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MKVenture|Week 33: Holding Hands and Breakups

The past two weeks have seen some new tech coalitions take form as Alibaba piloted to monetize on its Weibo investment and 360 Search took the place of NetEase as the search subsidiary of Youdao’s default search engine. Additionally, there was a breakup between Alibaba and Tencent, as Alibaba cut off WeChat over concerns that the latter would be too powerful in e-commerce traffic over time and would encroach on Taobao/TMall’s market share.

Alibaba Holding Hands with Weibo

Following its 586 million USD investment taking an 18% stake Sina Weibo, Alibaba moved the equity tie-up one step forward to business practice with the launch of an integrated Taobao Weibo. With the new service, Taobao vendors will have access to Weibo directly from within Taobao’s system and will be able to list items on Sina Weibo. Additional features will include conversion rate monitoring, fas insights and so forth.

But unless you really imagine a Twitter/Pinterest-based Amazon, the jury is still out on Taobao Weibo. It’s probably not going to go anywhere. I don’t see Weibo or Twitter users taking a liking to the fact that their timeline will be bombarded with unwanted ads very soon.

Taobao has always had a thing for social e-commerce, as I once wrote in the past. After so many failed attempts to get something out of their own social e-commerce services, Alibaba’s current attempt to leverage a popular incumbent would be another nice try. Taobao doesn’t really have many other options in this field.

In all fairness, Sina Weibo claims more than 500 million accounts which could route a considerable amount of e-commerce traffic to Taobao/Tmall, as attested by market researcher Hitwise. So it will count as a force for social commerce traffic, but that’s all. The HitWise report only attests to the fact that Weibo is useful for channeling online shopping traffic to Taobao among other ecommerce sites. It doesn’t mention the recent downtrend in Weibo’s popularity and that Weibo users are averse to a flood of advertisements stuffed into their timeline.

Qihoo Courting NetEase

As Sina and Alibaba have begun to hold hands, Qihoo has also been busy courting NetEase and has successfully taken over the latter’s general search business. Qihoo’s so.com should be a boost to Youdao’s general search business, as the latter can now focus on vertical areas like pricing engines and mobile products including its Evernote competitor Youdao Cloud Note.

The move makes sense big time to both. For Qihoo, winning over Youdao could add another piece (though very small) to its expanding search market share and could improve competition with Baidu, as NetEase has been pouring money for years into Youdao without yielding many results. According to CNZZ, a Chinese market intelligence company, as of this June Youdao accounted for 0.22% of the local search market, which really amounts to nothing. At the same time, Youdao’s Cloud Note has grown north of 15 million users, making it the number one note-taking app of its kind in China. It looks like it is time for NetEase to make hard yet sensible decisions to get rid of hopeless business and ride on new mobile trends.

Alibaba Breaking Up with WeChat

After the new cooperation case between Alibaba and Sina Weibo mentioned above went public, there was also mention of a breakup between Alibaba and Tencent. The largest e-commerce service in China is now prohibiting sellers from using WeChat to advertise to customers, citing “safe and legitimate concerns”. Partnering with Weibo and deviating from WeChat, Alibaba has made its choice in the social commerce arena.

Briefings

Xiaomi launched the HongMi (literal translation: Red Rice) low-end smartphone featuring an MTK quad-core processor (1.5GHz), a 4.7 inch IPS touch screen, with a price tag of RMB 799 (USD ~ 160). The move could help Xiaomi further reach out to new low-end consumers. Currently, smartphones priced under RMB 1000 are dominated by Shanzai (or imitation brand) phones. Xiaomi’s move will also be able to consolidate this market.

It seems Baidu wasn’t satisfied with just getting its hands on 91 Wireless. The search giant is also rumored to be considering acquisition of Nuomi and DingDing Map in an aim to ramp up its LBS-related business. The company formed an LBS division in its recent restructure to tap into this new trend.

Alibaba and Hunan Satellite TV reportedly made a joint bid for P2P online streaming service PPTV for 400 million USD while the Chinese online video market remains fragmented. Such a M&A would help online video services achieve necessary scale to negotiate with copyrighters and advertisers, which in turn would lead to potential new profitability.

Edited by Matt Johnson

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