Alibaba Has Lost Its Genie, While Tencent Restructures

Alibaba Founder Jack Ma

The two biggest internet companies in China both made major, unexpected, announcements this past week: Jack Ma is retiring from Alibaba, seceding his position as Chairman (he previously has done so as CEO), while Tencent is doing their first restructuring in six-years.

Tencent was hit hard by the regulatory crackdowns in the gaming space, dropping their overall valuation down so-fast and so-steep that market watchers began to worry. Forcing Tencent to perform their first company restructuring in six-years, a plan that may have been in the works but was definitely not scheduled for this moment.

Tencent restructuring will retain its four key units; Corporate & Development, Interactive Entertainment (aka its gaming divisions), Technology Engineering, and Weixin (its WeChat business and I would assume QQ).

In the restructuring they will form two new unit groups; Platform & Content, which will unite its digital services (outside of the WeChat ecosystem). Online media (Tencent Video & Tencent Comics), its non-WeChat social networks (recently launched short video “Douyin killer” Weishi), and its content businesses (Tencent Pictures).

While also creating a wholly new unit, beyond its key five pillars, and is the one of most interest in regards to Jack Ma stepping down from Alibaba; Cloud & Smart Industries.

Smart industries is a very broad-based term that could include IoT, virtual assistants (Alexa / Siri), and AI, but it is the cloud services that stands out.

Alibaba has dominated the cloud space in China since its inception, and Tencent ranks fifth in the Asia-Pacific region for cloud services. A position they wish to rectify and might readily do so, via their massive social media and fintech ecosystems of WeChat / Weixin, QQ, and WePay networks.

This announcement, coupled with Jack Ma’s retirement announcement, places Tencent in a position to take advantage of the vacuum left in the wake of Jack Ma no longer being the prominent face of Alibaba.

In all fairness Alibaba is an incredibly large, powerful, and successful company, but one cannot separate the fact that when people think of Alibaba they think of Jack Ma.

With the loss of Steve Jobs from Apple, Tim Cook stepped up and became the face of Apple. A company like Alibaba, which relies heavily on the cult-of-personality leadership in the media from their founders. But, it is unclear in Daniel Zhang can fill the charismatic shoes of Jack Ma, in the way Tim Cook has done for Steve Jobs.

Jack Ma announced that he will also cede licenses and legal entities to a number of board members, in particular he is surrendering control of variable-interest entities (VIEs) that hold the company’s business licenses. He is doing so, due to the fact that China still lacks laws on corporate governance, and by spreading out control of the company to its top executives Ma hopes to protect his shareholders. While also looking to position the control of the company over a larger group of executives so that, one or two individuals cannot gain overt control of the company.

The question now lies in if Alibaba is a strong enough corporation to continue without the face and man behind its phenomenal success? Especially, when the strategic partnership of Tencent and JD.com has encroached on its core ecommerce business.

Beyond ecommerce and brick-n-mortar ‘New Retail’, Tencent’s WePay is steadily moving on Alibaba’s own Alipay. With WePay beginning to dominate the fintech mobile payment areas outside of the 1st tiered cities of China, due to its embedded connection to WeChat and QQ without the need of downloading a separate app just for a payment (a la Alipay).

Tencent has its own charismatic leader in the form of the “Other Ma” Pony, but Tencent has risen as a social media, gaming, content connected ecosystem powerhouse without the need of Pony Ma being its public face. If you remove Pony Ma from the picture, the corporate governance of Tencent appears, on-its-face, to be more solidified than that of Alibaba.

Cloud services, ecommerce, fintech / mobile pay, these are all areas that may see rise within Tencent Holdings and decline in Alibaba Group, but like all things in the Middle Kingdom: The tea leaves are not always easily read.

This article was originally published on Oct. 2nd, 2018 on LinkedIn.

Beyond ACGN (二次元) Ryan specializes in China Film & Entertainment, and their cross-pollination with Chinese Entertainment-tech industries.

Ryan has direct Executive Consulting experience with partners in a range of entertainment & media fields in; India, Norway, China, Africa; Malawi and Kenya, and the United Arab Eremites; Sharjah and Dubai.

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