BAT：中国网霸三国志
China’s internet titans focus on staying ahead of mobile revolution (803 words)

by Charles Clover, November 3, 2014 11:22 pm

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The listing of Alibaba in New York in September created the world’s second-largest internet company by market capitalisation, behind Google. This did not happen by accident. Of the top 10 internet companies in the world, ranked by market cap, three are Chinese, and the rest are from the US.

Together, Baidu, Alibaba and Tencent form what is know in China as “BAT”. These economic juggernauts that have come to dominate the internet in China are operating almost along the lines of Japan’s keiretsu, which are alliances of businesses with similar interests or that have shareholdings in one another. They are also rapidly branching out into offline sectors, such as transport, travel, retail and banking.

Whether the rapid growth of the Chinese internet is just a bubble or a stable trend is open to question. However, for the time being at least, BAT has become the nucleus of an internet industry that is starting to rival the US, creating what is essentially a US-China duopoly. The three Chinese companies also benefit from what has become known as the “Great Firewall”, as most of the top US companies, such as Google, Facebook and Twitter, are excluded from operating in China.

However, no Chinese internet company has yet made the leap from China to become a global brand. For now, it is enough for them be dominant in China, which had 632m internet users as of June, 527m of whom go online using mobile devices. The potential of the forecast consumption boom, as China moves from an investment-driven economy to a consumption-driven one, is enough to attract investments such as the $25bn sunk into Alibaba in its initial public offering, the largest ever.

The internet is the most dynamic part of China’s budding private sector, though it remains solidly under the control of the state. Foreigners hold large shareholdings in Alibaba, Tencent and Baidu and dozens of other internet companies. But these stakes are largely theoretical at best and owned via “variable interest entities”, or VIEs, which guarantee a payment stream from, but not ownership of, the licence-holding vehicles in China. These VIE’s are technically illegal, though Chinese courts turn a blind eye to the practice, and owners know their large holding only exists thanks to the tacit consent of the state.

Nimble private internet companies, able to dance circles around the inefficient state-owned enterprises, have begun impromptu liberalising of whole sectors such as financial services. Alibaba’s fund company Yu’e Bao is China’s biggest online money market fund, with Rmb574bn ($93.8bn) worth of assets.

The internet is a phenomenal wealth generator. Five of the 10 richest men in China are tech moguls, up from none three years ago, according to the Hurun China Rich List, which tracks wealthy individuals. In September, Alibaba founder Jack Ma joined the list in first place and became one of the wealthiest men in the world, with a 7.8 per cent stake in a $230bn company.

Competition between internet companies is fierce, however. With the entire industry switching from desktop devices to mobile ones, many companies risk being left behind if they don’t have a “killer app” that will act as a gateway for mobile users.

Alibaba has been searching for just such a feature to challenge the currently undisputed leadership of Tencent, whose WeChat instant messenger has 350m monthly users. WeChat and Tencent’s other messenger, QQ, are the two most popular mobile apps in China, according to iResearch, a Beijing-based internet research firm.

In June, Alibaba bought UCWeb, a popular mobile browser company, and the two have developed Shenme, a mobile search engine. They are also working with Quixey, a US-based company in which Alibaba has invested, to design a mobile gateway using Quixey’s app search engine. Francis Bea of PapayaMobile, a Chinese mobile technology company, says Alibaba is attempting to mirror Tencent’s success with WeChat. He says: “In as highly competitive a market as China, there is potential for the mobile internet to disrupt established internet players if they don’t manage the transition from desktop to mobile.”

Alibaba has spent an estimated $6bn-$8bn in the space of a year on full acquisitions of, or investments in, companies including mobile providers, chain stores, an internet TV company, a maker of electrical appliances, a movie producer, a digital broadcaster and a professional Chinese football team.

While attention has focused on Alibaba’s acquisitions, Tencent and Baidu have been on similar spending sprees. Baidu is betting that its stake in Qunar, China’s top travel website by users, and mobile app store 91Wireless.com, will complement its popular search engine to carry it into the mobile age. Tencent has taken a stake in JD.com, China’s second-largest ecommerce platform, and mobile-friendly companies such as restaurant review site Dianping and South Korea’s CJ Games.