A new article from Adam Lashinsky of Fortune magazine, “Ma vs. Ma,” offers an intriguing look at the rivalry between Alibaba (led by Jack Ma) and Tencent (whose CEO is Pony Ma). The article validates many points we have been making about Alibaba, Tencent, and their rival Baidu, which are often collectively referred to as BAT: it’s important to understand BAT not just because of their influence in China, the world’s largest retail market, but also because of their growing influence on the world. Here are three major themes from “Ma vs. Ma” that resonate:

Beyond China

For many years, Baidu, Alibaba, and Tencent have dominated life in everyday China. Now they are expanding throughout the world. The article discusses how Alibaba and Tencent are expanding first by investing into companies in southeast Asia. For example, Alibaba has a majority stake in Singapore-based Lazada, southeast Asia’s largest e-commerce platform. Tencent is a major investor in Go-Jek, an Indonesian ride-hailing service.

The article asserts that expansion into the United States is going to take some time, but it would be wise for any Western business to consider how BAT are extending their influence into the United States. For instance, BAT are already investing into American start-ups. Baidu, which is not the focus of the Fortune article, is also expanding globally and inside the United States, an example being the recent opening of a Seattle location to develop Baidu’s artificial intelligence and cloud capabilities.

For more insight into the global expansion of BAT, read “Alibaba Ascends as a Global Power,” by my colleague Saul Delage.

Competing Ecosystems

Working with BAT means managing competing ecosystems, each with their own proprietary apps and payment systems. As Fortune notes, “In an economy in which e-commerce is dominant in ways unthinkable in the U.S., each company stymies the other’s payment service on their main platform.”

Because each company operates its own ecosystem, doing business with both is not always easy. For example, the article mentions that a consumer or business operating in Tencent’s WeChat app cannot easily toggle over to Alibaba’s Taobao online mall. And the walled gardens create inconveniences in other ways. As Lashinsky writes: “If you want to use Alibaba platform partner Ofo . . .  it is relatively inconvenient to pay with Tencent’s WeChat Pay; using Alipay is a hassle when renting with Mobike, the bike-share contestant in Tencent’s camp.”

In an April blog post “Why Baidu, Alibaba, and Tencent Dictate Your Future in China,” we noted,

“Alibaba and Tencent both operate commerce ecosystems that act as walled gardens. Any company that wants to succeed in China must pick either as their primary, although not exclusive, platform for tapping into the wallet of the Chinese consumer.”

But these self-contained ecosystems have their advantages. As we noted in a previous blog post, Alibaba and Tencent give you a measure of quality control because they are careful to vet businesses that can play in their ecosystem, meaning that once you’re inside their world, you can rest assured that the other players in their ecosystems have passed a standard of quality and reliability. (In other words, you won’t find yourself partnering with a bunch of start-ups that might go belly-up.) Moreover, Alibaba and Tencent can track all customer behavior for you inside their ecosystems, making attribution less of a challenge.

Our advice, as noted in this blog post, is to assess the value and role of each BAT ecosystem against your own people, processes, and platforms – or the BAT Framework. The framework covers questions such as:

It covers questions such as:

  • People: for example, in which ecosystems are my most enthusiastic customers?
  • Process: what is the role each ecosystem plays in my customer’s journey?
  • Platform: in which platform does my product have the greatest traction?

Doing so will help you make sense of the competing ecosystems in context of your own business needs.

The Importance of Super Apps

Apps in China are far more influential than in the United States, with Tencent’s WeChat being the undisputed top dog. “It is difficult for those outside China to appreciate the ubiquitous power of WeChat,” the article states. With 1 billion accounts, WeChat “is becoming something akin to a digital operating system for the entire economy.” Back in February, we noted in a blog post (“Rise of the Super App in China”) that any Western business wanting to crack the Chinese retail market needs to first understand how to play on WeChat in context of the mindset of the Chinese consumer. “Western brands need to understand the mindset of the Chinese consumer as they live inside these apps,” we wrote. “WeChat isn’t just for completing tasks, searching for products, and buying things with the brutal efficiency of an Amazon. No, WeChat is where consumers hang out, play games, interact with celebrities, and live their lives. WeChat is an experience.”

In addition, as BAT expand globally, understanding WeChat is important for any business whether they do business in China. WeChat reportedly is facing slow adoption outside China, meaning the time to understand it is now before your competitors do. Understand, for example, its popular features and how those features may catch on elsewhere. To be sure, there is room for WeChat to improve as is the case with any app. Our hunch: sooner or later, you’re going to need a WeChat strategy no matter where you do business.

Next Steps

Since Moonshot began discussing the growth of China as a retail market, it’s become clear that the consumer behaviors that pervade China and the business practices of BAT are going to have a bigger influence on a global scale. The time has come for businesses to understand BAT as global phenomenon. For more insight into how to work effectively with BAT, contact Moonshot. We’re here to help.

Mike Edmonds

Mike Edmonds

Managing Director, VP Product