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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