Will the BATs – Baidu, Alibaba and Tencent – own the future?

Baidu, Alibaba, and Tencent are playing a role in breathtaking industry transformation and the West risks being left behind, writes Scott McBride of IPG Mediabrands

China has long been a nomadic figure in the minds of many marketers, and all too often we in the industry are blindsided by the West when looking at trends, technology inspiration, and new ways to drive consumer engagement.

In fairness, the country may not have evolved in as linear a fashion as the West, skipping out steps such as desktops and dial-up internet to name but a few.

Nevertheless, infrastructure across telecommunications and banking have evolved more rapidly and more recently than was seen in the step change evolution in the West.

As a result they have evolved to meet the needs of today’s consumers in ways in which the West lags woefully behind. For example, you can use WeChat Pay for your morning coffee or Alipay for your iconic yellow cab ride dash across Manhattan. Simply put, China has given themselves and the world a consumer-centric approach that doesn’t simply ask them to fit in with pre-historic payment methods.

This coupled with the precipitous accumulation of personal wealth and urbanisation has propelled China to being a world leader in communications, digital and engagement technology.

Putting this into perspective, the latest McKinsey study aptly named ‘The Modernisation of the Chinese Consumer’ stated that 76 per cent of urban populations will be considered middle class by 2022, up from four per cent in 2000.

Hence sometimes the insight can be as plain as day, and none more so than the advancements driven from Baidu, Alibaba, and Tencent – known colloquially as the BATs.

Commonly compartmentalised as the Chinese search engine, eTailer and social giant, the behind-the-scenes transformation being driven by these conglomerates is not just staggering, it’s breathtaking.  

Stepping back a number of years, one can only respect the dominant search engine market share (80.64 per cent as of November 2017) that Baidu has owned, and its dominant eco-system play. However, the company still receives nine tenths of its revenue from online ads and the impact of the rapid evolution and scale of Alibaba and Tencent is leaving Baidu in the corner as spends transition to more social and eCommerce driven initiatives.

As such one could argue that the days of the three-letter acronym are numbered, and that ‘BAT’ will soon simply become ‘AT’. It’s not that we, the consumer, will cease to search, but search ‘intent’ is increasingly manifesting itself on other platforms –such as the Alibaba-owned online mall Taobao – versus the traditional search engine. The evolution of consumer behaviour has changed search and search intent forever.

The speed at which Alibaba and Tencent have accumulated their value, in terms of dollars, but more importantly consumer need, is firmly driven from their focus on data, technology efficiencies and the building of ecosystems, which not only meet the desires of today’s consumers but create the desires of tomorrow.

Alibaba sales hit $5 billion in first minutes of this year’s Singles Day

In the recent Singles Day, or 11/11, the 24-hour sales extravaganza that generated US$25 billion, Alibaba showcased it’s omni-channel ‘New Retail’ experience in a bid to widen its ‘offline influence’.

Alibaba’s Tmall partnered with retailers to equip 100,000 smart stores across China to feature mobile QR code check-ins to redeem coupons and Tmall-connected touch screens with product tag scanning to look up items, as well as QR codes for mobile scan to purchase.

Some fashion brands’ fitting rooms were also kitted out with Alibaba’s FashionAI digital stylists which scanned clothing items and recommended matching pieces that could be requested through the screen.

As the battle to ‘own’ the mainland’s e-commerce space intensifies the significance of Tencent’s stake in JD.com may become more apparent, although the site’s hold on the home market is relatively small (25 per cent in 2016). However, the platform’s long standing investment in infrastructure, coupled the deep pockets and eco-system of investor Tencent, will fuel the e-commerce arms race in China.

Also significant is the myriad of foreign investments made by both Alibaba and Tencent, in a comparatively similar space transactions with Lazada in South East Asia and Flipkart in India. In addition to this, both have made investments  in the underlying eco-system players such as consumer credit scoring, online payment firms, online gaming and instant messaging.

One thing is for sure, the new battleground is firmly rooted in the ‘connected e-commerce’ space, and one would wisely argue that for today and tomorrow ‘e-comm is the new digital’.

So, what can we learn from China’s internet – technology giants? Here are a number of implications to be considered:

  • Focus on the customer – when we say digital first, we mean mobile first with the consumer at the centre
  • Develop a framework which works for your new consumer-centric business that attracts, develops and grows mutually beneficial relationships with core audiences
  • Before embarking on executing your new ‘modern’ framework ensure you’ve got your house in order in terms of audience and value definition, digital touchpoints and experience planning, data management, interaction logistics whether online, offline and through-the-line 

Only when all those things have been considered should you start to write your creative briefs. 

Scott McBride is the chief digital officer of IPG Mediabrands APAC


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