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Tencent beats Alibaba in ‘red envelope’ app war

  • Author:Esway
  • Source:www.eswaychina.com
  • Release on:2015-03-02

Tencent beats Alibaba in ‘red envelope’ app war

Tencent trumped Alibaba in the “red envelope war” to lure users on to the companies’ competing mobile payment platforms during the lunar new year holiday.  

Users of Tencent’s WeChat mobile messenger sent 1bn red envelopes on lunar New Year’s eve, February 18, compared with 240m sent through Alipay Wallet, the app linked to Alibaba’s mobile payment service.    

The virtual red envelopes — hongbao in Chinese — are inspired by the Chinese holiday tradition of gifting cash-stuffed envelopes to friends and family.

Z-Ben Advisors, a consultancy that tracks China’s investment management industry, said the holiday promotion marked a coup for Tencent, which processed only 10 per cent of Chinese mobile payments in the third quarter last year, compared with 83 per cent for Alipay, according to iResearch.     

“Z-Ben Advisors would not be surprised to learn that this year’s hongbao promotion attracted another 100m-200m clients (and their bank details) for WeChat. Alibaba’s gains are likely to be less impressive,” the consultancy wrote on Thursday.     

Key to Tencent’s success was a tie-up with state broadcaster China Central Television, whose New Year’s eve gala is the country’s most-watched TV programme. At specific moments during the broadcast, WeChat users could shake their phones for a chance to win cash gifts.            

At one point during the broadcast 810m WeChat users shook their phones within a single minute, Tencent said.   

Analysts say WeChat’s strong position in mobile offers an opportunity to seize market share from Alibaba. Alipay’s advantage stems from its integration with Alibaba’s Taobao and Tmall ecommerce platforms.   

Long before smartphones were ubiquitous, millions of online shoppers were already using PCs to link their bank cards to Alipay and pay for purchases on Taobao.     

But the rise of the mobile internet has created a new opening for Tencent. WeChat boasted 468m users by the end of September, compared with only 190m for Alipay Wallet, though many WeChat users have not yet linked their bank cards.

Still, some analysts question whether WeChat’s momentum can continue after the holiday. Among both online and offline retailers, Alipay remains more widely accepted than Caifutong, the Tencent payment platform linked to WeChat.        

“Even though Tencent locked in a lot of bank cards, they still have a problem with how to monetise,” said Zhang Yi, chief executive of iiMedia Research, a consultancy focused on the mobile internet. “They’ve invested a lot in hongbao but they don’t have much income to show for it.”       

Both Alibaba and Tencent hope that once hongbao and other promotions hook users and their bank accounts into their respective mobile payment systems, the internet groups can effectively market other financial services such as banking and fund management.            

Alibaba and Tencent are among a group of companies that China’s banking regulator has approved to launch privately owned banks. Tencent’s WeBank formally launched last year, and Alibaba’s Zhejiang Internet Commerce Bank, also known as Ant Bank, is expected to begin operations this year.         

“Nothing is more important to Ant Bank and WeBank than acquiring banking customers as quickly as possible, by any means necessary. Both groups have or can build infrastructure to make banking customers profitable quickly,” says Z-Ben.  

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