Article / 23 January 2015 at 1:29 GMT

Alibaba goes after WeChat's dominance again

China Watcher / Shanghai
China
  • Tencent’s WeChat dominates China's instant messaging app market in China
  • Alibaba has tried to break this dominance before with its Laiwang app, but failed
  • The latest two attempts challenge WeChat from fresh perspectives

By Neil Flynn

Tencent’s membership of China’s exclusive BAT trio is due to the unrivalled success of its two social media platforms – QQ and WeChat. The user base of these two platforms exceeds a billion people, and Tencent has built its dominant mobile ecosystem around the two. Alibaba has previously tried to challenge WeChat’s dominance with Laiwang, which is a carbon copy of WeChat, but has had little success as WeChat’s users have no reason to switch between the two services.

This has been a big problem for Alibaba because as WeChat’s user base has grown, Tencent has added a shopping channel on both WeChat and QQ that links users directly to JD.com, which has become Alibaba’s biggest online shopping rival.


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Alibaba's earlier attempt to challenge WeChat’s instant messaging dominance failed, but it is now challenging WeChat from a couple of fresh directions. Photo: Thinkstock

 

Alibaba has developed a messaging app called Dingtalk (钉钉), which can be thought of as a business version of WeChat. It allows meetings to be conducted over the voice call feature between multiple people, which is a feature that WeChat doesn’t support. In addition, if a company registers with Dingtalk, their employees would be able to search for and contact colleagues, even if they aren’t already connected. The idea of this is to allow firms to have their own communication platform for its staff, and because the platform is on employees’ phones, staff can be easily contacted irrespective of the day or time.

DingTalk has reacted to the recent popularity of VoIP features in rival apps such as WeChat and Qihoo Free Phone, and as well as developing its own VoIP feature, the app has also integrated FaceTime. Tencent has explored the idea of making a business version of WeChat, but to date has only released an API for enterprises to develop their own features for employees to work with each other over WeChat.


Dingtalk

















Source: Dingtalk  


Challenge Tencent’s ecosystem, not WeChat

I’ve previously discussed how creating a like-for-like app to rival WeChat won’t work, because it has already amassed 600 million users, who have no reason to migrate to a different app if it has the same features. This is why I have welcomed Alibaba’s investment in Momo, because it offers a different service to WeChat, and can therefore be seen as a complement rather than a competitor. 

WeChat has maintained its popularity because it’s an entry point into the Tencent ecosystem. All of China’s tech firms have their own mobile ecosystem, and the BAT trio of Baidu, Alibaba and Tencent has the strongest. But whilst Alibaba’s Taobao and Tmall face competition from JD.com, and Baidu Search faces competition from Qihoo and Sogou, WeChat has very little competition in the instant messaging app market.

Therefore as users spend hours a day on WeChat, they have easy access to other Tencent services, such as online shopping, taxi hailing, cinema tickets, travel and banking. These are all services that Alibaba provides, but because users can make these purchases within WeChat, Alibaba loses out on this business. Alibaba has been very eager to break WeChat’s dominance for this very reason, because whilst the instant messaging app alone doesn’t generate revenue, offering a wide range of other services can monetize the huge user base, and take market share away from rivals.

Alibaba is thought to be making another attempt to challenge WeChat’s dominance of the instant messaging app market via its AliPay mobile payment app. It has been reported that the new update of the AliPay app will contain a feature called ‘My Friend’, which will allow users to send messages, voice recordings and photos to other users. Initially this sounds very similar to the likes of Alibaba’s Laiwang and NetEase’s YiChat, but the key difference is that while these two apps had to attract users, AliPay already has a huge user base. Therefore AliPay would need to find a way to make users stay on the app longer. When a user makes a payment to a family member or friend, the app will likely encourage users to add each other’s social connection, so that payment confirmations can be automatically be sent, and from there more social interaction can be encouraged.

A vain attempt or a genuine rival?

Alibaba appears to be doing all that it can to challenge WeChat in the instant messaging app market. I personally don’t see DingTalk being successful, because there is no reason why Tencent couldn’t add a group voice call feature to the next update of WeChat, or develop a basic enterprise service from which companies can develop further. DingTalk would then have no advantage over WeChat, so users would have no reason to switch between the two apps.

AliPay is different because it already has a huge user base, which likely won’t decrease with the addition of the social interaction features, because AliPay is the clear market leader in mobile payments. However, the challenge for Alibaba will be to find a way to encourage payment users to use the social media functions, particularly when they initially seem inferior to those of WeChat. If it can do this, then Alibaba may finally have a genuine rival for WeChat.


– Edited by Robert Ryan

Neil Flynn is head equity analyst at Chinese Investors. Follow Neil or post your comment below to engage with Saxo Bank's social trading platform


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