getUrls?link=3e8fdee475792eb0a4ea21326f8aac98 - Alibaba vs. Tencent, the market value battle or the ecological battle?

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In the past many years, Tencent has been dominating the Hong Kong stock market Throne. Recently, Tencent has attracted attention because of its 1 trillion Hong Kong dollar market value that was quietly dumped by Ali.

In people’s consistent perception, AT is the “Internet double”Xiong”, occupying the two major circuits of e-commerce and social networking respectively, have each embarked on a road to success that cannot be replicated. With the expansion of business scale, the two sides began to meet in narrow ways in many fields.

Of course, comparing AT’s specific business alone has little meaning. Observe the underlying business genes, development philosophy, and even the character of a company of this size, which may be the underlying cause of the trillion-dollar market value gap.

/01 /

Expanded scissors gap

2004 Tencent was listed on the Hong Kong Main Board in 1988, with an initial issue price of HK$3.7 per share. After that, its stock price began to grow exponentially. On September 5, 2016, after the Hong Kong stock market opened, Tencent soared to 209.6 Hong Kong dollars, with a market value of nearly 2 trillion Hong Kong dollars, surpassing China Mobile for the first time to become the most valuable company in Asia.

Ten years after Tencent’s listing, Alibaba knocked on the door of the New York Stock Exchange in 2014, with an initial issue price of US$90.5 per share. Data show that in the five years from 2014 to 2019, Ali’s stock price has risen by nearly 120%. As of the end of November 2019, its market value has exceeded US$530 billion.

The two sides have met in the true meaning of the capital market, starting on November 26, 2019. On this day, Alibaba was listed for the second time in Hong Kong. The evaluation of the two companies from the outside world has since taken a more intuitive dimension.

On the first day of Hong Kong stocks listing, Ali rose 6.25%at the opening of the market, to 187 Hong Kong dollars, and the market value reached HK$4 trillion. From this day on, Tencent, the”king of Hong Kong stocks”, was replaced by Alibaba. Just over two months ago, Tencent’s market value finally caught up with Ali, and someone immediately interpreted it as”Tencent forced Ali to the edge of the cliff.” But on September 2, 2020, when the Hong Kong stock market closed, Ali’s stock price reached 291.2 Hong Kong dollars, with a total market capitalization of 6.303 trillion Hong Kong dollars. Only then did people discover that Ali had surpassed Tencent’s 1 trillion Hong Kong dollars.

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Alibaba September 3rd stock price Trend (from Snowball)


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Tencent Holdings share price trend on September 3 (from Snowball)

The HK$1 trillion gap is obviously not a positive signal for Tencent. After all, it is equivalent to one-fifth of its own body mass.

According to data, from 2001 to 2018, Tencent’s operating income rose from 50 million yuan to 312.69 billion yuan. After it went public in 2004, its revenue growth momentum became more and more obvious. The growth rates from 2006 to 2009 reached 96%, 87%and 74%respectively. On the other hand, Ali’s revenue also rose from 6.7 billion yuan in 2010 to 376.8 billion yuan in 2019, with a compound annual growth rate of 49.6%.

According to the two financial reports, before 2017, Tencent’s quarterly revenue was basically It is higher than Ali, but after that, Ali’s revenue growth has accelerated, reaching more than twice that of Tencent in 2018-2019. By 2019, Ali’s revenue scale has been 35%higher than Tencent.

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Alibaba total revenue over the years (from Robo)

The 2020 Q2 financial report shows that Tencent achieved revenue of 114.883 billion Yuan, a year-on-year increase of 29%; net profit was 33.107 billion yuan, a year-on-year increase of 37%. In the second quarter of 2020 (first quarter of fiscal 2021), Ali’s revenue was 153.75 billion yuan, a year-on-year increase of 34%, and net profit doubled from 19.12 billion yuan in the same period last year to 47.59 billion yuan.

It should be noted that among Tencent’s 114.883 billion yuan of revenue, the value-added service revenue is 65.002 billion yuan, accounting for 57%of total revenue, financial technology and corporate services, online advertising and others accounted for 26%, 16%and 1%of total revenue respectively. As the revenue pillar of value-added services, most of its revenue is contributed by online games, of which 35.988 billion yuan in mobile games revenue and 10.912 billion yuan in mobile games.

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Tencent’s Q2 quarter revenue share of each business (from Tencent’s financial report)

Look at Alibaba again, the core e-commerce sector accounts for 87%of its total revenue, and this sector includes China’s retail business, B2B, Cainiao Network, and local Life services, etc. Among them, the new retail business represented by Hema and Tmall supermarkets has maintained a growth rate of more than 80%. At the same time, Alibaba’s cloud computing business also contributed up to 12.345 billion yuan in revenue in the second quarter, an increase of 59%year-on-year, becoming a new growth engine besides e-commerce business.

/02 /

Gene differences

There is no shortage The view is that it is normal for the market value to fluctuate. However, there is a trillion-scale market value scissors gap between AT-sized companies, and it is necessary to explore deeper reasons.

In the author’s opinion, the difference between ATs is firstly determined by their Genetically determined.

After deciding to switch to To B, many people think that Tencent does not have the To B gene. In this regard, Liu Chiping said he did not agree with”gene determinism”, he also cleverly put forward the view of”evolution”, believing that To B ability Can be obtained in acquired evolution.

Tencent, which started as a social network, has high-stick social network platforms such as QQ and WeChat. A huge amount of traffic is generated through the interactive use between C-end users, and a big fuss about these traffic is constantly seeking ways to realize cash.

Ali starts from e-commerce, and its role positioning is the platform, connecting the B-end merchants With C-end consumers. Over the years, through the establishment of commercial platforms, financial platforms, logistics platforms, cloud computing platforms and other infrastructures, the capabilities of Alibaba’s entire ecosystem have also been integrated. On this basis, a systematic ability to serve both ends of B and C has been formed. The better To C is, the better To B is, the better the positive cycle.

So we see that Ali’s capabilities fully cover the front-end service On the other hand, Tencent is grafting various businesses on the basis of huge traffic to extend the boundary and explore a more diversified C-end business model.

From a specific business perspective, Alibaba started from B2B and successively launched Taobao , Tmall, Alipay, solved the online transaction problem, and then developed logistics, cloud computing and other infrastructure issues. At the same time, it also derived financial services for small and micro enterprises, and broadened the business flow, logistics, information flow, and capital flow. Hedao has also opened up new tracks such as new retail and e-commerce live broadcasts, and has continuously enriched the scenes of serving consumers through the layout of local life, big entertainment, etc. These multi-end and cross-scenario capabilities can in turn better serve the B-end .

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Alibaba commercial operating system (from CITIC Securities)

Tencent started with QQ, and in the mobile Internet era, With WeChat as the entrance, it has cultivated a huge consumption ecological chain, and its business has expanded to games, videos, music, online reading and other fields. After missing the first-mover advantage of China’s cloud computing, Tencent Cloud’s current market share in the Chinese market has reached about 15%.

But Tencent has another trick—investment. Tencent has a huge investment planning, research, and execution team. The natural 2C gene means that it only needs to invest with capital and flow to continuously expand its own basic market. It does not need to do everything in specific business. Tencent’s investment has also achieved remarkable results. Investment income accounts for an increasing proportion of total revenue. Even because the investment is too successful, it is questioned and lost innovation, and it is often criticized for”no dream”.

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Tencent ecological business system (from Soochow Securities)

/03 /

Define”ecology”

In fact, because of the traffic dividend, Tencent has been much easier than Ali along the way ,”Using doctrine” can be described as a time-tested here.

Tencent has always appeared as a”nanny-style big brother”, emphasizing its financial The free and easy side of investment. From the earliest open platform, Guangdiantong, and later cloud services, Tencent continued to circle and build games,”not only set up the game, but also let the game run”, and invested in a large number of companies. These companies get funding, traffic, and cooperation opportunities from Tencent.

Some analysts believe that in this way, it was once thought that there was no To B gene Tencent’s status in the circle has been completely different.”Ecology” has also become one of Tencent’s To B keywords.

But Tencent is not without its own embarrassment-these”industrial resources” are difficult to be effective Integration, explosive synergy is impossible to talk about, and sometimes even stepping on each other. As a result, Tencent also missed some opportunities that were expected to be preemptive, such as social e-commerce and short videos.

Last year, the WeChat Mini Program GMV reached 800 billion yuan. This is only 200 billion less than Pinduoduo last year’s GMV. Once Tencent tried to operate its own e-commerce business, but after being frustrated, it turned to use precious traffic to”get big milk” Pinduoduo. Nowadays, seeing the”pro-son” grow up, how and how much do”godsons” care for?

As ​​the fields of investment and their own business development become more and more overlapping, this may be A classic problem that Tencent will face in the future.

When it comes to”ecology”, in fact, more often people think of Ali first. Unlike Tencent’s way of establishing an ecological chain through investment partners, Ali’s ecology is based on the underlying capabilities of To C and To B services. This means that Tencent’s ecology is to make up for shortcomings and gain capabilities by investing in the ecological chain, while Ali’s ecology is based on its own existing capabilities to integrate and export these capabilities.

Based on this ability, Alibaba has formed a set of commercial operating systems to help some B-side partners realize multi-end and cross-scenario global operations within the Alibaba ecosystem, thus opening up a new growth curve . Merchants on the Taobao Tmall platform can obtain services such as transaction, marketing, finance, logistics, supply chain, customer service, and security from the Ali platform. Alibaba Cloud and DingTalk also provide extensive services in manufacturing, agriculture, finance, smelting, photovoltaics, energy and other industries. The “cloud and nail integration” lowers the threshold for enterprises to obtain digital services.

explore personalized solutions for different industries, different industries and even companies. Ali is already It’s getting harder and harder to find opponents.

To B this track, you can’t rush, but you can’t be too slow.

In the financial reports of the two companies, To B services are both important growth engines. Alibaba’s core business and cloud computing growth are particularly dazzling.

The trillion-dollar market value of the scissors difference between ATs, what direction will it draw in the future, To a large extent depends on how the To B line advances. At least from today’s situation, Tencent still has a long way to go.

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