The tech industry is used to clashes between corporate rivals. Major conflicts between corporate titans usually result in the emergence of a victorious monopoly like Google, or Facebook. Alibaba vs. Tencent redefines competition between tech giants, in a war so expansive, so intense and so all-encompassing that the result is not a victor, but an invincible duopoly, locked in a titanic struggle to displace one another. Alibaba founder Jack Ma has told employees internally that they must “invade Antarctica” and “kill penguins”, as the flightless bird is the mascot for Tencent. Instead of a clear victor, the battle augments each other’s competitiveness to the point that they stand head and shoulders above any challenger. The impact of this war touches all sectors of the Chinese technology ecosystem, from social media to e-commerce, and mobile payments to bike-sharing. Alibaba and Tencent both boast formidable investment portfolios in a myriad of sectors and geographic locations. As the war has raged for year’s in China, their domestic market, the struggle is set to spill over to key strategic battlegrounds in places like Southeast Asia.

When attempting to fathom the strategic development of many burgeoning sectors in China, it is vital to understand the intricate dynamics of the competition between Alibaba and Tencent. Many western observers know these companies names, but how well do they understand the breadth of each company’s influence? Here we will try to unpack some of the key battles taking place right now in China’s tech space, and how they will influence the future development of the world’s most exciting innovation arena.

Philosophies and Origins

Alibaba:

Founded in 1999 by Jack Ma and a team of 17 colleagues in Ma’s apartment in Hangzhou, Alibaba initially set out to develop a domestic e-commerce marketplace. Fast forward to 2019 and Alibaba Group Holdings has evolved into a multinational conglomerate holding company specializing in e-commerce, retail, Internet, and technology. Founder Jack Ma, somewhat of a celebrity in China for his rise from hometown tour guide to Internet mogul, has instilled a very strong internal culture centered around unity, innovation and ambition. Although Jack Ma recently departed as CEO, his replacement Daniel Zhang is keen on continuing Alibaba’s mission to transform and digitize the Chinese economy. Due to the company’s original DNA in e-commerce, their logistic networks are often seen as a competitive advantage over the more software-centric Tencent. In space of 20 years, Alibaba has grown into a genuinely world-class company who’s scale and influence can rival any firm worldwide.

Tencent:

Tencent was founded in 1998 by Pony Ma and four friends. The social networking and software behemoth began with an ICQ inspired messaging service, QQ. In addition to its original strengths in social networks and gaming, its subsidiaries specialize in various internet technologies, entertainment, and artificial intelligence. The company’s golden egg, social platform WeChat, was launched in 2011. WeChat, that now boasts over 1 billion users, vaulted Tencent into the top echelons of the world’s most valuable and innovative companies. Pony Ma has developed a corporate culture that differs from Alibaba, where Jack Ma valued a united mindset that permeates the entire company. Instead, Tencent’s various business groups engage in ruthless competitions between each other, sharpening their overall competitiveness along the way. The fierce internal competition at Tencent drives disruption across sectors and industries.

Battlegrounds:

Mobile Payments:

WeChat Pay (T) vs Alipay (A)

Alipay and WeChat Pay

Mobile payments are the foundation for much of Chinese society’s transformation into a digital paradise. Enabled by the synergy between QR codes and social networks, the mobile payment space is the most significant battleground where Alibaba and Tencent compete head to head for market control. The battle began following Tencent’s dramatic debut of WeChat Pay, when the company gave out HongBao or “Red Packets” during the Chinese New Year Gala in 2014. WeChat Pay has the competitive advantage of being embedded within WeChat’s platform. This drastically decreases Tencent’s user acquisition costs for its mobile payment services. However, as a later entrant to the space, it has had to displace Alipay’s market dominance. Jack Ma’s revolutionary payment service began in 2004, and evolved with the changing technology. Alipay has tried to maintain its market leadership through innovative programs such as Ant Forest, where users can contribute to environmental initiatives to restore deforestation. Additionally, Alipay has exclusive partnerships with certain merchants, such as 10% off your bill at popular hotpot restaurant Haidilao. Both services are very popular, and users often take advantage of both applications.

Ultimately, WeChat Pay is leading the market with around 600 million users compared to Alipay’s 400 million.

CURRENT LEADER: WeChat Pay (T)

Enterprise Platform:

WeChat Work (T) vs DingTalk (A)

DingTalk

While enterprise software like Slack and Microsoft Teams lead the way as global internal corporate communications platforms, China is dominated by Alibaba’s DingTalk, released in 2014, and Tencent’s WeChat Work, released in 2016. Tencent, once again, leverages its existing massive user base on WeChat to allow for the seamless acquisition of WeChat Work users. By simply linking your existing WeChat account, employees can be digitally integrated into their company. With features including clocking in and out, organization groups, approvals, and logistical support the apps have streamlined the digitization of the workplace.

While Tencent’s advantage comes from its link to regular WeChat, Alibaba’s DingTalk was first on the market, although it received some criticism from users claiming that it gave employers too much control over their employees. DingTalk’s services utilize GPS to track the accuracy of employee’s actions. For example, if you request to go to the doctor, the GPS service on DingTalk can confirm that you are in fact at the location of the hospital and not going out with friends. The “ding” function on DingTalk sends an immediate notification to your phone, with a ready receipt, essentially prompting a quick response to a manager’s request. Discussion of DingTalk on Chinese social media basically agrees that the platform is more conducive to manager’s demands than preserving the autonomy of staff.

DingTalk has partnered with 5 million corporations as of 2017, while WeChat Work boasts a far fewer total, around 17,000.

CURRENT LEADER: DingTalk (A)

Food Delivery:

Meituan Waimai (T) vs. Ele.me (A)

Ele.me(left) and Meituan Waimai(right)

One of the biggest technological revolutions to recently sweep across Chinese society is the widespread proliferation of food delivery services. Transitioning countless offline merchants into online entities with unrivaled connectivity to consumers has created a fierce competition between the country’s two leading services, Meituan Dianping’s Meituan Waimai and Alibaba’s Ele.me. The two offer nearly identical services and merchant selection, with the large majority of their business coming in China’s densely populated urban centers, where economies of scale allow for the easy implementation of high frequency services like food delivery. In terms of market share, Alibaba’s Ele.me is leading with over 53% market share, with Meituan slightly behind at 40%. The battle for supremacy in this area is set to continue, as Meituan’s Hong Kong IPO in 2018 provided a much needed cash injection to support what is a very capital intensive business.

CURRENT LEADER: Ele.me (A)

Bike Sharing:

Mobike (T) vs ofo (A)

ofo(left) and Mobike(right)

The bike-sharing craze hit China’s urban centers hard beginning around 2016. The two firms at the forefront of this mobility revolution were ofo and Mobike. The two companies had radically different management teams, and contrasting development strategies. Mobike would be bought by Tencent-backed Meituan Dianping, while Alibaba would invest directly in ofo. The story of the ensuing battle resulted in a convincing win for Tencent.

Ofo was founded in 2014 by five Peking University graduates, led by CEO Dai Wei. Their project began as a bike-sharing platform specifically designed for Peking University students on campus. Ultimately, ofo expanded way too quickly, and the company eventually went bust by then end of 2018. Meanwhile Mobike, which has been integrated into Meituan Dianping’s ecosystem in an acquisition worth about $2.7 billion, has gone on to capture the leading market share in the bike sharing space. Mobike’s management team was much more experienced and pragmatic compared to the naive and high-minded founders of ofo. Mobike’s orange and silver bikes litter the streets of China’s major cities. As of April of 2018, Mobike had over 48 million active bike users, and that number is sure to be higher now that ofo has virtually bowed out of the market.

CURRENT LEADER: Mobike (T)

Cloud Services:

Tencent Cloud (T) vs AliCloud (A)

China’s cloud computing market has massive potential, as the cloud services market in China are expected to reach just over $100 billion in 2020. In this domestic cloud market, Alibaba’s AliCloud is the clear and undisputed leader. In terms of market share, Alibaba Cloud leads the way with 43%, far ahead of second placed Tencent Cloud at 11.2%. However, Tencent has been gaining ground, as their market share as of 2016 was just 7.4%. Tencent Cloud’s competitive advantage lies in the gaming space. With the impending arrival of widespread 5G wireless networks, cloud gaming has a massive potential to increase the dynamism of the Chinese gaming sector. In fact, 75% of Tencent’s gaming peers choose Tencent Cloud as their preferred partner, given Tencent’s gaming DNA. Despite Tencent’s progress in the cloud sector, Alibaba’s massive scale and “first mover” advantage has firmly entrenched its lead in this space. Tencent will hope that with the advent of cloud gaming, and further internationalization will boost its the prospects of its cloud services going forward.

CURRENT LEADER: Alibaba Cloud (A)

Digital Media & Entertainment:

Youku (A) vs Tencent Video (T)

Since Alibaba’s investment in Youku in 2014, the firm has evolved in an effort to catch up to leaders Tencent Video and also Baidu’s iQiyi. However, Youku’s president Fan Luyuan acknowledged in an interview that the company still has significant room for progress before dethroning incumbents like Tencent Video. Meanwhile, Tencent Video doubled its paying users in less than a year, with QuestMobile reporting that the platform boasted 457 million MAUs, ranking first in the industry. Baidu’s iQiyi is a close second with 442 million MAUs, while Youku lags behind with just 325 million MAUs. Ultimately, Tencent Video is the go-to platform for Chinese content consumers to watch anything from international hits like Game of Thrones to locally produced Chinese variety shows.

CURRENT LEADER: Tencent Video (T)

Mapping:

AMAP (A) vs Tencent Maps (T)

Mobile map applications are absolutely crucial to navigating China’s colossal megacities. There has been significant competition in this space, from AutoNavi, commonly known as Amap, and Tencent Maps. While Baidu Maps also holds significant market share, Amap leads in the mobile mapping space, with over 40 DAUs and over 340 MAUs. Tencent Maps may lag behind in user base, but its competitive advantage lies, as is common with Tencent products, in their relationship to the WeChat ecosystem. Sending locations through WeChat will prompt users to use Tencent Maps more than they perhaps would otherwise. This link to WeChat is likely the driving force behind Tencent Map’s success. However, Amap’s dominates in terms of user base, with everyone from foreigners to Didi drivers preferring Amap’s service.

CURRENT LEADER: Amap (A)

Autonomous Vehicles:

Both Alibaba and Tencent are looking to leverage their competencies in cloud computing, big data processing and IT infrastructure to provide the next generation of autonomous driving technology. Recently, Tencent signed a partnership with BMW to provide digital support and collaborate on research and development with the German automaker, with the goal of pioneering the creation and implementation of autonomous vehicles in China. Meanwhile, Alibaba has signed a partnership with automaker SAIC to provide digital support and smart systems for intelligent vehicles. The partnership between Alibaba and SAIC has spawned Banma in 2015, an autonomous vehicles subsidiary that hopes to create an operating system for driverless cars similar to Google’s Android for smartphones. SAIC is the largest automaker in China. Given the relative infancy of Tencent’s partnership with BMW, it seems that Alibaba’s Banma is further along in its journey to make meaningful contributions to the development on autonomous vehicles. Banma expects 6 million cars in China to be using its software by 2023. Ultimately, both companies are investing heavily in the future of autonomous mobility technology, from developing hardware to software architecture, with the hopes of dominating one of the most exciting frontier technology sectors.

SEE ALSO: Tencent & BMW Signed Strategic MoU to Promote Integration of Digital Platforms

Well-known venture capitalist and expert on Chinese technology, Kai-Fu Lee, has predicted that China will implement widespread autonomous vehicles at a faster pace than the United States. On ethical concerns regarding liability, Lee writes in his best-selling book AI Superpowers, “I believe the Chinese government will see these difficult concerns as important topics to explore, but not as a reason to delay the implementation of technology that will save tens if not hundreds of thousands of lives in the not-too-distant-future.” If China is dominate the future of this technology, expect both Alibaba and Tencent to have significant influence in the industry’s development.

CURRENT LEADER: Unknown- Stay Tuned

Conclusion:

The war will rage on, as both companies look to embrace frontier technologies in general AI, blockchain and smart retail, to name a few. Their differing strategies and corporate cultures will see both companies embark on varying paths trying to reach the same goal. As the competition continues, Alibaba vs Tencent will evolve from a battle to dominate the massive and growing Chinese market into a contest to export their influence onto the global technology scene.