Chinese e-commerce giant Alibaba is about to make stock market history when it publicly lists in September in New York and raise about $20 billion, expected to be the largest in IPO history.
However, rival Chinese firmTencent Holding is challenging Alibaba's dominance of by matching each business of the latter on the Web, from games, security or search engine. As Alibaba moves toward its IPO, Tencent is widening its messaging service and using this technology to bring more customers to its e-commerce partners.
Tencent's QQ and WeChat have a combined one billion users, which it plans to use to get traffic away from Alibaba by directing users to its e-commerce platform. Hong Kong-based China Securities analyst Bill Fan pointed out that even if messaging is not Alibaba's strong point, the company is trying to develop similar services.
In September 2013, Alibaba rolled out its messaging service called Laiwang. Tencent, to ensure that it is several steps ahead of Alibaba in the messaging business, upgraded its QQ latest version to a platform for food, drinking, and entertainment and expanded the number of Chinese cities covered by the services, said Dowson Tong, president of the social network group that has oversight over QQ.
The latest survey conducted in June by Shanghai-based IResearch, which had about 4,000 respondents, found that in 2013, a majority 83 per cent of internet users in China are subscribers to Mobile QQ, 80 per cent to WeChat, but only 23 per cent are Laiwang subscribers.
QQ, which was an instant messaging service on desktop computers, was altered for use on mobile device, boosting its monthly active users to 848 million. WeChat, or Weixin in China, has 396 million active monthly users.
The two popular messaging services boosted Tencent's market value to $161 billion, which made it one of the most valuable Internet companies in Asia. With Alibaba's public debut next month in The Big Apple, it is estimated to increase its valuation to $187 billion, in the process eclipsing Tencent, reckoned 11 analysts surveyed by Bloomberg.
The battle between the two Chinese Web giants for a bigger cut of the Chinese e-commerce market expected to reach $3.5 trillion in 2017 moves to a higher level as Alibaba takes the New York route to boost its capital base.
While Tencent is ahead in the messaging business, Alibaba is leading when it comes to e-commerce, accounting for 76.4 per cent of total mobile retail transactions in China. This reality led Yao Yue, analyst of Morningstar Inc in Shenzhen, to conclude, "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 services, and Alibaba'sTaobao is dominant."
The bourses would be another battleground between the two rivals since by September investors would have a choice between Alibaba (NYSE:BABA) or Tencent (OTCPK:TCEHY), which reported on Thursday a 59 per cent boost in it second quarter profit due to more games and shopping offerings to its more than 1 billion users on WeChat and QQ.
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