Jul
As far as Western consumers are concerned, perhaps those one can consider tech-savvy have heard about this Chinese trio, colloquially referred to as the BAT group: Baidu, Alibaba and Tencent. Everyone else… not so much, despite the fact that roughly 60% of the time spent by Chinese Internet users online ends up being related to a project affiliated with one of these three entities.
Whether we’re talking about the “Google killer” (at least domestically) Baidu, the e-commerce giant Alibaba or the #1 player when it comes to the mobile dimension of the Internet called Tencent, there is a staggering amount of money to be made by servicing the needs of domestic Chinese consumers, so let us briefly refer to each entity:
- Baidu, the search engine giant of China, with its 2018 revenue of almost $15 billion ($14.88 billion, to be more precise). As impressive as the numbers may seem and despite a more than healthy YOY growth rate of 28%, Baidu can be considered the most “tame” entity of the BAT trio. While it is trying to diversify and explore anything from smart home solutions to autonomous vehicles and smart transportation, it has nevertheless been less successful than the other three contenders in this respect
- Alibaba, with its $54.78 in yearly revenue for 2018 that has been facilitated by a growth rate more than two times greater than Baidu’s, makes it clear that it intends to dominate. Leaving revenue numbers aside, the fact that it went from 102 million users on its various retail platforms to 654 million users in one year speaks for itself. Aside from its core online commerce businesses, it’s worth noting that growth across a wide range of sectors has been impressive, for example a 76% YOY growth rate when it comes to its cloud computing segment
- Tencent, with its roughly $45.5 in revenue for 2018, is without a doubt Alibaba’s #1 competitor, with the “AT” dimension of the “BAT” trio leaving Baidu quite a bit behind. Best known for its gaming-related projects (with Tencent being considered the largest company in gaming worldwide) that brought in slightly under a third of its 2018 revenue, Tencent is also expanding into other areas, with for example social media bringing in roughly a fourth of its yearly revenue, an increase of 47% on a YOY basis (thanks to projects such as WeChat, with its over one billion users).
Needless to say, it becomes abundantly clear that we are dealing with a textbook case of sibling rivalry when it comes to Alibaba and Tencent. For example, with China being well on its way to becoming a cashless society in light of the fact that based on recent surveys, roughly 7 out of 10 Chinese citizens no longer consider dealing with physical cash a necessity, the rivalry between Tencent’s WeChat Pay and Alibaba’s Alipay is nothing if not fascinating. Whether we’re talking about ordering food on ELeMe (Tencent) as opposed to doing it on Meituan Waimai (Alibaba) or the more than frequent other examples of rivalry between these two entities, it is noteworthy to put it mildly that not only has China managed to dramatically decrease its dependence on Western companies, there has been and is so much growth that the “domestic player to domestic player” competition is the epitome of fierce.
All things considered, this much is certain: Western players cannot afford not to take not the possibility but downright reality of Chinese future dominance into consideration. With each year that passes, Chinese companies in the tech sphere become more and more sophisticated and while it may currently be tempting to limit oneself to simply living in a bubble which revolves around considering Western entities untouchable… perhaps it would not be the wisest idea in the world.
Of course, there are significant barriers involved and there’s a world of difference between the BAT trio (or other domestic tech companies, for that matter) increasing their revenue dramatically as a result of Chinese market growth and replicating the same trajectory internationally. However, as examples such as the explosive growth of TikTok in the West make clear (and among a remarkably young demographic, mind you)… never say never, especially as far as China is concerned.