JD.com Adds WeChat To Arsenal In Alibaba Assault
Alibaba founder Jack Ma’s worries about the rapid rise of mobile instant messaging service WeChat appear to be well founded, with word that Tencent’s (HKEx: 700) wildly popular platform will create an exclusive shopping channel for Alibaba’s chief rival JD.com. This kind of deal must certainly be Ma’s biggest nightmare, as it will instantly link JD, China’s second largest e-commerce company, with the hundreds of millions of young Chinese who regularly use WeChat to communicate. What’s more, WeChat has shown itself quite capable of converting its users into shoppers who could easily become JD customers.
Jack Ma probably didn’t envision this particular tie-up when he declared last year that WeChat posted a major threat and launched an aggressive promotion for Laiwang, Alibaba’s own rival mobile instant messaging service. (previous post) That’s because Tencent and JD.com were still e-commerce rivals at that time, even though both trailed well behind Alibaba’s 50 percent share of China’s B2C e-commerce market.
Since then, however, Tencent and JD.com have become strategic partners with their signing of a deal last month that saw the former buy 15 percent of the latter. The 2 companies have recently pooled their e-commerce business into a single platform with about a quarter of the B2C market. (previous post) Following that alliance, it was almost inevitable that the pair would form this kind of tie-up that will make JD.com WeChat’s main e-commerce partner.
According to the latest reports, JD will get high-level access to WeChat under their new agreement. (English article) That will allow JD to set up a shopping channel that will reside on one of WeChat’s 3 main home pages, alongside the highly popular “Moments” service, known in Chinese by its more common name of pengyouquan.
As a regular WeChat user, I can testify that Moments is one of WeChat’s most popular features, allowing friends to share photos, video clips and links to articles, similar to the News Feed feature on Facebook (Nasdaq: FB). Placement of the JD shopping channel in such a prominent place means that most of WeChat’s users are likely to see the new service, and many may be tempted to try it out.
Tencent already showed it can convert users to shoppers on WeChat when it launched a highly popular red packet promotion during the Chinese new year. That promotion allowed users to send virtual cash-filled envelopes or hongbao to friends and relatives over WeChat, and more than 5 million users input their credit and cash card data to use the service. (previous post) I expect we’ll probably see more similar promotions on WeChat this year and next, as Tencent works hard to start making some money from the service.
I’ll be watching closely to see if and when the JD channel shows up on WeChat, but do expect we will probably see it appear within the next few weeks. I also expect we could hear an official announcement in the not-too-distant future, as JD gets set to make a New York IPO to raise up to $1.5 billion. JD will need this kind of positive news to stir up buzz, especially following the tepid performance last week of the IPO for Sina’s (Nasdaq: SINA) popular Weibo (Nasdaq: WB) microblogging service. (previous post).
This latest JD-Tencent tie-up on WeChat does indeed look like quite a positive development, and could rekindle some of the waning investor interest in Chinese Internet companies on Wall Street. Accordingly, I would expect to see JD announce this new WeChat tie-up and try to launch its public listing either this week or next before investor sentiment fades further still.
Bottom line: JD’s new tie-up with WeChat could challenge Alibaba and will provide a big boost for the company in the run-up to its New York IPO, which could come this week or next.
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