"As Alibaba and Tencent compete for future fortunes in profits, both empires know success means winning the hearts and minds of China's middle class."
The storied rivalry between Alibaba and Tencent continues to rage across digital technologies and apps throughout China. The digital transformation set into motion by Jack Ma and Pony Ma, the founders and spiritual forces behind the two e-commerce juggernauts, is accelerated by an intense competition to win China's middle class.
The stakes are high. China's middle class is expected to increase from 430 to 780 million by the mid-2020s, a population largely represented by urban residents who are tech-savvy and conditioned to shopping online for everything from cosmetics to electronics.1
An Emerging Centralized Cybersphere
There was a time when Alibaba and Tencent kept their distance from each other. Alibaba focused on driving e-commerce through its mega-popular site Taobao, and Tencent dedicated its energy to WeChat, which has more than 1 billion active users.2 However, as China's population — like the rest of the world — became increasingly and inextricably integrated into the digital realm, the once comfortable boundaries separating the two empires began shrinking. Middle-class consumers desired ways to centralize the fragmented aspects of their digital lives — from banking, e-wallets and financial services to travel itineraries, online shopping accounts and communication platforms.
Today, Chinese consumers have to decide which brand of internet bests serves their particular needs: the Alibaba incarnation or the Tencent one. The decision is critical to both businesses. After all, once a consumer commits to an online banking, shopping and communications environment, loyalty remains high due to the inconvenience of switching accounts and changing contact information. For Alibaba and Tencent, first-time adoption is key. Ultimately, individual consumers will determine which version best streamlines the sprawling tentacles of the internet.
Two Powers, Two Divergent Cultures & Strategies
The internal cultures and strategies of each company are as different as the personalities of their founders. Alibaba still embodies the sensibility of the outspoken Jack Ma, who has returned to his teaching roots and more philanthropic work; Alibaba seeks to acquire more influence by purchasing significant, controlling stakes in affiliates to complement its well-known e-commerce companies, such as Fliggy, Tmall, Hema Grocery and the popular online payment services provider Ant Financial. Tencent, however, pursues a broader approach by securing minority stakes in a wide range of businesses that offer varying degrees of alignment with its flagship, WeChat, the objective being to establish relationships that will open doors for its technologies.3
Both strategies are ultimately designed to engage China's middle class, which increasingly expects high-quality products offering reliability, convenience and personality. Empowered with armies of cute cartoon mascots and sophisticated marketing strategies, the Alibaba vs. Tencent rivalry has changed the digital marketing landscape in China. While each company differentiates itself from the other through internal cultures, strategic planning and divergent brand identities, they have the Chinese middle-class marketplace in common — and this shared interest has led Alibaba and Tencent deep into Chinese traditions, culture and spending behaviors.
Customs & Traditions: The Digital Gateway to China's Middle Class
The Game-Changing Red Envelope Hongbao Campaign
In 2014, WeChat launched the Red Envelope campaign, which quickly became a powerful example of how harmoniously new technologies can assimilate into human dynamics. The initiative capitalized on the centuries-old Chinese tradition of offering red envelopes containing cash to family and friends on holidays, such as New Years and other celebrated occasions. The campaign was perfectly timed for a middle class in China that had unprecedented wealth, spending power and a growing obsession for digital technologies and devices. China, a nation renowned for celebrating its heritage and ancient traditions, fully embraced digital transformation into its culture and consciousness.
Alibaba, in response, launched its own Red Envelope campaigns that, like the WeChat campaigns, featured virtual money that could be distributed to individuals or groups — facilitating transactions among friends and family members at home, as well as colleagues at the workplace. The shift from cash offerings to digital currency was swift and revolutionary.
Today, both brands are using cutting-edge technologies, like AI, to gamify payments and customs tied to this historic tradition. Together, Alibaba and Tencent have forever influenced how Chinese families and communities experience Hongbao — a cultural inflection point for the cybersphere and the real world.
The Battle for Single's Day
As Alibaba and Tencent compete for China's middle class, cultural traditions beyond Hongbao have become effective consumer engagement opportunities. Single's Day, 11 November, China's most popular shopping day, is celebrated by both young Chinese singles and those in meaningful relationships. (The date 11/11 looks like four single people.) The holiday, which began in 1993, has exploded into the world's most lucrative online shopping event largely due to Alibaba's ability to leverage the holiday, beginning in 2009. In 2017, Alibaba's Single's Day sales garnered a record-setting $25.3 billion.4
Though Single's Day has been mostly ignored by luxury brands that craft their images around exclusivity and quality, high-end fashion brands and luxury products are now embracing the holiday by selling discounted merchandise through their WeChat mini-stores on 11/11. WeChat's reach provides these upscale brands with a powerful platform to advertise their products and sell to customers.5 Though Single's Day still belongs to Alibaba, WeChat will certainly explore ways to gain prominence in the world's most profitable 24 hours.
As Alibaba and Tencent compete for future fortunes in profits, both empires know success means winning the hearts and minds of China's growing middle class. As middle classes in countries around the world continue to expand and strengthen their purchasing power, Alibaba and Tencent demonstrate that the key to creating unprecedented growth opportunities is understanding the power of people.
1Babones, Salvatore. "China's Middle Class Is Pulling Up the Ladder Behind Itself." Foreign Policy, 1 Feb. 2018, https://foreignpolicy.com/2018/02/01/chinas-middle-class-is-pulling-up-the-ladder-behind-itself/
2Hollander, Rayna. "WeChat Has Hit 1 Billion Monthly Active Users." Business Insider, 6 Mar. 2018, https://www.businessinsider.com/wechat-has-hit-1-billion-monthly-active-users-2018-3.
3Lashinsky, Adam. "Alibaba v. Tencent: The Battle for Supremacy in China." https://fortune.com/longform/alibaba-tencent-china-internet/.
4Lashinsky, Adam. "Alibaba v. Tencent: The Battle for Supremacy in China." https://fortune.com/longform/alibaba-tencent-china-internet/
5Pan, Yiling. "4 Takeaways for Luxury Brands from China's 2017 Singles Day Bonanza." Jing Daily, 14 Nov. 2017, https://jingdaily.com/4-takeaways-2017-singles-day-bonanza/