On February 20th, according to media reports such as Jiemian News, several users discovered that some of their Taobao orders could be directly paid through WeChat Pay. Taobao customer service stated that WeChat Pay is currently gradually opening up to selected users and only supports the option to use it for purchasing certain products. Taobao will gradually expand this coverage in the future, and the process "will not take too long." In October of last year, Taobao also made a move to open up to WeChat Pay, but at that time, users had to save the payment QR code screenshot and then scan it with WeChat, resulting in a less smooth payment experience for the orders.
If Taobao does fully open up to WeChat Pay in the future, it signifies that the interconnection between Alibaba and Tencent has penetrated deeply into their respective core ecosystems. Prior to this, starting from June last year, Tencent gradually opened up its Moments, Video Account, and Mini Program ad placements to the Alibaba ecosystem.
For both companies, they are no longer direct competitors.
Alibaba's strategic focus has shifted from its previous multi-pronged attacks to a comprehensive defense, as its e-commerce foundation continues to face strong pressure from Pinduoduo and Douyin. On the other hand, Tencent's gaming business has been lackluster in the past two to three years, and all hopes from the senior management rely on Video Account. With the powerful ecosystem of WeChat, Video Account's number of active users has already surpassed Douyin, although its user stickiness and progress in commercialization still have a considerable gap compared to the latter.
Interconnection between tech giants has long been a topic of discussion in China, and the difficulties lie not in the technology but in the motivation. Even under regulatory pressures, the dismantling of walls between major internet companies has proven to be especially challenging. Therefore, in this sense, Taobao's opening to WeChat Pay has a demonstrative significance and can be seen as a phased outcome of multiple "friendly interactions" between the two companies in recent times. Of course, just like the forces that drove the two companies to build high walls in the past, today the driving force behind their cooperation is still commercial motivation.
Let's look at Alibaba first. Although we say that e-commerce is the field closest to money in the internet industry, the nature of transactions also determines that its ability to generate traffic is much lower than its ability to consume traffic. To some extent, this is also why many businesses have declined after being acquired by Alibaba. As a result of Alibaba's incorrect bet on consumer trends, Pinduoduo has gained an advantage in the competition for users' minds in the past few years.
Therefore, today, Alibaba needs traffic more than ever before, but unfortunately, traffic today is harder to obtain than ever before, not because there is less traffic, but because it has found other destinations.
Short video and instant messaging dominate users' online time distribution, corresponding to Douyin and Tencent. Before 2020, due to Douyin's own lack of e-commerce capabilities, it was easy for Alibaba to redirect traffic from Douyin, and the two companies did enjoy a honeymoon period. Alibaba gained traffic while Douyin, through monetization, also developed its own e-commerce business with the help of Alibaba.
Alibaba and Douyin started their cooperation in 2018 and signed a framework agreement in 2019 worth RMB 7 billion, including RMB 6 billion in advertising and RMB 1 billion in commissions. In mid-2020, after the expiration of this annual agreement, media sources revealed that the new annual agreement amount reached as high as RMB 20 billion. However, with the establishment of Douyin's e-commerce department in June 2022 and the complete cutoff of external live-streaming links just before Singles' Day, their honeymoon period came to an end.
The complete breakdown of cooperation undoubtedly had a greater impact on Alibaba. During this period, Douyin's e-commerce quickly gained momentum through live-streaming sales, and once the e-commerce ecosystem was established, the internal loop advertising model became much more effective than driving traffic to the Taobao ecosystem. With the significant reduction in traffic sent from Douyin to Alibaba, it seems that Alibaba has not found a better source of traffic supply. This was to be expected because, apart from Douyin, Tencent has the most abundant traffic, but at this time Alibaba and Tencent have not yet reconciled, and Tencent has not opened its floodgates to the Taobao ecosystem.
Interestingly, Alibaba's loss of a large share of Douyin traffic and the absence of a substitute from the Tencent ecosystem coincided precisely with Alibaba's "decline" period: Alibaba's stock price reached a high of $800 billion in the second half of 2020 but then plummeted to less than $200 billion.
On the other hand, although Tencent's performance has recovered somewhat in the past few quarters, the growth is still not satisfactory. This is particularly evident in its gaming business, which has not been able to produce competitively strong products in the past two years. Even the game "The King of Glory" released at the end of last year, despite substantial promotion and advertising resources, could not replicate the success of "PUBG Mobile" in the late-blooming phase. According to industry insiders, the daily active users (DAU) of "The King of Glory" may be only one-third of that of "QQ Speed," and the revenue gap may be even larger.
Therefore, in this situation, Tencent is undoubtedly willing to open up advertising resources to Alibaba, which is no longer a competitive threat. With Alibaba's economic strength and consumption willingness, it is entirely possible to push up Tencent's ad prices.
It is still important to note that based on the current development of Video Account, Tencent is clearly aiming to compete head-on with Douyin. According to "LatePost," the estimated total transaction volume (GMV) of WeChat Video Account's e-commerce in 2023 will be about 100 billion RMB. This scale may not seem large, but it is worth noting that Tencent only launched Video Account shops and native feed ads in July 2022, and its commercialization started just over a year ago.
The positioning of e-commerce in the Video Account ecosystem should be similar to Douyin's e-commerce. Therefore, if Video Account's e-commerce gains momentum in the future, Alibaba may face "traffic crowding out" similar to what it experienced with Douyin. During the last quarter's earnings conference call, management mentioned that WeChat's internal loop advertising revenue grew by over 30% year-on-year, contributing more than half of WeChat's advertising revenue.
Before this attempt to open WeChat Pay on Taobao, Alibaba's other businesses such as Ele.me and Youku have already integrated WeChat Pay. However, Taobao's direct opening to WeChat Pay still carries great symbolic significance. This is because in terms of business volume, Ele.me and Youku are several orders of magnitude smaller than Taobao, and these businesses, represented by the former two, were acquired by Alibaba from outside and cannot be considered as the core. Once Taobao fully integrates WeChat Pay, the most immediate question is, what impact will this have on Alipay? Peng Lei once said a long time ago, "Don't feel like you have to use Alipay for Taobao." Looking at the present, it is still impossible for Taobao to operate without Alipay, but there is a real possibility that a small portion of Taobao users do not use Alipay. In a previous article, "The New Stance" mentioned a phenomenon where many middle-aged and elderly users in emerging markets do not use Alipay, citing reasons such as "financial security against fraud."
It is not that Alipay itself is not secure, but this group generally has a low acceptance of new things. They usually believe that using Alipay when WeChat Pay can provide the same functions actually adds unnecessary risk. For these users, as Taobao starts to support WeChat Pay and convenience increases, they may start using WeChat Pay to complete their purchases on Taobao.
Of course, even if Taobao eventually fully adopts WeChat Pay, its product design should still prioritize Alipay. Moreover, today, when users use Taobao and other shopping apps, they generally default to frictionless payment for small transactions, and many users may not even realize that WeChat Pay is an option. Therefore, the introduction of WeChat Pay by Taobao should not have much impact on the basic performance of Alipay within the Alibaba ecosystem. What is more worthy of analysis is the potential changes this adjustment will bring to the relationship between Alibaba and Ant Group.
After going through antitrust adjustments, Ant Group and Alibaba are now two separate companies, and the former can no longer directly access data from the Alibaba ecosystem. This means that the connection between Alipay and Alibaba is actually not as strong as JD Pay, Duo Duo Pay, or Douyin Pay, which are internal components of the platform. The inclusion of WeChat Pay by Taobao objectively signifies further independence between the two. Alibaba's considerations and whether they had prior discussions with Ant Group cannot change this fact. Because when you put WeChat Pay in such a crucial position, even if you are Alipay, you will feel crowded.
Under these circumstances, it becomes even more necessary for Alipay to explore its own business model outside the Taobao ecosystem. As a widely used app, Alipay has accumulated 1 billion users in the past two decades, and its ecosystem is sufficient to support immense potential. The question is how to realize this potential. Alipay's current strategy is to enhance user stickiness through content and increase user engagement per capita. Additionally, it is accelerating the commercialization of live streaming sales and monetization of public domain traffic.
However, although Alipay's entry into the "Lifestyle" feature came a bit late, using content to enhance user stickiness is a method that has already been proven effective by other competitors. Recent data shows that Alipay has indeed made breakthroughs in certain niche categories through differentiated user characteristics and traffic advantages. Whether it can consolidate its gains and continue to cultivate user mindsets across multiple dimensions is key.
For Alipay, it will not fail because it loses to WeChat Pay within the Taobao ecosystem, as that will not happen. However, it may face challenges due to its over-reliance on Alibaba, as it has inappropriately tied its fate to another "independent" company.
"Going beyond Taobao" was part of Alipay's top-level design from its establishment, and it made substantial progress with the arrival of mobile internet. However, it is only in the past two years that it has truly found its focus. Survival is the top priority, and pressure serves as motivation. The entry of WeChat Pay into Taobao will undoubtedly further push Ant Group towards a more independent and open mindset, which is crucial for a company that is still "start-up" oriented.
In conclusion, if we go back a few years, no one could have imagined that one day you could use WeChat Pay to shop on Taobao. Some argue that this is because the industry trend has shifted from competition to cooperation, and from closed to open once the internet user base reached its peak.
"The New Stance" does not agree with this argument and is more inclined to attribute the progress in interconnectedness to the elimination and transfer of threats, resulting in adjustments to the "enemy versus us" relationship. If Alibaba and Tencent still had the same "aggressive" mentality as they did years ago, you would not see the harmony they have achieved today. Or perhaps you can try sharing content from Douyin to WeChat right away.
Of course, for ordinary users, having more convenience is always a good thing.
