Where there’s concentration, there’s power, and in the world of China’s internet industry, a trio holds a lot of power: Alibaba, Baidu and Tencent.
The Wall Street Journal reported that the threesome maintains sway over the industry with the strength of their collective checkbooks. Known colloquially as a unit as BAT, the search engine and social media players have paid billions of dollars to grab minority stakes, or outright buy, smaller firms — chiefly startups — to grab a hold of their growth (and strengthen their own competitive positioning).
In one example, Alibaba coughed up $4 billion last year, buying Youku Tudou to help push competition with Tencent video, among others. The question, WSJ posed, is whether buying smaller firms, consistently and quickly, blunts innovation. One observer thinks that this is the case. Xinlei Chen, professor of marketing at Shanghai Jiaotong University, said: “The monopoly power of BAT is much greater than the internet giants in the U.S.,” as antitrust laws are more lax in China, relatively speaking.
This has led to Tencent, for example, making two dozen investments within its home country, more than many individual private investment firms. Other firms, such as Alibaba and Baidu, have been setting up investment vehicles. Baidu has created a $3 billion fund to invest in internet firms, as an example.
And, noted WSJ, the competition extends into businesses not considered core for those three players. Tencent has invested in ridesharing firm Didi, and Alibaba has taken a stake in Kuaidi. Then, there was a merger to compete with Uber, and ultimately, all three firms in BAT own a collective 19 percent stake in Didi.
Chen noted that such tie-ups can impact competition, and according to WSJ, that regulators should devote attention to data flow and also the flow of web traffic itself — the very things that drive success of internet companies.