The “Feud” Between Chinese Tech Giants

The way they fight is hurting us all

Photo by Adi Constantin on Unsplash

Chinese Tech scene has always been a battlefield for fierce corporate brawls and a breeding ground for ingenious tech innovation. The fact that there is a big brother looming in the background exercising tight control over what goes in and what goes out means Chinese Tech world is a relatively closed ecosystem. Tech Giants like Tencent and Alibaba have made multiple attempts to expand overseas and met mixed results. On the other hand, Western tech firms like Google and eBay have long ago abandoned their positions in China amid various controversies.

Freed from outside competition and typical Western-styled regulations currently plaguing Google, Amazon, and Facebook, Chinese tech Giants enjoyed a kind of freedom envied by their western counterparts. They completely dominate their home turf, treat user data like their private property and regularly foray into other Giants territory, over time, they built walls to protect their territory from other raiders. The result is several closed ecosystems emerged within a closed ecosystem.

On Google, you can search for a product. More often than not, the search engine result page will include products pages from Amazon or eBay. On Facebook, you can open an Amazon product page within the Facebook app. No such thing in China. If you browse through a product search result page on Baidu, the Chinese equivalent of Google, you will find no listing from Taobao. If your friends on Wechat want to share a product on Taobao with you, she or he has to copy the URL from Taobao app and send it to you. On top of it, Wechat doesn’t allow you to open the Taobao URL within their app, you have to open a third-party browser for that.

All started in 2008 when Taobao suddenly blocked Baidu crawlers from indexing its page. The reason given for this action could be found from a short statement issued by Taobao. In this statement, They said they were doing so in the interest of consumers, claiming: “many unethical sellers are manipulating Baidu search engine results, thus providing misleading information to consumers. Since the integrity of the Baidu search engine was compromised, we must take our responsibility for our consumers seriously by blocking misleading search results.”

For the same reason, in 2013 Taobao blocked traffic from several affiliate networks like Mushroom Street, which were forced to transform their whole business model.

Later that year, Taobao went a step further and redirect all visits to their products pages from Wechat to their mobile app download page, effectively blocking the traffic from Wechat and turning Wechat into one of their funnels promoting their mobile app. Considering that sales from their mobile platform only made up 15 percent of Alibaba groups sales in 2013, this trick did pay off well.

Tencent soon responded in kind by blocking users from opening any pages of Taobao within their app. Not yet ready to give up traffic from Wechat, Taobao registered lots of suspicious looking domains, all pointing to taobao.com and encouraging users to use them to share Taobao products links on Wechat, thereby bypassing Wechat ban on their official domain. However, this practice didn’t last long, probably they eventually realized how ignoble this trick it.

It’s not an easy decision to make blocking Baidu and Wechat. But Alibaba, the parent company of Taobao, took the long view, calculating that by forcing users to search for a product within their platform, they could shape consumers behavior. It worked, Chinese online shoppers are long used to searching for products on Taobao’s platform, contrary to their western counterparts, who use Google for nearly all search. They also hoped that users would start to share products with their friends on their AliWangWang, their social media ambition after they closed the door to Wechat. This part of their strategy failed, AliWangWang remains a chat tool used by buyers to haggle. But they don’t care, they can not risk putting a powerful source of purchase intent traffic into the enemy’s hand.

Closing the door to search engine and social media put sellers in Taobao’s platform at a significant disadvantage, as their available means of promoting their products were drastically reduced to a single one, buying traffic from Taobao. Relying on their established Monopoly over traffic, Taobao was able to dictate the ads price.

Even after Taobao sellers were increasingly disillusioned with Taobao, most of them have nowhere to go but stick with Taobao. There were simply too few alternatives to their gigantic marketplace. Some Taobao competitors only opened their marketplace to corporate sellers who had already made a killing on Taobao and looked to expand elsewhere. A seller who has been running a store on Taobao for ten years confessed that he felt he lived under the mercy of Taobao, but so far he saw no reason to leave as the business are booming thanks to the rising consumerism of China’s middle class and burgeoning millennials who do all their shopping online.

As for consumers, they did initially complain about the inconveniences these selfish corporate strategies forced upon them, it’s not as if they have a yardstick for comparison in this closed ecosystem. But over time, these voices fizzled out, as long as they were able to afford more of those fashionable gadgets on sale in the coming years, they really don’t care.