even more so due to the fact that in a
social structure that lacks many retail facilities taken for granted in the
west, such as high-street banks and nationwide bricks and mortar retail outlets,
e-commerce is proportionately much more important in China than in most
developed countries. In addition, China is a very technically ambitious country
which has clear targets of becoming a world leader in most modern technologies
within a decade or so. Consequently, these companies are in a remarkable
business frenzy, growing fast, diversifying widely and innovating as fast as
they can manage. Diversification directions include news portals, movies,
online books, banking and AI.
Recent news about Chinese
Internet companies
Tencent, having passed Alibaba in capitalisation, now the
4th largest Internet company
On March 22nd Chinese Internet
giant Tencent Holdings of Shenzhen, the world's fourth largest Internet and world's
largest gaming company founded in 1998 by its current CEO and chairman Ma
Huateng (or Pony Ma), and which overtook Alibaba in capitalisation in 2015, reported:
·
Revenue up 48% YoY to
RMB 151.9 billion ($21.9 billion) in 2016, with Q4 revenue up 44%.
·
Net profit up 43% to
RMB 41 billion（$5.9 billion), with Q4
profit of RMB 10.5 billion ($1.5
billion), but below an expected RMB 11 billion projected average by analysts.
·
Monthly users for its
WeChat free mobile communications voice and text service (known in China as
Weixin) up to 889 million.
·
That it was recently
ranked as the top mobile publisher of 2016 based on revenue, ahead of Supercell
of Helsinki at No.2 (in June 2016 Tencent announced it had agreed to pay $8.6
billion, mostly to Softbank, which owns 72.7% of the company, to acquire 84% of
Supercell, with revenue in 2015 of Eurs 2.11 billion).
·
Online games revenue in
Q4 2016 of RMB 18.5 billion, including smartphone games revenue of RMB 10.7
billion ($1.55 billion).
·
Online advertising
sales of RMB 8.3 billion.
·
That Weixin Pay, a
payment option integrated into WeChat, had reached 600 million monthly users
and reported a peak 760,000 'red packets' (e-gifts) per second (and a total of
46 billion overall) during the recent Chinese New Year period. WeChat's payment
network with an estimated 33% market share domestically is beginning to become
a serious threat to the Alipay service, currently China’s dominant digital
payment system owned by Yahoo, SoftBank and Alibaba, with an estimated 55%
share.
·
The introduction in
January 2017 of a WeChat feature called Mini Apps, which are lite versions of
certain apps such as for buying tickets or shopping or hiring a Mobike, that
users can access by scanning a QR code without having to download and install
the full version of the app.
On March 24th Nvidia of Santa
Clara, California reported that Tencent Cloud would integrate its GPU computing
and deep learning platform, including its P100 and P40 accelerators, into its
public cloud computing platform.
To get an idea of the speed of
development, one only has to look at Tencent's announcements in March 2017, as
follows:
·
On March 3rd Ma
Huateng, China's fourth richest man, speaking at a press conference before the
National People’s Congress was due to set its agenda, proposed the setting up
of a world-class technology zone in southern China that would include the
financial centre of Hong Kong and gambling city of Macau, allied to the
manufacturing skills of Shenzhen, to preside over the global tech revolution of
the future.
·
On March 23rd Tencent
said it was planning an IPO of up to $500 million in Hong Kong of its China
Reading e-book business to enable it to increase spending on payments and
content to enhance its WeChat service.
·
Also on March 23rd, Zhang
Tong, the newly appointed director of Tencent's 250-strong AI unit, gave a
press conference in which he outlined the unit's strategy and objectives. The
group will work initially on speech recognition to enable machines to converse
with human beings and on datamining of commercial information and insight
available in the WeChat and QQ instant messaging archives; the team also works
on content generation, including creating automated news stories, photos and
music. Ma Huateng said the company may also explore AI technology for
driverless cars and online health care in the future.
·
On March 23rd it was also
announced that Kuaishou, a Chinese video streaming service popular with rural
communities and migrant workers, and which claims 50 million daily active
users, had raised $350 million in a funding round led by Tencent supported by
Baidu.
