China's Internet giants, Tencent to undercut Alibaba with billion chat app users

•  Video: Tencent Aims to Undercut Alibaba With 1B Users 

 
Tencent Holdings Ltd. (700) faces the prospect of losing its position as Asia’s most-valuable Internet company this year after Alibaba Group Holding Ltd. (BABA) goes public. The Shenzhen-based company isn’t going to concede quietly.

Tencent is taking on Alibaba in almost every business related to the Web, from games to security to search. In the latest escalation of the battle, Tencent is expanding in messaging services and using the technology to drive customers to its e-commerce partners -- in a direct challenge to its rival.

The fight exposes a rare vulnerability for Alibaba, which is planning an initial public offering that may be the largest in U.S. history.

Tencent has an enormous lead in messaging, with about a billion users for its QQ and WeChat products, compared with Alibaba’s last target of 100 million for its offerings.

Tencent is projected to report a 52 percent surge in profit when it announces second-quarter results today, bolstered by messaging.

“Tencent is using Mobile QQ and WeChat to take traffic away from Alibaba and direct people to e-commerce platforms backed by itself,” said Bill Fan, a Hong Kong-based analyst at China Securities Co. “Instant messaging hasn’t been Alibaba’s strong point, but it sees the viral effect that Tencent’s app is having so it’s trying to develop similar services.”


Photographer: Brent Lewin/Bloomberg Alibaba Group Holding Ltd., 24 percent owned by Yahoo! Inc., is competing with Tencent... Read More
Tencent’s two technologies let people trade messages over mobile phones and tablets, akin to the WhatsApp service that Facebook Inc. (FB) agreed to acquire this year for $19 billion.

QQ, which began as an instant-messaging service on desktop computers and was repurposed for use on mobile devices, has about 848 million monthly active users. WeChat, known as Weixin in China, has 396 million. (WhatsApp has more than half a billion active users.)

Most Valuable

The success of the messaging services has helped boost Tencent’s market value to about $161 billion, making it the most valuable Internet company in Asia.

Alibaba will compete for that title after it goes public. The latest estimate is that after the IPO the company could be valued at $187 billion, according to a survey of 11 analysts by Bloomberg. Tencent shares declined 0.2 percent as of 9:52 a.m. in Hong Kong trading, while the benchmark Hang Seng Index was unchanged.

Alibaba is trying to close the gap in messaging. In September, it started offering a service called Laiwang. Still, Tencent has continued to expand the features available through its apps to maintain its lead


Photographer: Brent Lewin/Bloomberg
QQ and WeChat helped triple Tencent’s mobile-game revenue to 1.8 billion yuan in the... Read More
“In the latest version of QQ, we have upgraded it to a platform for food, drinking and entertainment, and the number of cities we cover is also expanding,” said Dowson Tong, president of the company’s social network group that oversees QQ, in a recent interview.

Revenue Boost

Tencent has integrated games more tightly into its messaging services to capitalize on the China online gaming market, which IResearch projects will expand to 225 billion yuan by 2017.

QQ and WeChat helped triple Tencent’s mobile-game revenue to 1.8 billion yuan in the first quarter from the previous three months.

That trend likely continued in the second quarter. Tencent’s profit rose to 5.59 billion yuan in the three months ended June, according to the average of 11 analysts’ estimates compiled by Bloomberg.

That would make the second successive quarter with profit growth of more than 50 percent. Earnings climbed 61 percent in the three months ended March 2011.

QQ was the first iconic product billionaire Ma Huateng created at Tencent in 1999, two years after AOL Inc. (AOL)’s messaging service took off.

As more Chinese accessed the Internet, instant messaging became the most popular online app. Ma restructured QQ’s divisions in 2012 to take it mobile and the effort paid off.


Photographer: Brent Lewin/Bloomberg
QQ was the first iconic product billionaire Ma Huateng created at Tencent in 1999, two... Read More
Last year, 83 percent of China’s Internet users subscribed to Mobile QQ and 80 percent to WeChat, compared with Laiwang’s 23 percent, according to a survey among almost 4,000 people by Shanghai-based IResearch in June.

Stake Purchases

Tencent is now leveraging its vast user base to go after a bigger share of the China e-commerce market, which IResearch estimates will more than double from last year to 21.6 trillion yuan ($3.5 trillion) in 2017.

The company in March took a 15 percent stake in JD.com Inc., a direct competitor to Alibaba, and folded its own e-commerce assets into the venture. This year, Tencent has also agreed to buy 19.9 percent of Craigslist-like 58.com Inc. and take a 20 percent stake in Dianping.com, a website similar to Yelp Inc. that users review restaurants in China.

Single Click

Tencent has been working closely with JD.com and Dianping, directing traffic from Mobile QQ and WeChat to the websites, said Tong.

Those steps are beginning to yield results. A new single-click link to JD.com from Weixin produced an eightfold increase in daily transaction volumes compared with an earlier access that took two clicks, JD.com said in June. This month a similar integration with JD.com was provided to users of Mobile QQ.

Still, Tencent and its partners are far behind in e-commerce. Alibaba, which operates platforms including Taobao Marketplace and Tmall.com that connect retail brands with consumers, accounted for 76.4 percent of total mobile retail transactions in China, according to its IPO filing to the U.S. Securities and Exchange Commission.

The fact that Tencent wrapped its e-commerce assets into JD.com shows it wants to limit its investment in the segment, said Yao Yue, a Shenzhen-based analyst with Morningstar Inc.

“Even if Tencent’s instant messaging apps can direct a lot of traffic to JD.com, at the end of the day it still depends on who has the better shopping service, and Alibaba’s Taobao is dominant,” said Yao.

Alibaba hasn’t been able to achieve the same success in mobile messaging so far. The company in 2004 started Aliwangwang, a PC-based instant messenger for buyers and sellers, that is now used for negotiating prices, customer services and delivery notifications on its Taobao marketplace. It also has a mobile version called Wangxin.

Lagging Behind

Laiwang was started by Alibaba to broaden its reach, after billionaire founder Jack Ma alluded to Tencent being ahead in the messaging race at a Credit Suisse conference in March 2013.

“We also invested heavily, but we are not that lucky and not creative, so creative like Tencent, which has WeChat, such a powerful thing,” Ma said at the conference.

Ma has vigorously tried to promote Laiwang and said the company wouldn’t pay bonuses to staff who didn’t get 100 clients for the app before Nov. 30 last year, according to a post on the company’s microblog.

In an attempt to generate revenue from Laiwang, Alibaba said in January it would offer games on the app. A month later Alibaba’s Ma said the company’s achievement on mobile applications wasn’t satisfactory.

Alibaba spokeswoman Florence Shih declined to comment on the company’s mobile strategies, citing pre-IPO restrictions.

Jin Yuan, a Shenzhen mobile phone user, underscores the lead that Tencent has in messaging. Jin has been a QQ subscriber for the past 13 years and says Tencent does a better job of making messaging apps that are easy to use.

“I use QQ to keep in touch with friends I’ve known since the PC age and I use it for a lot of group chats,” Jin said. “I like to use WeChat a lot for sharing information about good places for food.”

By Lulu Yilun Chen Bloomberg

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  Showtime for Alibaba world-wide /div>

Showtime for Alibaba world-wide

It may start marketing pre-IPO share sale across 3 continents

Alibaba, China’s eCommerce giant, has quickly come onto everyone’s radar as it presents the possibility of being the largest tech IPO ever. According to the New York Times, the company is expected to go on the market at a value of roughly $200 billion – larger than US tech companies Amazon, eBay or Facebook. This week, we bring you articles to explain who Alibaba is and what you can expect from them in the future.

Two weeks, three continents, and 100 meetings. That -- and founder Jack Ma celebrating his 50th birthday on the road -- is what it will take for Alibaba Group Holding Ltd. to pull off the largest initial public offering in U.S. history.

The Chinese e-commerce company is weighing a plan to start marketing the share sale to investors on Sept. 3, with management traveling across Asia, Europe and the U.S. before an initial public offering in the middle of the month, people with knowledge of the matter said.

The schedule, put forth by banks managing the IPO, would have meetings begin in Hong Kong and Singapore before executives travel to London and eventually host their first U.S. event in New York on Sept. 8, the people said, asking not to be identified discussing private information. The timeline has Alibaba targeting a Sept. 16 trading debut, the people said.

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• Alibaba Could Reap $9.4 Billion From New Alipay Deal
• Tencent Net Income Jumps as Games Boost Messaging Apps

The investor meetings -- called a roadshow -- will give Alibaba the opportunity to answer questions from the world’s biggest fund managers and build demand for its shares. With Alibaba and selling shareholders expected to raise as much as $20 billion, the IPO has the potential to be the largest in the U.S. The company’s official price range is expected to be revealed on Sept. 2.


Photographer: Tomohiro Ohsumi/Bloomberg
Jack Ma, chairman of Alibaba Group Holding Ltd., speaks at SoftBank World 2014 in Tokyo, Japan.

Monday Pricing

For trading to start on Sept. 16, Alibaba would have to set a final price the day before -- a Monday. It is uncommon for companies in the U.S. to price IPOs on a Monday, in case news over the weekend negatively impacts market sentiment in the final day of the deal.

The plan is tentative and could change, although Alibaba wants to avoid debuting near the Jewish holiday the following week, one of the people said.

China's E-Commerce Giant

With six financial advisers already managing the sale, Alibaba plans to name additional banks that will have smaller roles on the deal, according to people familiar with the matter. The company will also update investors with earnings from the quarter through June, those people said.

Credit Suisse Group AG (CSGN), Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Citigroup Inc. are the most senior banks on the IPO. Alibaba may end up using more than 20 financial advisers in total, one person said.

Shares of Japanese wireless carrier SoftBank Corp. (9984), Alibaba’s largest shareholder, rose 2.4 percent at the close in Tokyo. Florence Shih, a Hong Kong-based spokeswoman for Alibaba, declined to comment.

Birthday Celebration

At $20 billion, Alibaba’s sale would edge past Visa Inc.’s $19.65 billion IPO in 2008 as the largest in U.S. history, data compiled by Bloomberg show.

Alibaba plans to divide executives into two separate teams, which will lead to about 100 meetings in total, according to the people. The teams will mostly be together for the larger group meetings, while separating to meet with individual investors, they said. The company hasn’t yet determined who from management will be attending each meeting, the people said.

In the U.S., Alibaba will also visit with investors in Boston, the Mid-Atlantic region, Kansas City, Chicago, Denver, Los Angeles and San Francisco, the people said.

On Sept. 10, when Ma celebrates his birthday, investor meetings will be held in New York, they said.

Alibaba is waiting until September to begin marketing the share sale as it seeks regulatory approval of its prospectus, a person with knowledge of the matter said last month. The company, which originally targeted an early August trading debut, is holding off to avoid rushing the deal as it continues discussions with the U.S. Securities and Exchange Commission, according to the person.

Discounted Valuation

The Chinese e-commerce operator may set its set its IPO value at $154 billion, or 22 percent below analyst valuations, in a move that could avoid repeating Facebook Inc. (FB)’s listing flop, according to the average estimate of five analysts surveyed by Bloomberg last month. The same analysts give Alibaba an average post-listing valuation of $198 billion, the survey shows.

Alibaba said yesterday it will sell its small-business lending arm to the company that already controls payments affiliate Alipay, separating itself from the last of its major financial units ahead of the IPO.

The sale takes financial and regulatory risk relating to the operations off of Alibaba’s balance sheet, while increasing the pool of profits the company can generate from them, the filing shows. The agreement also lifts a $6 billion cap, under certain conditions, on funds that Alibaba could receive if Alipay or its parent company go public, the filing shows.

  By Zijing Wu and Leslie Picker Bloomberg



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China's Internet giants, Tencent to undercut Alibaba with billion chat app users

British and Westerners' "Shangri-la complex" stymies rational perception of Tibet

 Shangri-La, China

LHASA, Aug. 13 -- Since British novelist James Hilton introduced the fictional "Shangri-la" to Western readers eight decades ago, foreign minds have often perceived Tibet as a mystical but harmonious paradise.

 

China.org.cn ‏@chinaorgcn Aug 12  China opens Tibet forum with focus on development  http://on.china.cn/VercN1  pic.twitter.com/bun6R8K9tV

They believe the mythical Himalayan region, isolated from the outside world, has been a permanently happy land where most inhabitants are meditative lamas clad in crimson robes, holding prayer beads and chanting scriptures.

But scholars and journalists from China and abroad attending the ongoing forum on the development of Tibet said that Westerners' "Shangri-la complex" is hampering and limiting rational understanding of the autonomous region of China.

In many Chinese eyes, Tibet used to be a backcountry with an inhumane serf system. The highland craves for development and civilization as any other part of the world.

Hilton had never been to the Tibetan areas he wrote. When journalists, film directors and politicians in his time portrayed Tibet as a heavenly place, the region was under the feudal system -- a form of society the same cruel as, if not worse than, its European alternatives in the dark Middle Ages.

It was also a land where the average life expectancy for Tibetans was no older than 36 years and wives with extramarital affairs would have their noses and ears cut off for punishment.

"Despite the British invasion of Tibet in 1904, the West did not have the opportunity to understand Tibet," Alessandra Spalletta, China news editor of the Italian news agency AGI, spoke at the forum. "They started a mystification of Tibet while building the mythology of 'Shangri-la.'"

"Western people are fond of their own images of Tibet," she said, "rather than the real Tibet."

As some scholars pointed out, Tibet has become a "spiritual supermarket" for Westerners, who are trying to find what they have lost in their own societies in the process of industrialization and modernization.

Some believed that Tibet, as the "last pure land on the earth," should be immune from any development which they are afraid might lead to destruction of the traditional Tibetan culture and annihilation of Tibetan Buddhism.

"Those people believe that Tibet should remain in a primitive stage for ever and Tibetans should always ride yaks and live in tents," Cui Yuying, vice head of the State Council Information Office, spoke at the opening ceremony of the forum.

For the past half century, however, Tibet has been on an irreversible path of development and civilization, which complies with the general trend of the development of the human society, the senior official said.

With the "Shangri-la complex," many Western scholars have opted to study Tibet's history before the 20th century. Some even suggest the history of Tibet after 1951, when the region was peacefully liberated, is not worth studying at all. Some Western media have shunned the economic achievements Tibet has made over the recent decades.

The notion of Shangri-la, created by the Westerners, has been utilized by separatists for splitting Tibet from China.

"Romanticization (of Tibet) is a part of the Dalai Lama's campaign for separatism," said Narasimhan Ram, chair of Kasturi & Son Limited and publisher of the Indian newspaper Hindu.

He said that the Dalai Lama always talks about beauty and isolation of the old Tibet rather than its backwardness and extreme poverty, taking advantage of the "Shangri-la complex."

Matevz Raskovic, a board member of the Confucius Institute, the University of Ljubljana in Slovenia, told Xinhua that some Western media's skewed depiction of Tibet that has reinforced the "Shangri-la complex" hinders and limits rational understanding of Tibet.

"When you look at Tibet the way some Westerners perceive it, it always goes to religious issues," he said. "It should be responsibility of journalists to expose other faces of Tibet, such as tourism opportunities and cohabitation of diverse cultures." - Xinhua

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International forum issues the ´Lhasa Consensus´

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