After three years of rectification, $BABA-W (09988.HK)$ quietly offered an olive branch to its old rival $TENCENT (00700.HK)$ .

On August 30, the State Administration for Market Regulation announced on its official website that the department will supervise$Alibaba (BABA.US)$The holding company has completed the three-year rectification.

The department pointed out that, based on the verification and evaluation, Alibaba Group has fully ceased the 'choose one out of two' monopoly behavior, strictly regulated its own business practices, earnestly implemented platform responsibilities, improved its compliance management system, enhanced the level of service for platform merchants and consumers, achieved good results in compliance rectification, improved the environment of the online retail market, effectively restored fair competition order, continuously expanded market development space, significantly enhanced competition vitality between platforms, and continuously optimized the quality of platform economic development and business environment.

Alibaba responded by saying, 'For Alibaba, this is a new starting point. In the future, we will continue to be based on innovation, adhere to compliant operation, increase investment in technology, promote the healthy development of the platform economy, and create more value for society.'

At the same time, Alibaba is once again promoting interconnection and intercommunication, with Taote as the main player in the sinking market.

Recently, many users have noticed that the Taote app now supports WeChat Pay. When placing an order, they can redirect to the WeChat Pay interface. After completing the payment, they are redirected back to Taote. The user experience is no different from normal third-party payment services, avoiding the cumbersome process of scanning QR codes or asking others to pay on behalf.

Taote customer service personnel stated that WeChat Pay capability is gradually being opened up. Whether users can use this feature depends on the information on the order page.

As the main force of the sinking market for the Taobao e-commerce system, Taote was launched in May 2021 and initially received strong support from the Alibaba Group. It has over 300 million annual active consumers.

However, due to long-term losses and significant changes at the Alibaba Group level, Taote's development over the past two years has not been ideal. Its presence is much weaker than previous years, and there have even been rumors of 'Taote returning to Taobao'. Now, Taote is attempting to integrate WeChat Pay, perhaps hoping to reach the long-tail population outside of Alipay by adding payment tools.

However, whether this move will have an immediate effect is not the key; whether Alibaba will take this opportunity to accelerate its opening to Tencent, and whether Tencent will return the favor, has more flavor and room for imagination.

The two internet giants used to constantly battle each other for years, and it was not until the second half of 2021 that they began to move towards each other under the external public opinion and regulatory pressures, gradually opening up their own capabilities and resources to each other.

Looking back at this far-reaching "interconnection", Alibaba and Tencent, despite having many verbal disputes, have also made many concessions.

Currently, Alibaba's subsidiaries such as Ele.me and Youku have already connected to WeChat Pay, and Taobao's e-commerce platform is also gradually being opened; Tencent has also made significant changes to WeChat's external link policy, allowing users to jump to apps such as Taobao and Tmall through links, and has opened up WeChat advertising and marketing services to Alibaba.

However, the interconnection between the two giants is still not complete. For example, users still cannot directly share Taobao and Tmall product cards to WeChat chats, and Taobao's mini program has not yet been granted access by WeChat. Correspondingly, most users still cannot smoothly use WeChat Pay on Taobao and Tmall.

On the other hand, compared to three years ago, Alibaba and Tencent now face more long-term challenges than ever. By opening up WeChat Pay through Taobao's special features and starting a new round of interconnection, it not only brings new users to Taobao but also has a greater chance of achieving a win-win situation, and promotes the two giants to continue moving towards "co-opetition".

01

Since 2013, Alibaba and Tencent have been blocking each other in an escalating battle, especially the artificial separation between the Taobao system and WeChat, which has resulted in online shopping users having to copy and paste the "Martian language"-like Taobao commands, struggling in the ecosystem of the two giants.

It was not until eight years later that the high walls between the two camps began to crumble in the face of the era of breaking monopolies. Alibaba and Tencent, under tremendous pressure, finally initiated interconnection and intercommunication.

The change first occurred on the outskirts of Alibaba, with apps such as Ele.me, Youku, Damai, Kaola Haigou, and Shuqi, all Alibaba-owned, being connected to WeChat Pay. At the time, Alibaba responded, expressing its hope to "face the future together with other platforms and move forward together."

Soon after, Taobao, the then-popular platform owned by Alibaba, took a crucial step by launching "WeChat Scan to Pay."

At that time, Wang Hai, the Vice President of Alibaba Group, stated that as WeChat Pay's direct access progress was slow, Taobao launched the WeChat Scan to Pay project. "Before interconnection is established, we hope to complete the payment using the scan-to-pay method, even if it is only for a few weeks or days. We don't want to wait too long for direct access to WeChat Pay."

However, even until today, Taobao is still unable to fully connect to WeChat Pay.

In 2022, Alibaba continued to expand its interconnected scenes. In February of that year, Taobao once again opened up WeChat Pay for internal testing, allowing users to choose between "WeChat Scan to Pay" and "Ask my WeChat friends to pay" when making payments on Taobao. More than half a year later, Alipay started to support QR code generation and scanning for transferring money to WeChat and QQ friends.

On the other hand, Tencent is also gradually opening the door to Alibaba, and the most anticipated move is the loosening of WeChat's restrictions on external e-commerce links.

As early as September 2021, WeChat announced that it would implement new measures for managing external links in stages and steps. Two months later, the changes were finally implemented: users can directly access external links in private chat windows, and the trial of allowing direct access to e-commerce links in group chat scenes has begun.

At the same time, Tencent is also trying to open up the flow valve and cooperate with Alibaba in advertising marketing in the WeChat and Alibaba scenes.

In the same year when WeChat conditionally released external links for e-commerce, Tencent Video, Tencent News, and QQ's advertising traffic accessed Alibaba's MAMA (Alibaba's merchant marketing platform). Taobao merchants can more conveniently tap into Tencent's traffic pool.

After three years of cooperation, the two parties expanded their cooperation in 2023, allowing merchants to advertise through Alibaba's MAMA on WeChat video accounts, Moments, mini programs, etc., and directly redirect to Taobao Tmall merchant stores, product detail pages, Taobao Live rooms, etc.

Alibaba's various businesses opening WeChat mini programs have also attracted attention.

Alibaba had previously stated that it had applied for the creation of WeChat mini programs for multiple businesses, but had not been successful. It was not until October 2022 that the simple 'Tmall Supermarket Xiaodingjia' mini program went online, giving the outside world a glimpse of Alibaba's layout of mini programs. More than half a year later, the 'Tmall Youpin' mini program went online just before the 618 shopping festival, igniting the imagination of selling on WeChat.

However, these two mini programs mentioned above did not operate for a long time and can no longer be found. Alibaba's attempt to attract WeChat users through mini programs did not materialize.

In addition, Alibaba has not yet fully integrated WeChat Pay, and WeChat has not allowed users to directly share products from Taobao to private chats, group chats, and other scenes, which are also the two most criticized usage scenarios by users. Despite nearly three years of progress in interoperability between the two giants, the artificial obstacles in core scenarios are still prominent.

02

In the wave of interconnection and interconnection that started in the second half of 2021, external factors are the main driving force for the two giants to move towards each other. The demand for breaking barriers and resource interconnection is not as urgent as it is today.

At that time, although Alibaba was under huge pressure,$PDD Holdings (PDD.US)$the user scale advantage continued to shrink and even reversed, but the absolute user increment was not low. In the 2022 fiscal year (as of March 31, 2022), Alibaba's annual active consumers reached 1.31 billion, with a net increase of 0.177 billion; of which the net increase of consumers in the Chinese market was 0.113 billion.

TaoTe's rapid growth is particularly noteworthy. Despite being in the sinking market in which PDD excels, TaoTe achieved an annual active consumer base of over 0.24 billion after 18 months of launch, with continuous growth exceeding 40 million for three consecutive quarters.

At the same time, Alibaba's revenue also maintained a fast growth rate. In the 2022 fiscal year, Alibaba's revenue exceeded 850 billion RMB, a year-on-year increase of 19%.

Tencent's situation at that time was similar to Alibaba's, although a strong challenger stood outside the door, it was still prosperous overall.

In 2021, Tencent's biggest opponent was naturally Douyin. After the demise of Weishi, Tencent faced the risk of missing out on the short video era; luckily, WeChat launched Video Number and promoted it unprecedentedly. According to the Video Number Development White Paper of the Light Media Research Institute in 2021, the DAU (daily active users) of Video Number exceeded 0.5 billion, a sharp increase of 79% compared to the previous year.

According to Tencent News "First Line", as of February 2021, the peak DAU of Douyin (including the Lite version and Volcano version) was about 0.7 billion, with an average of 0.6 billion. The difference in active user scale between Video Number and Douyin is not very large.

As for revenue, Tencent Games' revenue in 2021 reached 174.3 billion yuan, a 12% increase compared to the previous year. Considering the special market environment at that time, Tencent Games' performance sheet is not bad, and flagship mobile games such as "Honour of Kings", "Peace Elite", and "PUBG Mobile" have not shown signs of fatigue.

"Good Times" is the core business, Alibaba and Tencent lack the motivation to embrace their old rivals. But after three years, the two giants are facing more challenges; once again promoting interconnection and seeking incremental growth from each other's strengths, Alibaba and Tencent have returned to the table.

After Alibaba emerged from the price war and one-sided "refund only" quagmire in the e-commerce business, it is still in a recovery period and needs to find more growth momentum.

In the first quarter of the 2025 fiscal year (the second quarter of 2024), Alibaba Group's revenue increased by 4% year-on-year, of which the revenue of Taobao Group decreased by 1% year-on-year; net profit decreased by 27% year-on-year; not in accordance with generally accepted accounting principles in the United States, net profit decreased by 9% year-on-year.

If Alibaba wants to return to rapid growth, introducing more consumers from outside the ecosystem is one of the basic actions. Taote, which has been under considerable pressure recently, is now trying to integrate WeChat Pay, theoretically reducing the payment threshold and reaching out to long-tail users who have not installed Alipay. If the effect is good, Alibaba's other businesses, such as Taobao and Tmall, may follow suit.

On the other hand, Tencent's core gaming business has just resumed growth. From 2022 to 2023, the revenue of this business basically stagnated. In the second quarter of this year, Tencent Games' revenue in the domestic and international markets reached 34.6 billion yuan and 13.9 billion yuan, respectively, a year-on-year increase of 9%, returning to a growth trajectory.

But challenges still exist. In the second quarter, among the three major business sectors of Tencent, only online advertising maintained a double-digit percentage year-on-year growth rate, with a significant lead over the 6% growth of value-added services and the 4% growth of financial technology and enterprise services, increasing from 19.5% to 29.9 billion yuan compared to the same period last year.

Regarding the financial technology business with WeChat Pay at its core, Tencent disclosed in a conference call: the number of payment transactions continues to grow at a double-digit percentage, but the average transaction amount is decreasing. In this context, integrating WeChat Pay into the Taobao e-commerce ecosystem helps Tencent acquire more high-value consumers, increase transaction amounts, and thereby drive growth in the entire financial technology sector.

03

Alibaba's limited opening of payment scenarios to Tencent is another example of internet giants transitioning from competition to cooperation.

The new BAT trio - ByteDance, Alibaba, and Tencent once engaged in intense battles in various internet fields and built barriers to try to isolate users. However, with changes in internal and external environments, sticking to their own 'territory' is no longer feasible, leading to increasingly intense cooperation among large companies.

One of the most typical examples is Tencent and ByteDance reaching a 'century reconciliation' around games.

Five or six years ago, ByteDance once heavily expanded its gaming business, even penetrating Tencent's territory. Tencent then countered by battling for game live streaming rights, frequently initiating infringement lawsuits against Douyin (TikTok) anchors for 'pirating' behavior.

For most of the time after 2018, Tencent and ByteDance considered each other as arch-enemies, with commercial cooperation like advertising placement mostly severed. However, starting from 2023, Tencent quietly resumed buying traffic on platforms like Douyin and Xigua Video to promote its own games such as 'Return to the Empire' and 'Naruto,' with Douyin not impeding Tencent's series of actions.

By the beginning of this year, ByteDance massively retreated from the gaming sector, no longer directly threatening Tencent. In response, Tencent has essentially stopped suing Douyin, allowing top Tencent game anchors like Zhang Dayi to 'switch' to Douyin, and has also opened live streaming rights for games like 'Honor of Kings' and 'Peacekeeper Elite.'

From the latest financial report, Tencent has benefited a lot from this settlement, and Douyin has further consolidated its leading position in the game live streaming field, and eliminated potential infringement risks.

The interconnection between Alibaba and Tencent is increasing.

In January of this year, Alibaba's second-hand e-commerce platform Xianyu launched a WeChat mini program and began to support WeChat Pay. A month later, many users noticed that Taobao has also started to support WeChat Pay; Taobao responded that it is currently open to some users and some products, and will gradually cover all users in the future.

In March, the topic of 'WeChat can now be used to start DingTalk meetings' trended on Weibo. Users can join DingTalk meetings within WeChat without having to download the DingTalk app. Now, the giant in the Taobao e-commerce sector, Taote, has started to support WeChat Pay in a small range, pushing forward the cooperation of the two giants another step.

The frequent exchanges of goodwill among the three giants reveal a new trend in China's internet industry: commercial interests in the present replace long-term strategic competition, becoming the main consideration for large companies.

In recent years, companies like ByteDance, Alibaba, and Tencent are no longer investing heavily to compete in niche markets, but are instead putting more funds and resources into their core businesses. Even in the face of groundbreaking technologies like AI, the focus of the giants is on self-development, while also investing appropriately in external entrepreneurs, rather than waving their checkbooks to buy star companies.

Correspondingly, the new BAT (ByteDance, Alibaba, and Tencent) have increasingly high demands for traffic monetization efficiency. Take the gaming industry for example, ByteDance has significantly reduced its gaming business and is now cooperating with Tencent to earn advertising revenue. When Tencent promotes new games, it allocates more budget to Douyin rather than its own platform, in hopes of achieving a higher return on investment.

Now, Alibaba and Tencent also face similar situations. The Taobao e-commerce platform naturally requires traffic from external sources, and WeChat's traffic pool is a battleground. Tencent also needs to find more high-value monetization scenarios for WeChat beyond advertising. However, WeChat Stores have just been launched and still have a long way to go before they can grow. Selling traffic to Alibaba is one of the easiest solutions.

Three years ago, Alibaba and Tencent entered the game of connectivity, but made little progress. Today, although the game itself has not changed much, the two players have more reasons to take the initiative and seek a wider range of reconciliation and cooperation.

References:

Alibaba finally digs into the WeChat gold mine.

Tencent goes back to its old path by avoiding "Genshin Impact".

New Beijing News: New progress in connectivity! Taotu adds WeChat payment, reporter successfully tested and placed an order.

Listening Tech: "Taotu" falls.

IT Times: WeChat payment quietly enters "Taobao Village".

Editor/Somer