Taobao and Tencent join forces to "break down walls"

Author | Liu Baodan

Editor | Zhou Zhiyu

The "wall" in the payment field between Alibaba and Tencent, the two major Internet companies, has finally been dismantled.

After half a year of planning, Taobao finally announced on September 4th its plan to add WeChat Pay. This means that Alibaba intends to open up the e-commerce transaction entrance of over 1 billion users to Tencent.

In response to this, Taobao Tmall stated that the company has always adhered to the concept of open cooperation and actively explored interoperability and cooperation with various platforms. WeChat Pay also expressed a similar attitude to Wall Street News.

From being enemies to friends, Alibaba and Tencent took more than a decade. Behind this, the Alibaba Group and Tencent Group have experienced expansion followed by contraction, with new giants like ByteDance and Pinduoduo coming to the forefront. The industry continues to iterate forward, bringing ancient stories to new directions.

With Alibaba and Tencent shaking hands and making peace, both sides are moving from establishing business barriers to form competitiveness towards broader business cooperation. The industry is returning to the logic of business development, enhancing efficiency while exploring the potential in segmented businesses.

Internet giants are becoming more focused and pragmatic, strengthening their core competitive advantages and bringing financial growth. The era of blind expansion and pursuing scale at all costs is over.

A new chapter in the Internet industry is about to begin.

Hand in Hand

This time, Alibaba extended an olive branch to Tencent.

On September 4th, Taobao released the "Opinions on Adding WeChat Payment Capability for Solicitation" (hereinafter referred to as "the Announcement") to enhance consumers' shopping experience, with plans to add WeChat payment capability on Taobao.

Wall Street News learned that this wall-breaking action had been progressing for half a year, initiated by Taobao.

In February this year, many users found that besides Alipay, WeChat Pay was also added as a payment option when placing orders on Taobao. Taobao customer service responded that this was a feature in testing and was only open to some users.

Now, after more than half a year of testing and exploration, Taobao has finally put the introduction of WeChat Pay on the agenda.

Currently, the announcement of adding WeChat Pay on Taobao is in the "voting" stage. Taobao has given merchants two options: support or re-evaluate, with the voting deadline set for the afternoon of September 5th.

In response, WeChat Pay stated that the functional adaptation with Taobao platform merchants is currently being opened. Taobao mentioned that WeChat Pay services will gradually be opened to all merchants on the Taobao platform after the announcement takes effect, and once merchants activate WeChat Pay, consumers can choose "WeChat Pay" to purchase products from the corresponding Taobao store.

This also means that Alibaba will officially open up the core e-commerce transaction field to Tencent.

From a business perspective, Alibaba and Tencent joining hands in the payment field will benefit their respective business developments.

For Alibaba, adding WeChat Pay can optimize consumers' shopping experience, aligning with the development philosophy of "putting users first."

Eddie Wu, who took office as Alibaba's CEO in September last year, wrote in his first all-staff letter that putting users first is the strategic focus. To create the best user experience, one must seek the broadest openness and cooperation, including with companies that are traditionally seen as competitors WeChat Pay has a high penetration rate in third- and fourth-tier cities, as well as among the elderly population. The integration of WeChat Pay into Taobao is expected to bring incremental users to these markets and enhance the stickiness of users who prefer WeChat Pay.

For WeChat, Taobao e-commerce is a huge trading venue that will bring unimaginable market space for the payment business.

QuestMobile data shows that as of December 2023, Alibaba's user base is 1.151 billion. As the leading e-commerce platform, Alibaba's GMV in the domestic e-commerce market reached as high as RMB 80 trillion in the 2022 fiscal year.

It is worth mentioning that as the main payment service provider for Taobao, Alipay has also stated that openness, collaboration, innovation, and sharing are the basic spirits of the Internet. The company will continue to deepen cooperation with Taobao and create greater value through technological and product innovation.

Turning Point

From the development history of the Internet industry, the trend of cooperation and competition between Alibaba and Tencent is an inevitable trend of the times, but even so, it took more than ten years for Alibaba and Tencent to turn enemies into friends.

Eleven years ago, Alibaba suspended third-party application services related to WeChat, and Taobao no longer directly redirected to WeChat external links. Jack Ma and Pony Ma personally built a "Berlin Wall," clearly separating Taobao and WeChat, the two major national apps.

Four years ago, the relationship between Alibaba and Tencent began to thaw, and the two giants started to dismantle the wall.

In the second half of 2020, advertisements for Fliggy began to appear on QQ Music. Starting in 2021, advertisements for Tencent Video, Tencent News, and other apps, as well as Taobao links in WeChat, could directly jump to Taobao. There were rumors in the market that Alibaba and Tencent were considering opening up their ecosystems to each other, causing both giants' stock prices to rise by more than 3% in a day.

In September last year, Ali Mama and Tencent Advertising further deepened their cooperation. High-quality advertising traffic from WeChat Video Accounts, Moments, Mini Programs, etc., will be delivered through Ali Mama's UD Effect and can directly jump to Taobao, Tmall merchants' stores, product details, and Taobao live streams. The two sides are also deeply integrating in terms of complementary audiences and system co-construction.

Finally, Tencent has opened up its core traffic resources to Alibaba. Now, Alibaba has also opened the door of e-commerce transactions to Tencent. The two giants tacitly displayed their sincerity.

This is the result of Alibaba's proactive choice, but fundamentally, it is the change that Alibaba must make to adapt to the new stage of the industry.

Of course, regulatory policies are also a driving force. In 2021, the Ministry of Industry and Information Technology proposed to ensure the normal access of legal website links. In the same year, Alibaba was fined RMB 18.2 billion for violating the Anti-Monopoly Law. On August 30th this year, the regulatory authority announced that Alibaba had successfully completed a three-year rectification and achieved good results.

The vast Alibaba and Tencent ecosystems have become a thing of the past. With the rise of new giants such as ByteDance and Pinduoduo, the Internet industry has entered a new round of reshuffling.

For Alibaba, how to regain a foothold in the increasingly competitive e-commerce market and prove itself among a group of competitors is a top priority.

Alibaba is embarking on a new journey with a start-up mentality. Last year, Alibaba underwent the largest organizational restructuring in over twenty years, aiming to free its e-commerce, cloud computing, local services, express delivery, entertainment, and other businesses from constraints, compete fully in the market, and return to the development logic of the business itself Alibaba and Tencent have each taken a step forward, marking a new era in the internet industry where younger leaders like Zhang Yiming, Huang Zheng, and Wang Xing have emerged.

As the tide of time continues to move forward, the internet industry awaits a new round of "heroes emerging from the younger generation"