PART 3 : Comprehensive Cases
AMITY
RESEARCH CENTERS HEADQUARTER
Case S Alibaba versus Tencent: The Battle for Chinas M-Commerce Space

BANGALORE
Abstract: Mobile e-commerce or m-commerce was growing fast in China. By 2018, China was anticipated to rank as the second largest m-commerce market in the world. The rising m-commerce market had lured many Internet players, including Chinese web giants Tencent and Alibaba. Tencent, which started off as an instant messaging platform in 1998, had gradually grown into a leading Internet service portal in the country. Alibaba, which began its business in 1999 as an online B2B model, gradually adopted B2C and C2C business models and was ranked as the leading player in the Chinese e-commerce market. Since October 2013, both Alibaba and Tencent had been involved in various frenzied acquisitions to outpace each other in the online markets particularly in the m-commerce segment. The rivalry was more visible in 2014 particularly with the taxi-calling apps Didi Dache backed by Tencent and Kuadi Dache of Alibaba. The quick shift in consumers behavior from desktop to mobile devices, coupled with the development of mobile Internet further intensified the competition between the Internet giants in the country. In 2014, Tencent launched a mobile payment platform, and more than 200 million users signed up for the service within 15 days. In an effort to stave off competition, Alibaba also adopted several strategies. Against this background, it remained to be seen who, ultimately, would win the battle in Chinas m-commerce space.
Pedagogical Objectives
The case study helps to understand and analyze:
The m-commerce market in China.
The rivalry between Alibaba and Tencent in Chinas m-commerce market. The impact of rival in reviving the countrys m-commerce market.
Case Study
-In China shopping is a social activity. You want to tell friends about it, recommend it—its a smartphone activity, and whoever owns that organizational ability also has a hold over how a person shops.
—FRANK LAVIN
CEO, Export Now2
This case was written by Dr. Suchitra Mohanty, Amity Research Centers Headquarters, Bangalore. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from published sources. 0 2014, Amity Research Centers Headquarters, Bangalore.
No part of this publication may be copied, stored, transmitted, reproduced, or distributed in any form or medium whatsoever without the permission of the copyright ownelü
I Adam Jourdan, -As Giant U.S. IPO Nears, Alibabas China E-commerce Crown Slips,- http://www.reuters.com/article/2() 14/03/17/us-chma-ecommerce-idUSBREA2G04Z20140317, March 17, 2014.
2Export Now offered a group of interrelated online services to the customers that facilitated export and sales of various items on the web. 0 Amity Research Centers HQ, Bangalore. All rights reserved.
-The penguin [Tencents corporate mascot] has walked out of the Antarctic. They are trying to adapt to hot weather, and toforce the world to adapt io their preferred conditions too. It is time for Ali to hit out, either on the offensive or the defensive.
JACK MA
Founder, Alibaba
-The wind is blowing against Alibaba and the biggest risk is coming from the mobile sector. ... Firms are all lining up—the school ofTencent or the school ofAlibaba—and the camps are forming.„4
ZHANG CHENHAO
Executive Director, Gold Sand Capital5
Tencent, one of the most successful Internet players in the country, was introduced by Huateng Ma in 1998, and Alibaba, the key player in the Chinese e-commerce market, was founded by Jack Ma (Ma) in 1999. 6 Alibaba, which started its business as an online B2B model, had gradually adopted B2C and C2C business models and was known as the leading e-commerce portal in China. Alibaba had launched online business platforms such as Taobao, Tmall, group buying platform Juhuasuan and Aliexpress, and so on. Tencent had also introduced a variety of social platforms, including QQ, WeChat, QQ games, Qzone, and so on.8
The Chinese m-commerce market was growing at a faster rate. In 2014, out of 618 million 10 Internet users, around 80 percent were accessing the web on mobile phones; 85 percent were interested in buying various products through Internetenabled mobile handsets. ll Besides, China was anticipated to rank as the second largest mobile commerce (m-commerce) market in the world after the United States by 2018. 12 The rising m-commerce market coupled with the quick shift in consumers preferences toward mobile shopping and the
3
Jiying Chen and Zhihui Xu, -Digital Warfare,- http://www.newschinamag .com/magazine/digital-warfare, April 2014.
4 As Giant U.S. IPO Nears, Alibabas China E-commerce Crown Slips,- op. cit.
5
Gold Sand Capital was one of the popular e-commerce investment advisory firms.
6Kim Gittleson, -Tencent and Alibaba Battle for Internet Dominance in
China,- http://www.bbc.com/news/business-26540666, March 18, 2014. -Company Overview,- http://news.alibaba.com/specials/aboutalibaba/ aligroup/index.html.
8-About Tencent,- http://www, tencent.com/en-us/at/abouttencent.shtml.

IDC: Mobile E-Commerce to Become the Focus of Competition in Chinese E-Commerce Market,- http://www.idc.com/getdoc.jsp?containerld= prCN24764014, March 25, 2014.
10,Tencent and Alibaba Battle for [nternet Dominance in China,- op. cit. -IDC: Mobile E-Commerce to Become the Focus of Competition in Chinese E-Commerce Market,- op. cit.
12M1chelle Evans, -Chinas M-Commerce Market to Triple by 2018,- http:// blog.euromonitor.com/2() 14/01/chinas-m-commerce-market-to-triple-by-2() 18
.html, January 3. 2014.
335

$90,000
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
0
2010 2011 2012 2013 2014 2015
Mobile Commerce Mobile Commerce As A % Ecommerce

Source: John Heggestuen, -Chinas Smartphone Explosion: The Top Opportunities in the Worlds Largest Mobile Market,- http://www.businessinsider.in/Chinas-Smartphone-Explosion-The-Top-Opportunities-InThe-Worlds-Largest-Mobile-Market/articleshow/24949669.cms, October 30, 2013.

EXHIBIT 1 China: Growth of M-Commerce
development of mobile Internet further attracted many Internet players toward the Chinese m-commerce market.
In 2014, Tencent launched a mobile payment platform, and more than 200 million users signed up for the service within to the United States. Within five years (2014—2018), the size of the m-commerce market was forecasted to increase by more than three times in the country. According to the projections of Euromonitor International, the size of the m-commerce market
would touch $134.3 billion 18 in the United States and $123.8 billion in China by 2018. Besides, China had the largest number of mobile subscribers as well as smartphone users in the world, which further provided remarkable opportunity for mcommerce in the Asian country 19 (Exhibit Il).
In 2013, IDC21 estimated that more than 360 million smartphones were purchased by Chinese consumers. According to the China Internet Network Center22 (CNNIC), as of June 2013, around 78.5 percent of the Chinese netizens had surfed the Internet through their handsets, which was comparatively higher than the people who visited the web on desktops (69.5%) and laptops (46.9%). Moreover, the rapid developments in 3G network with 300 million 3G subscribers, the widely accessible Wi-Fi spots in the country, along with the reasonably priced handsets acted as a fuel for the growth of m-commerce in China.24 Mobile purchasing aligns with the
181bid. 191bid.
EXHIBIT 11 M-Commerce in the Asia Pacific
China
Thailand
South Korea
India
Indonesia
Taiwan
Hong Kong
Vietnam
Philippines Malaysia
Singapore
Australia
Japan
New Zealand
0 10 20 30 40 50 60 70
Source: Jim Erickson, -Whats Driving Chinas M-Commerce Boom [Charts],- http://www.alizila.com/ whats-driving-chinas-m-commerce-boom-charts, February 26, 2014.
rising use of consumers, is proportion of e-commerce critics projections, Mobile commerce By the end of 2013, Chinas mobile commerce market—e-commerce transacted on smartphones or tablets—will reach $24.2 billion In value and account for I I percent of all e-commerce, a proportion that is on par with the U.S. market. Mobile transactions and payments Sixty-mne percent of Chinese consumers said that they had purchased a product or service with their smafiphone, compared with 46 percent m the United States.
Mobile advertising Mobile e-commerce will account for $2.1 billion tn spending or 13 percent of all online ad spending m China this year. Thats also on par with U.S. levels. (In the first half of 2013, U.S. online ad spending was 15 percent mobile.)
Smartphones China is currently responsible for 38 percent of global smartphone shipments. The country is near the smartphone tipping point. In just over a year, smartphone subscriptions will outpace feature phone shipments.
Mobile platforms Android is dominant. It accounted for 72 percent of smartphone sales compared to Apples 21 percent m the 12 weeks through August 2013.
App stores China is already responsible for
15 percent of global Apple app store downloads.
stage. The fragmented. 26
online rivals in play actively country. 27 The companies monopoly months afAlibaba and to expand market (such handsets, of Gavekal companies had Internet there is more areas
Chinese consumers desire for speed and the convenience for any time shopping.... The trend toward smarter and more functional phones and tablets, coupled with the social media platforms to inform and connect likely to fuel the continued rise in the number and so-called m-commerce transactions in the Chinese
8 market,„25 explained KPMG (Exhibit Ill). However,
1- also pointed out that despite the favorable growth the m-commerce market in China was at a nascent
1- mobile payment market in the country was highly Alibaba, Baidu, and Tencent, the big three n China, popularly known as BAT, were aiming to 1- in the emerging m-commerce market of the Internet giants were ranked among the top ten web in the world (Exhibit IV) and were enjoying a natural
1- in their respective domains. However, for the six ter October 2013, the online rivals, particularly Tencent, were engaged in aggressive acquisitions their businesses in different segments of the as online taxi reservation, online payment through etc.) to compete with each other. Arthur Kroeber Dragonomics stated that, -Before, each of these a distinct sphere, but with the arrival of mobile more and more convergence on a single model, and of overlap. Thats where the battle lines are now.
Jim Erickson. -Whats Driving Chinas M-Commerce Boom [Charts],- http://www.alizila.com/whats-driving-chinas-m-commerce-boom-charts, February 26, 2014.
Chinas M-Commerce Market to Triple by 2018,- op. cit.
Chinese Internet: Mobile Wars,- op. cit. 281bid.
EXHIBIT M-Commerce Growth Opportunities in China
Source: John Heggestuen, -Chinas Smartphone Explosion: The Top Opportunities m the Worlds Largest Mobile Market,- http://www.businessinsider.in/Chinas-Smartphone-ExplosionThe-Top-Opportunities-In-The-Worlds-Largest-Mobile-Market/ articleshow/24949669.cms, October 30, 2013.
EXHIBIT IV Top Ten Internet Players in the World

Global top internet sites
Desktop unique visitors (n)
Jan 2014

.22 1
893
856
705
495
392
355
343
Rising power
Internet
As at Mar 19 2014
Google
Facebook
Amazon
Tencent
Alibaba (est)
Ebay
Baidu

companies
amazon

market cap
407bn
$ 176bn
174bn
$ 136bn
$ 73bn
57bn

Annual % change in desktop unique visitors Jan 2014
38
—4
Sources: Thorson Rounders Distance; Conscious

Source: Charles Clover, -Chinese Internet: Mobile Wars,- http://www.ft.com/intl/cms/s/2/56a160aa-a86f-l le3a946-00144feab7de.html#axzz2wTprNHt8, March 19, 2014.
Alibaba versus Tencent: The Digital War
The Alibaba group, which started its journey in 1999,29 was the largest e-commerce group in China. The company was founded by Jack Ma, a teacher from Hangzhou, China. In 2003, Alibaba introduced Taobao, an online marketplace. In 2008, the group
started Tmall.com as part of Taobao.com and, in 2010, it introduced AliExpress, an online retail marketplace targeted at global customers. Later in 2011, Tmall started working as an independent online marketplace of Alibaba and was ranked largest B2C online platform in China by iResearch. Besides, in February 2014, Taobao was recognized as the leading
30
m-commerce app in the country by Alexa.com. to further strengthen our Internet-based offerings. We believe
However, Tencent, one of the biggest rivals of Alibaba, was an early entrant in the e-commerce space. 34 It was founded in 1998 35 by Huateng Ma with the objective of connecting young users on the Net and introduced the popular instant messenger platform QQ. In 2004, 36 Tencent was listed in the Hong Kong Stock Exchange as Tencent Holdings Limited. Gradually, Tencent introduced other innovative messenger platforms such as WeChat, QQ.com, QQ Games, Qzone, 3g.QQ.com, SoSo, PaiPai, and Tenpay. 37 In 2005, 38 the web firm collaborated with the global search engine leader, Google. The collaboration enabled Tencent to include Google Web Search in its Internetbased services. -Cooperation with Google is part of our efforts

In 2013,31 Alibaba had foraye&iiftöthe online education

marketplace and introduced Tongxue, a vertical site through Taobao. Tongxue offered various online education materials and online videos for different courses in the country. It also offered materials prepared by tutors for various exams, materials for vocational training such as bakery lessons, makeup tips, and so on. Analysts pointed out that the online education market, valued at 72.3 yuan in 2012, was anticipated to reach 174.5 billion yuan by 2015. 32 Alibaba also launched smart TVs in the Chinese market in 2013 with an aim to extend the e-commerce business to the living rooms of the people.33

Company Overview,- op. cit301bid.
31
Jing Meng, -Taobao Launches Online Education Marketplace,- http://www .chinadaily.com.cn/china/2() 13-12/04/content_17152461 .htm, April 12, 2013. 321bid.
33
Kaylene Hong, -Alibaba Launches 55-lnch and 42-lnch Smart TVs in China to Extend E-Commerce into the Living Room,- http://thenextweb.com/ asia/2013/09/ 10/alibaba-launches-55-inch-and-42-inch-smart-tvs-in-china-toextend-e-commerce-into-the-living-room/, September 10, 2013.
Google Web Search will provide our users with a high-quality search experience and increase the stickiness of our user community. In addition, Googles targeted advertising programme, Google AdSense, will contribute to our revenue growth, emphasized David Wallerstein, senior executive VP of Tencent. In the same year, the company also signed an agreement with China Mobile to provide mobile value-added service 161
Mobile Chat. 40 In 2006, QQ reached a new milestone with 20
Tencent and Alibaba Battle for Internet Dominance in China,- op. cit. 351bid.
About Tencent, http://www.tencent.com/en-us/at/abouttencent.shtml. 371bid.

Tencent Announces Alliance with Google in Web Search and Targeted Advertising,- http://www.tencent.com/en-us/content/ir/news/2005/ attachments/20050204.pdf, February 4, 2005. 391bid.
Tencent Signs New 161 Mobile Chat Agreement with China Mobile,- http://www.tencent.com/en-us/content/ir/news/2005/attachments/2005()1 1 8 .pdf, January 18, 2005.

IIS of Alibaba, It was founded of connecting lar instant mested in the Hong lited. Gradually, platforms such QQ.com, SoSo, rm collaborated he collaboration h in its Internetart of our efforts ings. We believe Ith a high-quality of our user comIsing programme, venue growth, ve VP of Tencent. n agreement Ided service milestone with 20
n China,- op. cit. juttencent.shtml.
yarch and Targeted
Nith China Mobile,-
million online users account. By 2014, QQ became the largest messenger platform in the world with more than a billion user
41 accounts.
Earlier in 2012,42 Tencent reorganized its business entity into six subgroups: Corporate Development Group (CDG), Interactive Entertainment Group (IEG), Mobile Internet Group (MIG), Online Media Group (OMG), Social Network Group (SNG) and Technology and Engineering Group (TEG). -Through the reorganization, we hope to unleash the Companys potential capabilities to capture the opportunities of the evolving Internet industry. Our goals are: to strengthen our social networking services, to embrace the expanding global online games market, to extend our presence in mobile Internet, to integrate our online media platforms, to nurture our search business, to build out our e-commerce platforms, and to enhance our capabilities to incubate new businesses. At the same time, we will pool certain of our technology and engineering teams to further develop core technologies and operational platforms so as to better support future business growth, 43 said Huateng Ma.
In 2013,44 Tencent invested around $448 million and entered into a strategic collaboration with Sogou Inc in China. Analysts said that the collaboration further strengthened the position of Tencent on the mobile front. -We believe Sogou is the ideal partner for Tencent to develop search opportunities further within China. This reinforces our open, win—win philosophy of working with leading teams to create innovative products for users, and build a healthy, diversified ecosystem for the industry,- stated Huateng Ma. He further added that, -We have high regard for Sogous strong innovation capabilities and successful execution track record. We are confident that Sogou, after combination with Soso, will deliver superior search experiences to users on our social, browser and content platforms, especially on the mobile front.-
To compete with Alibaba, Tencent also launched its own online education site with the help of QQ 1M in 2013.46 Through the education site, Tencent offered services such as group video chatting, PowerPoint presentations, and so on47 (Exhibit V).

Will the Rivalry Revive the Industry?
-The worlds major tech companies are realizing that having a really popular mobile messenger has simply become table stake for competing in this era of computing.. .. If you want to
411bid.
Tencent Forms Six Busmess Groups to Embrace Future Internet Opportunities,- http://www.tencent.com/en-us/content/ir/news/2() 1 2/ attachments/20120518.pdf, May 1 8, 2()12. 31bid.
-Sohu, Sogou and Tencent Jointly Announce Strategic Cooperation,- http:// ww.tencent.com/en-us/content/ir/news/2013/attachments/20130916. pdf. 51bid.
Xiang Tracey, -Tencent Finally Taps into Online Education Market, with a ive Video Course Feature Added to QQ [M,- http://technode.com/2013/1 1/15/ encent-finally-taps-into-online-education-marketwith-a-live-video-courseeature-added-to-qq-im/, November 2013. Ibid.
play in mobile, you need to have a popular mobile messenger. You dont have one? You dont get to play,„48 stressed Ted Livingston, CEO, Kik Messenger.49 Alibaba, the leading player in the $1.6 trillion Chinese e-commerce market, might have lost its battle with opponent Tencent in Chinas mobile Internet market. ( Tencent had gradually ruled the smartphone screens of the users in the country with the help of its popular social messaging platforms, WeChat and Weixin. Analysts noted that the m-commerce battle between Tencent and Alibaba gained prominence soon after the acquisition of the mobile messaging firms WhatsApp I by Facebook and Viber52 by Rakuten.53 The acquisitions signaled that the mobile messaging platform would play an important role, particularly in users experience in their smartphone screens.54
In China, Alibaba was struggling with its mobile business. The Laiwang mobile messaging app of the company had not shown any remarkable progress so far (both as a chat app and as a mobile gaming portal). By November 2013, Laiwang had registered only 10 million users compared to the 272 million users of WeChat as of September 2013. The WeChat users employed its services for booking taxis, topping up phone credit, investing in wealth management products, and so on through the messaging platform. -WeChat has won China. . Its going to be the dominant application there. Tencent controls the channel, the customer relationship (and) that means they can promote their services and e-commerce offerings to the exclusion and detriment of Alibaba,- said Ben Thompson, technology writer, stratechery.com. Besides Wandoujia, the Chinese app store reported that the games introduced by WeChat were the most-downloaded ones through its app store.55
Alibaba also introduced few interesting promotional measures for Laiwang. For example, it sent a memo to its employees to sign up at least 100 new users to obtain the New Year bonus at Alibaba. 6 Alibaba was also planning to build a mobile gaming platform to compete with rival Tencent in the country. Wang Shuai (Shuai), spokesman for Alibaba, emphasized that the games introduced through the Laiwang platform were mainly to compete with the rival WeChat. -Were unhappy with Tencents monopoly in this industry.... We have to help to fight for a healthy environment for game develop-
„57
ment, explained Shuai.
48
Denny Thomas and Paul Carsten, -Whats Up for Alibabas Mobile App Strategy?- http://in.reuters.com/article/2014/02/24/tech-mobile-alibabaidlNL3NOLQ2NJ20140224, February 25, 2014.
49
An instant messaging application for mobile devices started in 2009.
Whats Up for Alibabas Mobile App Strategy?- op. cit.
51 Facebook acquired WhatsApp in 2014 for $19 billion; it was known as the biggest acquisition in the tech industry.
52Viber was an instant messaging voice-over-Internet application Talmon Marco founded in 2010.
53Rakuten was the largest e-commerce company in Japan on the basis of sales volume.
Whats Up for Allbabas Mobile App Strategy?- op. cit. 551bid.
56-Bloggers Weigh In as the War for Chinas Chatters Gets Dirty,- https://www .youtube.com/watch?v=clsRdDffMgk, October 28, 2013.
57-Whats Up for Alibabas Mobile App Strategy?- op. cit.

EXHIBIT V Alibaba versus Tencent
Alibaba Specification Tencent
Lai wang Messaging WeChat (355 million active users as of March 2014)
Sina Weibo (Alibaba won 18% of Sina Weibo Tencent Weibo
Weibo having 129 million active users)
Tabao (119 million active shopping accounts) C2C Commerce Paipai
Tmall (50.6% market share 2013 2nd Quarter) B2C Commerce Jingdong
Alipay (300 million registered users 3rd Party Payment Tenpay more than the TenPay)
Juhuasuan ( 1/3rd of the daily deal markets) Daily Deals Dianping
Alipay Credit Card Virtual Credit Cards Tenpay Credit Card
Taobao, Qyer Travel Booking E Long, 1711
Kuaide Dache Taxi Hailing Didi Dache (almost twice the market share of Kuaide)
Haier E-Commerce China South City
Logistics
Aliyun, Yahoo Search Sogou, Soso
Aliyun, Kanbox Cloud Storage Weiyun (having 3()() million registered users)
Autonavi Navigation Tencent Map
Aliyun OS Android Rom CyanogenMod
Aliyun App Store App Stores Tencent MyApp
Laiwang, Taobao (as operators) Gaming Tencent Games, Riot Games, Epic Games
Xiaml Music QQ Music (250 million registered users)
Skyworth, Wasu Rainbow, Aliyun OS (2013) Smart TV Le TV, Future TV, Weixin TV
(in 2013)
Tutorgroup, Taobao Tongxue (in April, 2013) Education QQ group (in November, 2013)
Source: Compiled by the author from Paul Bischoff, -Tencent versus Alibaba: A Complete Guide to an Increasingly Fierce Rivalry
(INFOGRAPHIC),- http://www.techinasia.com/tencent-alibaba-complete-guide-increasingly-fierce-rivalry-infographic/, March 19, 2014.

In Tencent invested around HK$ 1.5 billion dollars ($193.5 millions9) in the logistic firm, China South City Holdings. The investment allowed Tencent to obtain around 9.9 percent stake in the logistics firm. The company also had an option to increase its stake up to 13 percent by 2016. Soon after the deal, the shares of Tencent rose more than 5 percent on the Hong Kong stock exchange. Analysts said the China South City deal would support Tencents plans to expand its e-commerce business. -Chinese small-to-medium-sized enterprises have huge demand to expand their businesses online.... Cooperation
Tencent Shares Rise to Record on China South City Deal,- http://www.bbc com/news/business-25754894, January 16, 14.
59 Update I Tencent Grows E-Commerce Ops Via China South City Investment,- http://www.reuters.com/article/2014/01 / 15/tencent-chinasouthcityidUSL3NOKP399201401 15, January 15, 2014.
with China South City enables us to jointly facilitate such enterprises migrating online, utilising China South Citys physical locations and logistics capabilities, revealed Martin Lau Chi Ping, president of Tencent. Besides, both Tencent and China South City were planning to work on online payment services, warehousing, and delivery services. 61 Critics added that until early 2014,62 Alibaba and Tencent were working closely to develop their own area of expertise such as Alibaba on the e-commerce sites and Tencent on the instant messaging services sites. However, during 2014, both Tencent and
Tencent Shares Rise to Record on China South City Deal,- op. cit. 611bid.
62Eric Pfanner, -E-Commerce War Intensifies in China between Rivals Tencent and Alibaba,- http://retail.econonuctimes.indiaumes.com/news/e-commerce/ e-tailing/e-commerce-war-mtenslfies-in-china-between-rivals-tencent-andalibaba/28945144, January 17, 2014.

Alibaba were trying to encroach on each others traditional a 20 percent stake in Dianping, a lifestyle and group buying boundaries. Bryan Wang, an analyst with Forrester Research, _platform to provide services from online to offline. Alibaba

while commenting on Tencents alliance with China South City Holdings, stated that, -Tencent is absolutely trying to get more aggressive in the e-business space, challenging Alibaba, as most of their services are now overlapping.-64
The battle between the Internet giants Tencent and Alibaba to capture the emerging mobile payment market of China became more intense with the cab-calling services. 65 Wang Ran, founder of China eCapital, quoted the rivalry between the two web giants as the -the first battle in the first world war of the Internet.-66 The two popular cab-calling smartphone apps, Didi Dache (Didi) supported by Tencent and Kuaidi Dache (Kuaidi) of Alibaba, were competing with each other to provide cab services through their online booking facilities. Didi proclaimed 12 yuan (US$ I .96) price subsidy to the passengers if the taxi fare was paid by WeChat. Within a few hours, Kuaidi publicly announced that it would reduce the price one yuan more than its rival if the payment were received by Alipay. Alipay was a dominant player in the mobile payment market with almost 300 million registered users. In 2013, Alibaba had earned around 900 billion yuan (US$ 147.7 billion) through mobile payments from 2.78 billion transactions.67
Further, analysts felt that the warfare in the mobile Internet market might be unavoidable due to the increasmg demand of the consumers to be connected all the time. Around 81 percent of the countrys Internet population had browsed the net through mobile phones in 2013. Hu Yanping (Hu), Director of Data Center of China Internet68 (DCCI), further justified that, -Most Chinese netizens are not satisfied in using the Internet sitting down at a table. They want to use it anytime anywhere... This is the reason why the two firms are promoting mobile Internet products. Mobile Internet services will make peoples lives more comfortable and convenient.- Both Alibaba and Tencent were

adopting different approaches to lure the customers to use mobile also acquired AutoNavi, a digital mapping entity that would offer various navigation and location-based solutions to the users through the Net. It would also help the smartphone users in locating their favorite services and products.70
In a sudden turn of events in March 2014, the Peoples Bank of China banned the use of QR codes and virtual credit cards due to security concerns. 71 The suspension of mobile payments through the QR codes and virtual credit cards created a further new hurdle for both Tencent and Alibaba. -This seems to be a knee-jerk reaction by Chinas central bank in response to rising payment security concerns worldwide. ... Certainly this announcement is a big deal for mobile payments and represents the first time the QR code has been thrown into the security spotlight on such a large scale,- remarked concerned Jordan McKee (McKee), an analyst for Yankee Group. However, McKee added that, -I dont anticipate the QR code ban will be long-term. . .. Rather, I suspect the government will investigate the procedures of companies like Alibaba and Tencent and lift the ban, permitted there are no blatant security flaws.„72
Industry analysts predicted that the battle between Alibaba and Tencent would have a significant impact on Chinas m-commerce market and would facilitate a rapid expansion of the mobile Intemet market in the country. -Companies will seek ways to integrate all mobile services to make profits and even change peoples lifestyle, added Hu. Besides, Deloitte released a report 74 and mentioned that, -The adoption of mobile payment is low and application scenarios are limited. The players are very active, but the majority of mobile payment services and products are still m the pre-commercial phase. „75 However, Hu added that the various acquisitions by Alibaba and Tencent were only the first steps toward the development of the mobile Internet market.76 Its too early to say which will top the mobile payment market as two thirds of the market has not been devel-

payments. Money transfer and credit card payment were the mainoped yet,„77 emphasized Hu. attraction of Alipay, whereas Tencent drew the customers for mo-
69 bile payment with its mobile social-networking and game apps.
The m-commerce market in China was still at a nascent stage and upon maturity the m-commerce market would be almost four times the size of the e-commerce market. Besides the cab-calling services, there would be huge competition in associated services such as personal finance products, maps, meal-ordering, social-networking apps, mobile gaming platforms, e-commerce, and so on. In 2014, Tencent also acquired
63,Tencent Shares Rise to Record on China South City Deal,- op. cit. E-Commerce War Intensifies In China between Rivals Tencent and Alibaba,- op. cit.
China Internet Giants on a Collision Course over E-Payments,- http://www March 17, 2014.
66-Chinese Internet: Mobile Wars,- op. cit.
Tencent and Alibabas Mobile Payment War Escalates,- http.•//www wantchinatimes.com/news-subclass-cnt.aspx?id=2() 140223()()0()57&cid= 1 102, February 23, 14.
68Data Center of China Internet was an independent third party institute based in China focused on Internet research and Internet measurement.
Tencent and Alibabas Mobile Payment War Escalates,- op. cit.

Case Questions
1. Give a brief overview of Chinas m-commerce market and its major players.
2. Discuss the competition between Alibaba and Tencent.
3. Discuss the opportunities and challenges for Alibaba and Tencent in Chinas m-commerce market.
70s.Tencent and Alibabas mobile payment war escalates,- op.cit.
71Borison Rebecca, -China banks mpayments ban throws a curveball at Alibaba, Tencent- http://www.mobilecommercedaily.com/china-banksmpayments-ban-highlights-growing-security-concerns, March 18 th 2014 701bid
Tencent and Alibabas mobile payment war escalates,- op.cit. 74Trends and Prospects of Mobile Payment Industry in China 2012-2()15 was a report by Deloitte China that covered the various opportunities and challenges of the Chineses mobile payment market.
Tencent and Alibabas mobile payment war escalates,- op.cit.
76ibid.
77ibid.