How this US-China trade war will remake the world

New world order: People visit the bund in front of Shanghai's financial district of Pudong. The US-China trade war looks like the beginning of a profound break in the global order. As China and the United form two opposing economic and geopolitical coalitions, the rest of the world will be forced to choose. - Reuters

President Donald Trump has long said the goal of his trade policy is simply to get better deals for Americans. But as the trade war intensifies, it seems increasingly likely that his policies will lead to something more: a lasting break with China and a new alignment of global power.

First, consider the evidence for the break.

The current impasse in trade talks was sparked by a sudden change in terms on the part of the Chinese negotiators.

This change likely caught the administration off guard, but Trump’s response is notable: He immediately ramped up tariffs, then announced a ban on business with Chinese telecommunications firm and national champion Huawei Technologies Co.

These actions have backed Chinese President Xi Jinping into a corner and turned the trade dispute into a matter of Chinese national pride.

This limits the possibility not only of a quick resolution, but also of the chances that the Chinese people will accept any concessions to the US.

Trump’s handling of this situation stands in sharp contrast to his negotiating strategy on other issues.

Though the president railed against NAFTA throughout his campaign, he’s touted its replacement as a huge success, even though it is only cosmetically different, and has been willing to suspend his tariffs on Canada and Mexico to ease its passage through Congress.

Likewise, Trump has been more than willing to trumpet his successful negotiations with North Korean leader Kim Jong Un even though the evidence for such success is thin.

Meanwhile, the president’s tough talk against Europe and Japan for their trade practices, and against NATO allies for their defence spending, has been mostly bluster.

When it comes to China, however, the president is doubling down.

He has encouraged US supply chains to move out of China and established subsidy programmes to cushion farmers from the effects of a protracted trade war.

Which leads to the long-term implications of this battle. A protracted trade war would almost guarantee a global realignment.

Supply chains that run through both the US and China would constantly be subject to disruptions, so global manufacturers would have to decide whether to pursue an America-centric or China-centric strategy.

That’s already the case in the digital sphere, where Chinese restrictions on the Internet divide the world into two parts: that which is served by US tech giants such as Google and Facebook, and that which relies on Chinese firms such as Baidu and WeChat.

China’s threat to cut off US access to rare-earth minerals points to a potential bifurcation in commodities markets as well.

The trend is clear: As China’s economic and geopolitical power grows, countries within China’s sphere of influence will feel increasing pressure to integrate their economies with Chinese supply chains and multinationals rather than American ones.

At the same time, as my Bloomberg Opinion colleague Tyler Cowen points out, the rise of China is a main driver of populist sentiment in the UK and Australia.

This creates political pressure in those countries for further isolation from China.

In the US, Trump has made it clear that he sees the trade war with China as politically advantageous for him, and he’s probably right.

It’s probably also true that this anti-China sentiment will outlast him.

Break in global order

Add up all these factors, and the US-China trade war looks like the beginning of a profound break in the global order. As China and the US form two opposing economic and geopolitical coalitions, the rest of the world will be forced to choose.

Maybe the European Union can form a third unaligned pole, as France and Germany’s membership in the EU (and the UK’s absence from it) provides them with the negotiating power to avoid falling under the Chinese or American sphere of influence.

Of course, in some ways this type of multipolar alignment would be a return to the past. The dual-superpower world that existed for much of the second half of the 20th century was always an exception, and the era of American supremacy that began after the collapse of the Soviet Union was never going to last.

Until recently, however, a new kind of bipolar arrangement seemed possible: a kind of competitive partnership between China and the US, with the EU playing a supporting role.

The events of the last few weeks have left that looking increasingly unlikely. — Bloomberg Opinion

By Karl W. Smith , a former assistant professor of economics at the University of North Carolina’s school of government.

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China's new tech soft power

Foreigners are tapping Chinese innovation to network and build businesses

International market: Foreign visitors to an expo in Nanning, the Guangxi Zhuang autonomous region, evince interest in forestry by-products and pay for them using WeChat Pay. [Photo by Peng Huan / for China Daily]

China's innovations impress foreigners, change startup game, boost confidence

The consumption power of more than 1 million foreigners working or studying in China is disproportionately bigger than their tiny share (0.07 percent) of the total population - and whizzes of the country's homegrown tech ecosystem are sitting up and taking notice, as the economy transitions from export and investment-led growth to a consumption-driven model.

Manufacturers of gadgets, providers of technology-enabled services, and developers of intellectual property like innovative technologies are all vying to make life easier for the relatively small but monetarily significant foreigner community in China.

French engineer Sebastien Bernard, 37, will probably agree. He came to work and live in Beijing four months ago. The first thing he was asked to do by his friends and colleagues was to download and install WeChat, the all-in-one killer app, on his smartphone.

He complied, and his life is much the better for it, he said. As it transpired, Bernard was e-invited to join a WeChat group.

Initially, 15 foreigners chatted with each other and shared their life experiences on the e-group. Gradually, the group grew to a 200-member community of sorts that shared not just useful information like job links or party invitations but, wait for it, e-commerce discount coupons and weekend getaway packages.

Friendly advice sensitized Bernard to other treasures on WeChat. Among many other things, he learned to use the app to order food, book a taxi ride, buy movie tickets, and make digital payments for e-commerce.

Using Chinese apps, some of his friends even play online games, and borrow or lend money using e-credit channels that are redefining inclusive finance.

According to a WeChat report, by May 2017, foreigners in China sent 60 percent more WeChat messages than Chinese users on average per month. They also use WeChat audio calls 42 percent more than Chinese users.

Notably, foreigners in China are good at using different functions or features of WeChat. On average, they use emojis 45 percent more than Chinese users per day. Typically, a foreigner sends 10"red packets" - cash e-gifts - per month. Nearly 65 percent of foreigners who use WeChat use the app's digital payment tool WeChat Pay.

"Here in China, having WeChat and Alipay accounts is like being plugged into the world. The apps include almost every conceivable service that can help make modern life easy," said Bernard.

Agreed Yang Qiguang, 26, a researcher from Columbia University's Tow Center who is pursuing PhD at the Renmin University of China in Beijing.  

"Chinese companies are creating a tech ecosystem that helps everyone, including foreigners, to work and live in a more convenient way."

Forming social networks using e-tools has become integral to modern life, particularly in urban areas - and China's tech ecosystem perhaps performs this function better than any other, by bundling consumption-related conveniences, he said.

"The tech ecosystem here facilitates people, including foreigners, to spend more. It is also boosting the confidence of both domestic and foreign companies operating in China. They know they now have powerful and reliable e-tools like apps to drive sales in a humongous market with more than 1 billion consumers," he said.

That's not all. Yang said China's tech ecosystem is fostering entrepreneurialism. Even foreigners living in China are beginning to use Chinese apps to start up in a variety of fields, including technology, education and entertainment. All this business activity is a long-term positive effect for the Chinese economy, he said.

Yang could well have been speaking about David Collier, 52, a Briton who has founded four startups so far, respectively in the United States, the United Kingdom and China.

Rikai Labs, his WeChat-based e-learning business in China, helps Chinese users to master the English language through proprietary automated software. Collier said every seven years, a big platform shift comes along - from web to mobile apps; from apps to messaging platforms - that creates huge opportunities.

"We chose to base our business on WeChat because it provides a great platform for a knowledge service. You have to build your business where people are spending their time, and the biggest messaging platform of all is WeChat," he said.

"Also, we can use WeChat payment for instant payment, QR codes for marketing purposes and to track user acquisition channels. Now with WeChat's mini programs, we can add interactive games and other features."

There's more. Links to Rikai Labs and related content can be shared socially online. "It provides a very compelling platform with real-time features, social distribution, marketing hooks and monetization," Collier said.

But risks abound too, he said. Platforms such as WeChat have become extremely competitive for startups. "If you don't move at high speed, riding with WeChat is like taking the maglev."

Data, however, suggest that foreigners appear to have an edge over Chinese users in exploiting the local tech ecosystem for small businesses and online social networking, which actually helps businesses directly or indirectly.

A case in point is Baopals, a startup founded by three expatriates. Call it the English Taobao, if you will. Baopals is anchored in Taobao and Tmall, the online shopping platforms owned by Alibaba Group, China's tech giant.

Foreign visitors to an expo in Nanning, the Guangxi Zhuang autonomous region, evince interest in forestry by-products and pay for them using WeChat Pay. [Photo by Peng Huan / for China Daily]

In July 2015, Charlie Erickson, Jay Thornhill and Tyler McNew, all US citizens in their late 20s and early 30s, developed Baopals, a website that helps translate product information on the Chinese Taobao and Tmall into English. In one stroke, the trio thus opened up the astonishing world of Chinese e-commerce, or 800 million products, to non-Chinese consumers in China.

Baopals already boasts 40,000 registered users, with 16,000 of them joining last year alone, doubling the user count in 2017. A Baopals user buys 58 items on average per year, and spends about 2,500 yuan ($368) to 3,500 yuan annually.

In addition to English, the website has Korean and Russian versions, making e-shopping simpler for foreigners in China.

The website is going from strength to strength on the back of the trio's innovations. It has introduced attractive sections like "The Cool, The Cheap& The Crazy". It accepts Alipay, WeChat Wallet and China UnionPay for payments.

Although e-commerce destinations are dime a dozen in China, most of them are in Chinese, and cater to Chinese consumers, so Baopals stands out, said Thornhill.

"Even on Amazon China, the default language is Chinese. When you switch to English, you still see lots of content in Chinese. They just haven't made the effort to serve China's expat population properly," he said.

That gap should spell business opportunities for those looking to start up, he said. "We are also changing the stereotype that Chinese goods are cheap products with low quality," he said, adding that several products including Xiaomi air purifiers and Huawei products are very popular among foreigners.

According to Thornhill, Baopals' revenue comes from service fee paid by shoppers. It charges a service fee of 5 percent of each item's price, plus a small fixed fee based on the item's price - 2 yuan for items priced below 30 yuan, and 8 yuan for items priced above 90 yuan. More than 2.3 million products had been sold by Jan 17 this year, a huge increase from the same period last year.

Given the experience in China, it is clear that homegrown technologies can succeed outside the mainland, he said. "This year is going to be a big year for Baopals, as we'll be launching our global service. Expats leaving China can continue buying things they love here, and foreigners everywhere can discover the treasures of China's online shopping."

Agreed Yang from the Tow Center. China's tech ecosystem, he said, provides foreigners on the mainland with well-rounded platforms to do business not only in China but across the world.

"It may take years for foreigners to build such infrastructure themselves. The time and energy saved during the process can be used for bolstering their own products and business."

It's not just small players such as Baopals that are drawing confidence from their success in China. Even e-payment giants such as WeChat Pay and Alipay, emboldened by their rapid adoption among foreigners in China, are confident of replicating their success worldwide.

Alipay has introduced its payment services, including departure tax refunds, at 10 major international airports in Japan, Thailand and New Zealand. Although the initial goal is to serve Chinese tourists traveling overseas, the larger plan is to roll out Chinese technologies worldwide and gain a global visibility and footprint.

So, it has struck cooperation agreements with local banks and companies in foreign markets, to provide e-payment services. For instance, its partners in Japan are Hida Credit Union and Kyoto Shinkin Bank, which helps attract Japanese users as well. Using such strategies, Alipay has accumulated more than 1 billion users in all, including 300 million outside China.

Sources:  China Daily/Asian News Network

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SY Lau, a Malaysian took China's WeChat by storm

SY Lau has made the country proud through talent, perseverance and hard work

Known globally as the WeChat Company, Tencent is the largest Internet service provider in Asia, with a market capitalisation (as of April 16, 2015) of US$193bil. It delivers value-added Internet, mobile/ telecom services and online advertising, in order to fulfil the strategic goal of providing users with “one-stop online lifestyle services”.

In 2006, when SY Lau (pic) joined Tencent as one of the senior management team, he focused on driving corporate growth with the specific mission of overseeing Tencent’s Online Media Group (OMG).

Today, OMG is one of the largest media companies in the world, with a portfolio that includes a matrix of online information and entertainment products.

We sit down to talk to the Star Speaker of this year’s Chief Marketing Officers (CMO) Conference.

Early days

I came from an average family and was raised by parents who believed strongly in traditional Chinese parenting. I am the eldest in the family with two younger sisters. My dad worked in the Nanyang Press for more than 25 years before he passed away at an early age due to illness. My mom was an excellent tailor, but I guess my sisters and I would remember her most as a disciplinarian who instilled the spirit of inquisitiveness and competitiveness within us during our formative years.

I studied in St John’s Institution before graduating with a major in Mass Communication from one of the local universities. Subsequently, after working for 10 years or so, I obtained my MBA from Rutgers, the State University of New Jersey, and graduated from Harvard Business School upon completing their pinnacle AMP programme.

My first job was with McCann Erickson as a trainee account executive. How did I get the job? When I was in the final year of my undergraduate studies, I decided to conduct a field research on the Malaysian Advertising Industry using collections of communication theories. The research effort opened up doors for me to conduct field work with more than 10 leading advertising agencies in Malaysia.

A month before my graduation, I received six job offers from the top 4As agencies, and Noel Derby offered to pay RM1,000 to have my work translated into English for use by his company.

I chose McCann because of two reasons. I strongly believed in the motto of the company, Truth Well Told, and, more importantly, Ong Thiam Hong impressed me as a sincere business leader.

Did you go to China by accident or was that part of your plan for a long time? How did it all begin?

Well, it was both by accident and somewhat part of the plan. I was fluent in both English and Mandarin and I thought that if I had an opportunity to venture overseas, China would certainly be my first choice.

I remember when the opportunity came, I was already working with Leo Burnet. One day during lunch, I met Ong Thiam Hong and he told me McCann Hong Kong was in trouble.

One of their biggest international clients, Nestlé, had a new managing director for Greater China, and she was about to fire McCann. The new MD was Leong Ming Chee, a highly respected Nestlé veteran from Malaysia, with a remarkable track record in one of the most significant markets in Asia. So, the McCann regional management team was frantically looking for a lead person to solve this problem. Apparently Ong had given my name to the regional team based on the fact I used to be one of the well-respected account leaders on the Nestlé account in Malaysia.

I spent the next three years stabilising and building the Nestlé business for McCann, by nurturing and building a professional local team from scratch.

We ended up winning more than a dozen new business accounts for both China and Hong Kong markets.

During this time I won the prestigious Milo Account for China and the media Agency of Record (AOR) , which was a first in Asia.

Lessons learned

China is a huge market, and I have seen many business professionals cutting corners here and there in the name of responding to pressure. Irrespective of industry, I think business people today could excel more if they were more conscious of focusing on leadership led by principles.

This reminds me of an advertising campaign that I saw recently on CNBC; I think it is for a bank from Singapore. The story goes... a father was bringing his son to a fun fair. As the father was purchasing tickets to enter the circus, the ticket seller said it would cost a dollar for an adult ticket and half price for children under four. The father then asked for two tickets. The ticket seller appeared to be shocked and asked curiously about the age of the boy, to which the father replied five. The ticket seller then said you could have told me he was four and I would have let you in without knowing. The father replied while holding his son’s hands, “Well, you may not have known, but he would have.”

Today, we live in a world where few people believe principles really do define who we are. It is my wish we have more principle-driven executives in the business world.

Leadership talks

In recent years, I have been honoured to be invited to deliver a number of speeches at some of the world’s leading universities. The main topics of the speeches explored the development of China’s digital economy environment and Tencent’s role in that development.

In 2012 at Stanford, taking into consideration that the number of Chinese web users had increased slowly since June 2008, I predicted that the demographic dividend (the organic growth brought by the growing number of Chinese Internet users) is going to be cashed out.

So, I proposed that targeted advertising placement and personalised content creation would be the key to break the bottleneck.

I believe that mobile media can not only help advertisers with product promotion, brand communication and customer relationship management, but also with the integration and optimisation of business models, which can become a new marketing platform in the long run. Future digital marketing will go Personal: shifting from media buying to user buying; go Richer: developing a technology-driven creative team and raising the proportion of developers; and go Offline: powering the integrated marketing model with O2O, and achieve closed loop marketing from advertising to sales.

At the Said Business School of Oxford University last year, I shared opportunities brought about by the growth of mobile Internet access across China; we see opportunities at three different levels: the consumer level, the industrial level, and then extending to the level of the whole economy.

Mobile Internet meets the pent-up demand of Chinese people for increased and upgraded levels of consumption, facilitates a long called-for industry transformation as well as expediting the liberalisation of the national economy.

In short, the Internet plays the role of an enabler to transform the new thinking of sustainable development into reality under what we call the New Normal.

The second-mover advantage triggered by the Internet industry can be summarised by examining two different perspectives: Industrial and Geographical.

Very simply put, the Internet has changed the lives of people in China in profound and meaningful ways.

It provides not only a new way of thinking and doing, but a feasible methodology for achieving China’s economic goals. The Internet is not just a resource; it is a means to turn dreams into economic reality.

Digital vision

I think Malaysia had the vision a long time ago, but unfortunately this vision was not implemented to the best of its potential. At the end of the day, the Internet today has become a basic infrastructure, and it should be discussed at a national policy level.

When I attended the recent BoAo Economic Forum, I had the privilege to meet and dine with Tun Abdullah Ahmad Badawi.

He patiently listened to my story of how the private sector got involved in formulating a national policy for Internet Plus in China.

As you know, one of the most significant characteristics in the development of China’s digital economy exists in its integrating with various industries at high speed.

In China, we call this procedure “Internet Plus” – Internet plus the retail industry, plus the real estate industry, plus the manufacturing industry, and of course, plus the media industry.

China has already revealed that Internet Plus will become a policy for the country alongside another national strategy for the manufacturing industry, that is “Made in China 2025”.

A government fund of 40 billion yuan (US$6.38bil) has already been put in place for investment in China’s emerging industries.

Meanwhile, the “Broadband China Project” is being carried out. It will help to make broadband coverage in China reach over 250 million users, and a newly-gained user number of 4G service hit 200 million by the end of 2015.

All of these provide guarantees for the development of the digital economy.

Tencent’s future

Since Internet companies are always impacted by the combined forces of technology and users, I want to talk about some opportunities that I see as solid and realistic here...

Connecting the last billion

First of all, it took 20 years for the Internet to really take hold in China, turning 47.9% of the total population into Internet users.

For the other half of the population who are not yet using the Internet, a lot of them are elderly, young children, or those who cannot afford the necessary equipment.

To plug those people into the Internet world with easy and inexpensive access will be our major mission in the near term.

I think mobile phones are the most viable option to achieve this goal. Through what Nicholas Negroponte of the MIT Media Lab calls, “connecting the last billion”, I believe Tencent will be capable of enabling the development of China even more.

Media of the ‘Mega Web’

Actually, I call this idea of a fully inter-connected world “the world of the Mega Web”, in which the role of the media will greatly expand. The media is already connecting users to content, and it will further connect us to many more things; more devices, more context, more people.

Media will expand to touch almost everything, everywhere. When connectivity expands to that level, singularity will be triggered. The information that we have will become “intellectual” as Big Data accumulates, interconnects and becomes available to even more devices. This expanded access to intelligence is the basic information we act upon, machines act upon and entire smart cities act upon.

The future: connect, call out, make the whole community answer When data itself becomes both interpretive and predictive, a judgment like “Something needs to be done to improve this situation” will more frequently be made by media rather than people, and more insightfully than we can imagine now. Once everyone is inter-connected, we will be able to reach out to every member of the society, in every remote part of the globe, and call for collective actions to solve problems both locally and globally.

Currently, our mission is to support the Internet Plus Action Plan of China. We are ready to cooperate with the partners and potential partners coming from different vertical industries on a strategic level, so that together we can provide better O2O commerce, online payment experiences and smart livelihood services for our users. We see opportunity around the world, whether this is for our own apps like WeChat or for partnership and investment in Western businesses.

I think WeChat is possibly the most recognisable brand for those in the US or UK.

Tencent also supports other famous brands around the world in markets like gaming and social. Companies like Epic Games and Riot Games are owned by Tencent, while we have our own gaming IP that is successful in China.

To see SY in action on April 21, visit www.marketingmagazine.com.my/cmo20015

- The Star/Asia News Network

Related:

Tencent: The Growing Giant

by Simon Kemp in News on 28 May 2014 at 16:06

 

 Tencent released its Q1 results earlier this month, including the latest monthly active user figures for its various social platforms.

As the chart above shows, Tencent’s platforms have attracted a huge share of the world’s social media users, even if the majority of those users are still based in China.

Despite this geographic focus, Tencent now accounts for 3 of the world’s top 5 platforms, driven by the continuing growth of QQ, Qzone and WeChat:

Qzone alone now accounts for around 40% of the world’s social media users.

Moreover, the impressive growth of WeChat (Weixin), both in terms of its active user numbers as well as the platform’s functionality, suggests that Tencent is still far from reaching its peak.

Is it only a matter of time before the rest of the world joins the Tencent family?

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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>

A booming WhatsApp posts mixed message as strong rivals emerge in Asia; War of the Apps heats up in China

 
 What's inside WhatsApp? 

WhatsApp: A booming smartphone message service

SAN FRANCISCO - WhatsApp was launched five years ago as a shot at doing to text messaging what Skype did to telephone calls.

If Facebook's move to buy the startup in a cash-and-stock deal valued as high as US$19 billion (S$24 billion) is any indication, the California-based WhatsApp may have hit the mark.

The firm founded by former Yahoo employees Brian Acton and Jan Koum in 2009 took its name from a play on the phrase "What's Up," according to its website.

They also devoted themselves to a credo of "No Ads. No Games. No Gimmicks."

A note stating just that and signed by Acton remains taped to Koum's desk, according to venture capital firm Sequoia, which invested in the startup early and stands to cash in big time on the Facebook take-over.

The "contrarian approach" of gathering no information about users for targeting ads was shaped by Ukraine-born Koum's aversion to tactics of secret police in communist countries, Sequoia partner Jim Goetz said in an online note.

"Jan's childhood made him appreciate communication that was not bugged or taped," Goetz said.
"When he arrived in the US as a 16-year-old immigrant living on food stamps, he had the extra incentive of wanting to stay in touch with his family in Russia and the Ukraine."

Koum remained true to those ideas when, after working at Yahoo with his "mentor" Acton, he turned to building WhatsApp, according to Goetz.

The stated mission was to build a better alternative to traditional SMS messaging in a world where smartphones were clearly becoming ubiquitous.

The founders jokingly described themselves at the website as "two guys who spent combined 20 years doing geeky stuff at Yahoo! Inc."

WhatsApp is a platform for sending images, video, audio, or text messages for free over the Internet using data connections of smartphones.

The application is free, but after using it for a year, there is an annual subscription fee of 99 US cents.

"We feel that this model will allow us to become the communications service of the 21st century, and provide you the best way to stay in touch with your friends and family with no ads getting in the way," the startup said in a blog post discussing pricing.

WhatsApp is reported to have grown stunningly fast to more than 450 million users and said to handle 50 billion messages daily.

As of the start of this year, WhatsApp had 50 employees, more than 30 of them engineers. While the company has its headquarters in the California city of Mountain View, where Google has its main campus, most of the engineering work is reportedly done in Russia. - AFP

In Asia, WhatsApp posts mixed message for Facebook

Singapore: WhatsApp may be hugely popular but its forays into Asia, the world's biggest mobile market, have had mixed success, raising questions about whether it can sustain the explosive growth Facebook Inc cited to justify its $19 billion price tag.

Data from app metric company App Annie, for example, shows that WhatsApp ranks as the top communications app in only three of 13 Asian countries tracked - Hong Kong, India and Singapore.

"WhatsApp has been a strong player in Asia, but in the past year has faced strong competition from LINE and WeChat," said Neha Dharia, India-based analyst for Ovum, a technology consultancy. "WhatsApp has not been displaced by these players, but has seen stiff competition in growing its market share."

Facebook said on Wednesday it would buy WhatsApp for $19 billion in cash and stock, in a deal worth more than Facebook raised in its own IPO. [ID:nL3N0LO52J]

For sure, WhatsApp has been phenomenally successful. For many users it has replaced sending costly texts, or SMS messages. Since its launch in 2009 it has built an active monthly user base of 450 million users.

A survey by marketing and research company Jana found WhatsApp to be the most used messaging app in all the countries it surveyed - India, Kenya, Nigeria, South Africa, Brazil and Mexico - beating competitors by a huge margin. 

The reason: users most prize the basic functions it offers - ad-free chat and photo sharing.

WhatsApp subscribers sent 18 billion messages a day in January. The overall market is growing rapidly: According to Ovum, 27.4 trillion such messages were sent last year; this year that figure will be close to 69 trillion.

CHINA CALLING

By hooking up, Facebook and WhatsApp may be able to take on those markets that have been elusive to Facebook so far. With Facebook blocked in China, and lagging Twitter Inc and Naver Corp's LINE in Japan, WhatsApp "is a potential avenue for Facebook" into those markets, said Vincent Stevens, a senior manager for telecoms consultancy Delta Partners.

Forrester, a consultancy, forecasts that China will have more than 500 million smartphones this year.

And in the fast growing smartphone market of India, says Neil Shah, research director of devices and ecosystems at Counterpoint Research, local users now account for almost 9 percent of total active WhatsApp users around the world - some 40 million of them.

But Facebook and WhatsApp face formidable foes. Where once messaging apps were simply about messaging, now Tencent Holdings Ltd's WeChat, LINE and KakaoTalk offer a slew of additional services, from icons and games to buying goods and services.

"LINE and the others are very different to WhatsApp. They're much more innovative in the business models they engage in," says Michael Vakulenko of VisionMobile, a UK-based consultancy. "They are innovating much faster than WhatsApp and going in a different direction."

This could prove decisive in Asia - the biggest battleground for social messaging apps - where no single player dominates.

Data from market research company Nielsen, for example, showed BlackBerry Messenger as the most downloaded messaging app in Indonesia last October, the latest data available, while Viber, bought by Japanese online retailer Rakuten Inc for $900 million last week, was the most popular in the Philippines, and LINE in Thailand.

WhatsApp was third in Indonesia, second in Malaysia and not in the top-10 in the Philippines or Thailand. And while locals say WhatsApp remains the default messaging app in Indonesia, some notice a shift.

FICKLE FORTUNES

Jerry Justianto, who runs a radio station network in Jakarta, says he's noticing fewer of his friends using WhatsApp than before. "I think it's reached a plateau in Indonesia," he said. "I see a lot of WhatsApp accounts in my list are inactive."

A survey by market research firm On Device Research late last year found that while nearly two thirds of Indonesians surveyed had installed WhatsApp, less than half used it at least once a week, compared to three quarters of Brazilians who had installed it.

Part of the problem, Justianto says, is that WhatsApp's approach of linking accounts to a phone number doesn't suit Indonesians who change their SIM card frequently. "Some of my early adopter friends are moving to Telegram messenger, where you can activate multiple devices with one number."

Telegram, which offers much the same features as WhatsApp, is evidence of the fickleness of users. The app is free and heavily encrypted, and is popular in some countries. In Spain, for example, it has risen from its launch last year to be the No.1 communications app in Google's Play store, at the expense of WhatsApp, according to App Annie data.

This, said one executive at a handset company in Spain, was partly because of a viral campaign among users to switch, and partly because many users dumped WhatsApp before they were charged at the end of their first, free year.

GETTING USERS TO USE MORE

Across Asia, the fragmentation is evident to users such as Martin Tomlinson, Asia Pacific director for On Device Research, who says he has installed at least six messaging apps for work: "I need to have at least three of these on my phone because that's how my clients communicate."

LINE, for example, considers its top markets as not only Japan but also Taiwan, Thailand and Indonesia. Now, says Simeon Cho, general manager at LINE Plus, which handles LINE's ex-Japan business, the goal is less about winning new users than getting existing ones to use the app more frequently.

Kakao, which started the KakaoTalk messenger service in 2010 and has since grown rapidly to 130 million users, said it was also focusing heavily on Southeast Asia, where there is relatively low smartphone penetration and no dominant messenger service.

And for China's Tencent, KakaoTalk and LINE are more of a threat overseas than WhatsApp, as the company's WeChat expansion is focused on Southeast Asia.

WhatsApp would only pose a serious threat if the likes of Tencent were to expand farther west. "This means it's now going to be more difficult for LINE to win in North America and Europe," said Serkan Toto, a Tokyo-based technology consultant.

 - By Jeremy Wagstaff Reuters

Facebook deal sends message to WhatsApp's Asia rivals

HONG KONG - Facebook's stunning US$19 billion (S$24 billion) deal for messaging service WhatsApp places the social network in an arena where competition is fierce, particularly in Asia, where fast-growing chat rivals dominate their home markets.

The multi-billion dollar valuation of WhatsApp is based on expectations that its 450 million monthly users will eventually pass one billion, powering the social network's drive into the fast- growing mobile space - particularly in emerging markets, where the simplicity of the messaging app can thrive on less expensive phones.

But it is not the only service gaining traction around the world, particularly in parts of Asia, where players such as WeChat in China, Kakao Talk in South Korea and Line in Japan dominate - and, according to analysts, show greater potential for making money given their different products and strategies.

While WhatsApp, which is free to download but charges users US$1 per year, is popular in some Asian markets such as Hong Kong and Singapore, services such as Line, WeChat and Kakao have also expanded around the region and beyond.

"Mobile-messaging apps are growing fast in Asia," noted Elinor Leung and Seung-Joo Ro in a report for regional brokerage CLSA.

"While Facebook dominates the US, mobile-messaging apps such as WhatsApp, Line and WeChat have rapidly taken over Asian SNS (social networking service) markets, especially in the emerging markets."

WhatsApp currently has a larger base than each of the three Asian services but they are growing fast, particularly when it comes to emerging markets, where smartphones or less expensive "feature" phones are seeing explosive growth.

CLSA noted that "Asian mobile-messaging apps like Tencent's WeChat and Naver Corp.'s Line should be valued at a premium to WhatsApp with their wider service offerings and higher revenue potential from games to e-commerce and payment."

WeChat is currently valued by CLSA at US$35 billion and Line at US$14 billion.

Global social messaging volumes are expected to reach 69 trillion and subscribers to such services 1.8 billion by the end of 2014, according to data from market research firm Ovum.

"In SouthEast Asia there is a huge tussle for market share," Neha Dharia of Ovum told AFP.

"WhatsApp will be able to claim the Facebook share of those markets as well, making it hard for these other guys to grow."

WeChat

WeChat, or "Weixin" in Chinese, is a free instant messaging and social media mobile application developed by Chinese Internet giant Tencent and officially launched in January 2011.

It has not only become a popular mobile communications tool in China - where Facebook is mostly blocked and WhatsApp usage is comparatively low - but has also attracted tens of millions of users in overseas markets.

The Facebook deal values active WhatsApp users at US$42 a piece. According to analysts with Japan's Mizuho bank, WeChat is worth twice that amount "on the back of its gaming, [commerce] and mobile payment potential".

WeChat's number of monthly active users worldwide reached 272 million by the end of September last year, more than doubling from a year earlier amid a drive to attract more users in countries such as India, Spain and South Africa.

WeChat provides text, photo, video and voice messaging services on major mobile platforms. It also offers games, online payments and taxi booking.

Line

Launched in 2011 as an instant message and free voice call app, Line - whose parent company is South Korea's Naver Corp. - has grown to 350 million users worldwide and aims to hit 500 million this year.

Its user-friendly interface and voice communication capacity have helped it become one of most successful apps in Japan, while also seeing popularity in Thailand, Taiwan, Spain and Latin America.

The app is best known for "stickers" - cartoon-like images purchased by users, sales of which are core to Line's revenues.

Kakao Talk

Launched in 2010, Kakao Talk is used by 95 per cent of South Korea's smartphone users and boasts 130 million users worldwide. It is reported to be preparing for an initial public offering next year that could value it at US$2 billion.

The free app allows users to send messages, pictures, soundbites and video via the Internet, either on WiFi or through cellphone networks.

Gifts can be bought using Kakao's online shopping facilities, a feature that helped push revenue last year to 230 billion won (US$215 million) from 46 billion won a year ago.

It is eyeing Southeast Asian markets including Malaysia, the Philippines and Indonesia where it is fighting for market share against Line and WeChat.

Viber

Developed by Cyprus-based Viber Media, which was founded in 2010, the service boasts 280 million users and was recently purchased by Japanese IT firm Rakuten for US$900 million - or roughly US$3 per user. It allows free text messages and phone calls as well as video messaging. It recently launched a service allowing desktop users to call non-Viber users' mobile phones, in a challenge to Skype, owned by Microsoft.

Analysts have questioned whether it can make more money from customers in the same way that the likes of Line and WeChat have, leading to Rakuten's share price plunging as much as 13 per cent on the first trading day after it announced the deal.

- AFP

War of the apps heats up in China

In the Battle between the two Chinese Internet giants Alibaba and Tencent, the consumers are the real winners.

 

RAISING a hand to flag down a taxi by the streets could be passé in China, or at least in the eyes of the taxi booking app developers.

Two popular mobile apps, Kuaidi Dache and Didi Dache (“dache” means taking the taxi), make it possible for passengers to hail a cab without flailing an arm, but just tapping on their smart phones.

The war between the two apps, which are backed by Chinese Internet giants Alibaba Group and Tencent Holdings Ltd respectively, has gotten more intense this week.

On Monday, Didi Dache announced that it was going to revive its 10-yuan (RM5.42) rebate programme for users who book a cab and pay via Tencent’s instant messaging app Wechat.

Every passenger is entitled to receive a subsidy of 10 yuan each trip, for up to three trips a day.

For taxi drivers in Beijing, Shanghai, Shenzhen and Hangzhou, a reward of 10 yuan awaits for up to 10 bookings they successfully respond to through Didi Dache.

Cabbies in other cities will receive 5 yuan (RM2.71) for the first five trips and 10 yuan for the next five trips.

To prevent users from cheating, Didi Dache said it would block passengers and drivers who reach mutual agreements to use the app only after the passengers get into the cabs, with the motive of earning the rebates.

Didi Dache reportedly poured in 1bil yuan (RM542.18mil) for this round of subsidy.

Kuaidi Dache was quick to follow up with an “always-one-yuan-more” reward.

Users who hail a cab through its app and pay via Alibaba’s mobile payment service Alipay Wallet were promised that they would always enjoy one yuan more than users of its competitor.

It is not the first time these two apps are using these tactics to entice users.

In January, Didi Dache rolled out the 10-yuan rebate promotion, prompting Kuaidi Dache to offer the same rebate in response.

When Didi Dache reduced the 10-yuan incentive by half on Feb 10, Kuaidi Dache seized the chance to announce that it would retain the 10-yuan offer.

Now that Didi Dache has readjusted the rebate back to 10 yuan, Kuaidi Dache has decided to have the upper hand by pledging “always-one-yuan-more”.

However, just a day after these announcements were made, Didi Dache upped the rebate once again. Passengers would now receive between 12 yuan and 20 yuan (RM6.51 and RM10.84) per trip.

Kuaidi Dache followed suit to offer a subsidy of at least 13 yuan (RM7.05) per trip.

While Didi Dache offered 10,000 free trips a day to lucky passengers, Kuaidi Dache pledged 15,000 free trips a day.

It appeared that there was no end to this intense price war.

This “war” between the two apps is only one segment of the fierce rivalry between the two Internet companies, Tencent and Alibaba.

Tencent owns Wechat while Alibaba has developed a similar app known as “Laiwang”.

Alibaba bought 18% stake of the popular Twitter-like service Sina Weibo last year, which is the contender of Tencent’s Wechat.

Last week, Alibaba offered to purchase mobile mapping app AutoNavi. Tencent, meanwhile, already has a mapping service that boasts a similar function to Google’s Street View.

This latest contest in the taxi-booking app was seen as a tactic to encourage smart phone users to adopt the habit of using mobile payments.

During the just-concluded Chinese New Year holiday, Wechat users went gaga over the electronic angpao.

They had to first link their bank accounts to Wechat before they could give or receive money among their circle of friends.

According to Beijing Times, from the eve until the eighth day of Chinese New Year, more than 40 million angpao were handed out in the activity participated by more than eight million people.

Even Alibaba’s founder Jack Ma described the phenomenon as a “Pearl Harbour attack”.

In a poll on finance.ifeng.com, 70.42% of some 5,600 respondents felt that the war of taxi booking apps between Tencent and Alibaba was not a vicious competition.

Almost half of them believed that what mattered most at the end of the day was the product experience.

They were of the opinion that the company with the better service would prevail, in contrast to only 23.38% of the respondents who predicted that the one with bigger financial capability would eventually be declared the winner.

With the two giants locking horns and trying to outdo each other, many believed that the consumers are the biggest beneficiaries.

The rebates did not have a reported deadline. Until the cash rewards are withdrawn, users can continue to enjoy the subsidies to save some pennies.

Contributed  by Tho Xin Yi The Star/Asia News Network

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