China

Young Chinese Upstart Douyin Could Be The Solution In Alibaba’s War With Tencent

Despite the fact that Alibaba and Tencent are of different camps, with the former dominating China’s e-commerce sector, and the latter being prominently known for China’s gaming and social platforms, both tech giants have been converging and competing in many new territories.

They have even joined the exclusive US$500 billion market value club in end-January this year.

E-commerce giant Alibaba has tried many times to dip its toes into the Tencent-dominated social media sector, with failed attempts.

On the other hand, Tencent too had failed a few times in running its own e-commerce initiatives, including a C2C market similar to Taobao.com.

It then turned to invest in JD and a slew of local supermarket chains, and still remained relevant in China’s e-commerce sector.

Douyin Joins The Battle 

Alibaba vs Tencent / Image Credit: Financial Times

In this increasingly heated competition between two of the largest Chinese tech behemoths, a startup suddenly ascended quickly and became strong enough to challenge Tencent’s social media preeminence.

As a result, the startup, namely Douyin, has been hunted by Tencent for being a formidable rival.

Douyin and Tencent took each other to court as their competition escalated, while Alibaba voiced its open support for Douyin.

In fact, Douyin has collaborated with Alibaba on the social e-commerce front, and some industry insiders believe that Alibaba will stand to benefit should it acquire Douyin.

The startup can help to complement its social media and networking business, and help the company to ride on the social shopping trend, among other reasons.

With that, this article will explore and explain these reasons:

Why does Alibaba want to get into social media?

Jack Ma, founder of Alibaba / Image Credit: Xinhua

China’s largest e-commerce giant Alibaba has long seen the value of social media and the push into social media and entertainment has resonated with China’s young people.

For instance, Alibaba’s Taobao mobile app added social and entertainment features over the last few years prior to June 2016 to keep people on the app longer.

This strategy turned out to be an overwhelming success, with Taobao’s monthly mobile active users increasing 39% to 427 million and mobile revenue, hitting a new high of US$2.6 billion in the June quarter of 2016.

However, its launch into the social media business was fraught with difficulties as they failed a couple of times, from Taojianghu to the most recent Laiwang, Alibaba’s instant messaging service.

The latter was created in mind to take on Tencent’s WeChat, but it struggled to gain traction and failed miserably.

As of now, Tencent’s WeChat monthly active users have exceeded the 1 billion mark.

Another case in point could be Alibaba’s investment into Momo, one of the largest social networking services.

But this too didn’t work well, with Alibaba selling its shares in Momo by the end of 2016, as both companies seemed to grow apart. There were no synergies to be gained with Alibaba’s core business.

While this journey to dabble into the social media sector is met with many stumbling blocks, it is clear that the right social media fit would be very useful for the future growth of the e-commerce giant.

Why is Douyin a good fit?

Image Credit: Technode

Douyin is the latest and most formidable rival to Tencent’s social media empire.

Bursting into the social media scene in September 2016, Douyin has enjoyed a meteoric rise and was already ranked as the number 1 short video app in China by February this year.

With robust editing capabilities, background music and special effects to create entertaining videos, the short-video app has become lethally addictive to the young Chinese crowd.

As a matter of fact, more than 40% of its users are aged from 24 to 30 – the same young crowd that Alibaba is looking to target.

Currently, Douyin’s DAU in China has already exceeded the 150 million mark and its MAU stands at a staggering 300 million.

Tik Tok, its international version app, also proved to be an instant hit as it became the most downloaded non-game Apple iOS app globally by Q1 2018.

In spite of the overwhelming success, like most social media platforms, it is also exploring other channels to monetize its online traffic.

Perhaps, social e-commerce could be the answer.

Social e-commerce is the combination of social media to support social interaction and user contributions to assist in the e-commerce process of buying and selling products and services online.

Unsurprisingly, Douyin is already in close partnership with Alibaba.

The go-to short video app, Douyin, has moved to monetize its spectacular growth in user traffic by integrating with Alibaba’s platform.

A shopping cart logo can now allow users of Douyin app to buy goods ranging from food, stationery to cosmetics on Taobao and Tmall platforms.

Considering Alibaba’s giant e-commerce system and the incredible popularity of Douyin, it’s likely to have more opportunities for further collaboration in the realm of social e-commerce.

Interestingly, as if to draw Douyin and Alibaba a tad closer, the uncontrollable feud between Tencent and ByteDance Technology, the operator of popular news aggregator Jinri Toutiao and short-video app Douyin, escalated to a new level in early June this year and have since reached the courts of Beijing.

This probably began when Douyin users got their short videos removed on WeChat in the name of “inappropriate content” – a possible reaction when Tencent felt the material threat from Douyin.

In addition to this, Tencent has revived its own short video app, Weishi, and even began offering a new filter effect a month later, in a move to improve its short video services.

In light of this, Douyin might also need Alibaba, in its escalating face-off with Tencent.

An enemy’s enemy is a friend, in that case, as Tencent sort of pushes Douyin and Toutiao to the Alibaba’s camp.

Given the aforementioned points, Douyin might indeed be the key to Alibaba’s push into social media and it could also look to benefit from wider monetization avenues from its booming online traffic.

Furthermore, a strong backer like Alibaba could go a long way against Tencent’s relentless attempts at deterring Douyin’s further growth.

Lu Zhenwang of Wanqing Consultancy, an internet strategy firm, also once commented that short clips of people dancing could be a strong weapon for both Alibaba and Tencent to reach out to younger consumers, especially those living in smaller cities.

This article is written by Robin Moh and edited by Ben Jiang; and was first published on Kr ASIA.

Featured Image Credit: South China Morning Post 

 

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