Alibaba can no longer call itself the most valuable Chinese tech stock. Social media company Tencent has now claimed that title. Alibaba still has the title of largest IPO on the New York Stock Exchange, but Tencent’s rising market capitalization is pushing it out of the top spot in terms of Chinese tech firms.
So, what’s behind the interest in China’s largest social media company? According to a report, its WeChat app — which has grown way beyond chatting — is now contributing to a lot of the company’s profit. It logged $5.2 billion in profit in the most recent quarter and had revenue of $18.7 billion — larger than Alibaba. Long gone are the days when WeChat was just a communications app; it’s now a must-have app for tons of people in China. Consumers are using it to pay for parking tickets, to make purchases in restaurants and cafes and even to make down payments on apartments. WeChat is also like Facebook in that people post what’s on their mind in a social media setting. Tencent’s revenues for performance-based advertising in WeChat Moments and WeChat Official Accounts grew 80 percent year over year to $556 million. The report noted Tencent is positioned to benefit from fast growth in mobile ads.
Alibaba, on the other hand, is huge when it comes to shopping, but it doesn’t have an app that can compete with WeChat, putting it at a disadvantage. Alibaba’s growth is mainly in the eCommerce space, as well as in media and entertainment — areas Tencent is also having success in. Alibaba does have one ACE card that could put it back on the top: AliCloud, its unit that handles the IT infrastructure of companies in the cloud. That unit had an annual growth of 156 percent in the most recent quarter, raking in $187 million. If Alibaba is able to grow its cloud unit even more, shares could surge.