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Alibaba cloud biz is on a run rate over $4B

By Ron Miller

Alibaba announced its earnings today, and the Chinese e-commerce giant got a nice lift from its cloud business, which grew 66% to more than $1.1 billion, or a run rate surpassing $4 billion.

It’s not exactly on par with Amazon, which reported cloud revenue of $8.381 billion last quarter, more than double Alibaba’s yearly run rate, but it’s been a steady rise for the company, which really began taking the cloud seriously as a side business in 2015.

At that time, Alibaba Cloud’s president Simon Hu boasted to Reuters that his company would overtake Amazon in four years. It is not even close to doing that, but it has done well to get to more than a billion a quarter in just four years.

In fact, in its most recent data for the Asia-Pacific region, Synergy Research, a firm that closely tracks the public cloud market, found that Amazon was still number one overall in the region. Alibaba was first in China, but fourth in the region outside of China, with the market’s Big 3 — Amazon, Microsoft and Google — coming in ahead of it. These numbers were based on Q1 data before today’s numbers were known, but they provide a sense of where the market is in the region.

Screenshot 2019 08 15 11.17.26

Synergy’s John Dinsdale says the company’s growth has been impressive, outpacing the market growth rate overall. “Alibaba’s share of the worldwide cloud infrastructure services market was 5% in Q2 — up by almost a percentage point from Q2 of last year, which is a big deal in terms of absolute growth, especially in a market that is growing so rapidly,” Dinsdale told TechCrunch.

He added, “The great majority of its revenue does indeed come from China (and Hong Kong), but it is also making inroads in a range of other APAC country markets — Indonesia, Malaysia, Singapore, India, Australia, Japan and South Korea. While numbers are relatively small, it has also got a foothold in EMEA and some operations in the U.S.”

The company was busy last quarter adding more than 300 new products and features in the period ending June 30th (and reported today). That included changes and updates to core cloud offerings, security, data intelligence and AI applications, according to the company.

While the cloud business still isn’t a serious threat to the industry’s Big Three, especially outside its core Asia-Pacific market, it’s still growing steadily and accounted for almost 7% of Alibaba’s total of $16.74 billion in revenue for the quarter — and that’s not bad at all.

Africa Roundup: Canal+ acquires ROK, Flutterwave and Alipay partner, OPay raises $50M

By Jake Bright

in July, French television company Canal+ acquired the ROK film studio from VOD company IROKOtv.

Canal+ would not disclose the acquisition price, but confirmed there was a cash component of the deal.

Founded by Jason Njoku  in 2010 — and backed by $45 million  in VC — IROKOtv boasts the world’s largest online catalog of Nollywood: a Nigerian movie genre that has become Africa’s de facto film industry and one of the largest globally (by production volume).

Based in Lagos, ROK film studios was incubated to create original content for IROKOtv, which can be accessed digitally anywhere in the world.

ROK studio founder and producer Mary Njoku  will stay on as director general under the Canal+ acquisition.

With the ROK deal, Canal+ looks to bring the Nollywood production ethos to other African countries and regions. The new organization plans to send Nigerian production teams to French speaking African countries starting this year.

The ability to reach a larger advertising network of African consumers on the continent and internationally was a big acquisition play for Canal+.

San Francisco and Lagos-based fintech  startup Flutterwave  partnered with Chinese e-commerce company Alibaba’s Alipay to offer digital payments between Africa and China.

Flutterwave is a Nigerian-founded B2B payments service (primarily) for companies in Africa to pay other companies on the continent and abroad.

Alipay is Alibaba’s digital wallet and payments platform. In 2013, Alipay surpassed PayPal in payments volume and currently claims a global network of more than 1 billion active users, per Alibaba’s latest earnings report.

A large portion of Alipay’s network is in China, which makes the Flutterwave integration significant to capturing payments activity around the estimated $200 billion in China-Africa trade.

Flutterwave will earn revenue from the partnership by charging its standard 3.8% on international transactions. The company currently has more than 60,000 merchants on its platform, according to CEO Olugbenga Agboola.

In a recent Extra Crunch feature, TechCrunch tracked Flutterwave as one of several Africa-focused fintech companies that have established headquarters in San Francisco and operations in Africa to tap the best of both worlds in VC, developers, clients and digital finance.

Flutterwave’s Alipay collaboration also tracks a trend of increased presence of Chinese companies in African tech. July saw Chinese owned Opera raise $50 million in venture spending to support its growing West African digital commercial network, which includes browser, payments and ride-hail services. The funds are predominately for OPay, an Opera owned, Africa-focused mobile payments startup.

Lead investors included Sequoia China, IDG Capital  and Source Code Capital. Opera  also joined the round in the payments venture it created.

OPay will use the capital (which wasn’t given a stage designation) primarily to grow its digital finance business in Nigeria — Africa’s most populous nation and largest economy.

OPay will also support Opera’s growing commercial network in Nigeria, which includes motorcycle ride-hail app ORide and OFood delivery service.

Opera founded OPay in 2018 on the popularity of its internet search engine. Opera’s web-browser has ranked No. 2 in usage in Africa, after Chrome, the last four years.

July also saw transit tech news in East Africa. Global ride-hail startup InDriver launched its app-based service in Kampala (Uganda), bringing its Africa operating countries to four: Kenya,  Uganda, South Africa and Tanzania. InDriver’s mobile app allows passengers to name their own fare for nearby drivers to accept, decline or counter.

Nairobi-based internet hardware and service startup BRCK and Egyptian ride-hail venture Swvl are partnering to bring Wi-Fi and online entertainment to on-demand bus service in Kenya.

Swvl BRCK Moja KenyaBRCK is installing its routers on Swvl vehicles in Kenya  to run its Moja service, which offers free public Wi-Fi — internet, music and entertainment — subsidized by commercial partners.

Founded in Cairo in 2017, Swvl is a mass transit service that has positioned itself as an Uber  for shared buses.

The company raised a $42 million Series B round in June, with intent to expand in Africa, Swvl CEO Mostafa Kandil said in an interview.

BRCK and Swvl wouldn’t confirm plans on expanding their mobile internet partnership to additional countries outside of Kenya .

Africa’s ride-hail markets are becoming a multi-wheeled and global affair making the continent home to a number of fresh mobility use cases, including the BRCK and Swvl Wi-Fi partnership.

More Africa-related stories @TechCrunch

African tech around the ‘net

Aspire raises $32.5M to help SMEs secure fast finance in Southeast Asia

By Manish Singh

Aspire, a Singapore-based startup that helps SMEs secure working capital, has raised $32.5 million in a new financing round to expand its presence in several Southeast Asian markets.

The Series A round for the one-and-a-half-year old startup was funded by MassMutual Ventures South Asia. Arc Labs and existing investors Y Combinator — Aspire graduated from YC last year — Hummingbird, and Picus Capital also participated in the round. Aspire has raised about $41.5 million to date.

Aspire operates a neo-banking-like platform to help small and medium-sized enterprises (SMEs) quickly and easily secure working capital of up to about $70,000.

AspireAccount, the startup’s flagship product, provides merchants and startups with instant credit limit for daily business expenses, as well as a business-to-business acceptance and other tools to help them manage their cash flow.

“I saw the problem while trying to rally small businesses trying to grow in the digital economy,” Andrea Baronchelli, founder and CEO of Aspire told TechCrunch last year. “The problem is really about providing working capital to small business owners,” said Baronchelli, who served as a CMO for Alibaba’s Lazada platform for four years.

Aspire currently operates in Thailand, Indonesia, Singapore, and Vietnam. The startup said it will use the fresh capital to scale its footprints in those markets. Additionally, Aspire is building a scalable marketplace banking infrastructure that will use third-party financial service providers to “create a unique digital banking experience for its SME customers.”

The startup is also working on a business credit card that will be linked to each business account by as early as this year, it said.

Baronchelli did not reveal how many business customers Aspire has, but said the startup has seen “30% month-on-month growth” since beginning operations in January 2018. Additionally, Aspire expects to amass more than 100,000 business accounts by next year.

Southeast Asia’s digital economy is slated to grow more than six-fold to reach more than $200 billion per year, according to a report co-authored by Google. But for many emerging startups and businesses, getting financial services from a bank and securing working capital have become major pain points.

A growing number of startups are beginning to address these SMEs’ needs. In India, for instance, NiYo Bank and Open have amassed millions of businesses through their neo-banking platforms. Both of these startups have raised tens of millions of dollars in recent months. Drip Capital, which helps businesses in developing markets secure working capital, raised $25 million last week.

Flutterwave and Alipay partner on payments between Africa and China

By Jake Bright

San Francisco and Lagos-based fintech startup Flutterwave has partnered with Chinese e-commerce company Alibaba to offer digital payments between Alipay and African merchants.

Flutterwave is a Nigerian-founded B2B payments service (primarily) for companies in Africa to pay other companies on the continent and abroad.

Alipay is Alibaba’s digital wallet and payments platform. In 2013, Alipay surpassed PayPal in payments volume and currently claims a global network of more than 1 billion active users, per Alibaba’s latest earnings report.

A large portion of Alipay’s network is in China, which makes the Flutterwave integration significant to capturing payments activity around the estimated $200 billion in China-Africa trade.

“This means that all our merchants can accept or install Alipay as a payment type to accept payments from its billion users,” Flutterwave CEO Olugbenga Agboola — aka GB — told TechCrunch.

GB Flutterwave disrupt“There’s a lot of trade between Africa and China and this integration makes it easier for African merchants to accept Chinese customer payments.”

A Flutterwave company release added, “We’ve managed to connect African countries…to each other so it was about time we connected Africa to the world. We started with the U.S. … but you can’t connect Africa to the world without China.”

An Alipay spokesperson confirmed with TechCrunch the Flutterwave collaboration. Flutterwave will earn revenue from the partnership by charging its standard 2.8% on international transactions. The company currently has more than 60,000 merchants on its platform, according to Agboola.

The Flutterwave-Alipay alliance developed out of Agboola’s acceptance in Alibaba’s Africa eFounders Fellowship.

“Because of that I was in China to do meetings with Jack Ma and the only ask I had from that trip is ‘I want to be the Africa payment infrastructure that plugs directly into Alipay,’ ” Agboola said.

The Alipay partnership follows those between Flutterwave and Visa earlier this year to launch a consumer payment product for Africa, called GetBarter.

Founded in 2016, Flutterwave allows clients to tap its APIs and work with Flutterwave developers to customize payments applications. Existing customers include Uber, Facebook, Booking.com and e-commerce unicorn Jumia.com. Flutterwave has processed 100 million transactions worth $2.6 billion since inception, according to company data.

In a recent Extra Crunch feature, TechCrunch tracked Flutterwave as one of several Africa-focused fintech companies that have established headquarters in San Francisco and operations in Africa to tap the best of both worlds in VC, developers, clients and digital finance.

Flutterwave’s Alipay collaboration also tracks a trend of increased presence of Chinese companies in African tech.

China’s engagement with African startups has been light compared to the country’s deal-making on infrastructure and commodities. That looks to be shifting.

Alibaba founder Jack Ma has made several trips to the continent and this March announced the $1 million Africa Netrpreneur Prize for African startups and founders. Chinese company Transsion—a top-seller of smartphones in Africa under its Tecno brand—operates an assembly facility in Ethiopia and announced its IPO this year.

And this month Chinese owned Opera announced $55 million in venture spending to support its growing West African digital commercial network, that includes browser, payments and ride-hail services. 

 

Tencent brings cloud service to Japan in global push

By Rita Liao

The world’s largest video game publisher is looking outside its home country for growth. Tencent, the Chinese internet behemoth that operates WeChat and a few blockbuster games, announced on Friday that its cloud service has entered Japan as part of the firm’s international push in 2019.

Tencent Cloud was already serving clients in Japan prior to the announcement, TechCrunch has learned, but this is the first time it has officialized the entry, which might be a sign of Tencent’s ambition to speed up global expansion. The international push comes at a time when Tencent’s domestic business is under pressure following China’s new gaming regulation.

Indeed, Tencent’s cloud computing division is targeting up to five-fold growth in revenue this year and Japan will be a key market, said Da Zhiqian, vice president of Tencent Cloud.

Tencent’s cloud business is the second largest in China with an 11% market share, according to industry researcher IDC. That puts the Shenzhen-based company behind its arch-rival Alibaba, which accounts for 43% of the local cloud market. The cloud computing battle outside China is only more competitive with the presence of giants AWS, Microsoft Azure and Google Cloud, which lead with a respective share of 31.7%, 16.8% and 8.5% in 2018, according to research firm Canalys.

But Tencent could be an appealing hosting solution for smaller gaming companies who look to the giant for lessons. The company’s attempt to replicate the success of Honor of Kings outside China fell apart, but it quickly shifted gears by launching a Steam-like gaming platform WeGame X focusing on Chinese games developed for overseas markets. Meanwhile, its mobile version of PlayersUnknown Battleground is making headway globally as revenue surges.

Tencent can also tap into its vast portfolio network around the world. Huya and Douyu, two top game live streaming companies in China that are both backed by Tencent, have ramped up international expansion in recent times and they surely need some cloud computing help to ensure low video latency. It goes the same way with Tencent-backed short-video app Kuaishou, which is fighting TikTok inside and outside China.

Tencent’s cloud engine for games supports features that can smoothen communication between teammates, including the likes of multi-player voice chat, 3D voice positioning, voice messaging and speech to text recognition. The company is providing cloud infrastructure service in 25 countries and regions and has deployed over one million servers worldwide as of May. Besides games, Tencent said it will also roll out cloud solutions tailored to e-commerce, video streaming and mobile mobility clients in Japan. Its local partners include gaming company Pitaya and IT firm E-business.

Alibaba to help Salesforce localize and sell in China

By Rita Liao

Salesforce, the 20-year-old leader in customer relationship management (CRM) tools, is making a foray into Asia by working with one of the country’s largest tech firms, Alibaba.

Alibaba will be the exclusive provider of Salesforce to enterprise customers in mainland China, Hong Kong, Macau, and Taiwan, and Salesforce will become the exclusive enterprise CRM software suite sold by Alibaba, the companies announced on Thursday.

The Chinese internet has for years been dominated by consumer-facing services such as Tencent’s WeChat messenger and Alibaba’s Taobao marketplace, but enterprise software is starting to garner strong interest from businesses and investors. Workflow automation startup Laiye, for example, recently closed a $35 million funding round led by Cathay Innovation, a growth-stage fund that believes “enterprise software is about to grow rapidly” in China.

The partners have something to gain from each other. Alibaba does not have a Salesforce equivalent serving the raft of small-and-medium businesses selling through its e-commerce marketplaces or using its cloud computing services, so the alliance with the American cloud behemoth will fill that gap.

On the other hand, Salesforce will gain sales avenues in China through Alibaba, whose cloud infrastructure and data platform will help the American firm “offer localized solutions and better serve its multinational customers,” said Ken Shen, vice president of Alibaba Cloud Intelligence, in a statement.

“More and more of our multinational customers are asking us to support them wherever they do business around the world. That’s why today Salesforce announced a strategic partnership with Alibaba,” said Salesforce in a statement.

Overall, only about 10% of Salesforce revenues in the three months ended April 30 originated from Asia, compared to 20% from Europe and 70% from the Americas.

Besides gaining client acquisition channels, the tie-up also enables Salesforce to store its China-based data at Alibaba Cloud. China requires all overseas companies to work with a domestic firm in processing and storing data sourced from Chinese users.

“The partnership ensures that customers of Salesforce that have operations in the Greater China area will have exclusive access to a locally-hosted version of Salesforce from Alibaba Cloud, who understands local business, culture and regulations,” an Alibaba spokesperson told TechCrunch.

Cloud has been an important growth vertical at Alibaba and nabbing a heavyweight ally will only strengthen its foothold as China’s biggest cloud service provider. Salesforce made some headway in Asia last December when it set up a $100 million fund to invest in Japanese enterprise startups and the latest partnership with Alibaba will see the San Francisco-based firm actually go after customers in Asia.

Cars-as-a-service, Alibaba and ridehailing, mental health, and the future of financial services

By Danny Crichton

The future of car ownership: Cars-as-a-service

It’s Mobility Day at TechCrunch, and we’re hosting our Sessions event today in beautiful San Jose. That’s why we have a couple of related pieces on mobility at Extra Crunch.

First, our automotive editor Matt Burns is back with part two of his market map and analysis of the changing nature of how consumers are buying cars these days. Part one looked at how startups like Carvana, Shift, Vroom, and others are trying to disrupt the car dealership’s monopoly on auto sales in the United States.

Now, Burns takes a look at how startups like Fair and premium automakers like Mercedes are disrupting the very notion of owning a car in the first place. Rather than buying a car or leasing one, users with these new services are asked to subscribe to their cars, giving them the flexibility to get a car when they need it and to get rid of it when they don’t. Fair has raised $1.5 billion in venture capital, so clearly the space has caught the eye of investors.

“In simple terms,” co-founder and then CEO [of Fair] Scott Painter, told TechCrunch following its recent raise, “for every dollar in equity we unlock $10 in debt, and we borrow that cash to buy cars.”

Fair works much like a traditional lease with more options. Users can drive the vehicles as long as they’re paying for them and can switch to a different one whenever. This is different from a traditional lease where the buyer is often locked into the vehicle for two to four years. The model makes Fair an excellent option for Uber and Lyft drivers, and in the last year, Uber sold fair its $400 million leasing business to accelerate this offering.

Meituan, Alibaba, and the new landscape of ride-hailing in China

Meanwhile, on the other side of the world, our China tech reporter Rita Liao takes a deeper look at the quickly changing tides of the ride-hailing industry in China. It’s a fight between intermediation, disintermediation, and who ultimately owns the ride-hailing consumer. As transit in China and the rest of the world increasingly becomes multi-modal, who owns the gateway to figuring out the best method and paying for it is increasingly in the driver’s seat:

Meituan, Alibaba, and the new landscape of ride-hailing in China

By Rita Liao

Instead of switching between apps to secure a ride during rush hour, people in China can now hail from different companies using a single app. Some of the country’s largest internet companies — including ride-hailing giant Didi itself — are placing bets on this type of aggregation service.

The nascent model is reminiscent of a feature Google Maps added in early 2017 allowing users to hail Uber, Lyft, Gett and Hailo straight from its navigation app. A few months later, AutoNavi, a maps app owned by Alibaba, debuted a similar feature in China. Other big names like Baidu, Hellobike, Meituan and Didi subsequently joined forces with third-party ride-booking services rather than building their own.

The trend underscores changes in China’s massive ride-hailing industry of 330 million users (in Chinese). The government is tightening rules around vehicle and driver accreditation, leading to a widescale driver shortage. Meanwhile, established carmakers including BMW and state-owned Shouqi are entering the fray, offering premium rides with better-trained fleet drivers, but they face an uphill battle with Didi, which gobbled up Uber China in 2016.

By corraling various ride-booking services, an aggregator can shorten wait time for users. For new ride-hailing players, riding on a billion-user platform like Meituan opens up wider user acquisition channels.

These ride-hailing marketplaces let users request rides from any number of third-party services available. At the end of the trip, users pay directly through the aggregator, which normally takes a commission of about 10%, although none of the players have disclosed how revenue is exactly divided with their mobility partners.

In comparison, a ride-hailing operator such as Didi charges about 20% from each trip since they take care of driver management, customer support and other dirty work which, to a great extent, helps build the moat around their business.

Here’s a look at who the aggregators are.

Image recognition, mini apps, QR codes: how China uses tech to sort its waste

By Rita Liao

China’s war on garbage is as digitally savvy as the country itself. Think QR codes attached to trash bags that allow a municipal government to trace exactly where its trash comes from.

On July 1, the world’s most populated city (Shanghai) began a compulsory garbage-sorting program. Under the new regulations (in Chinese), households and companies must classify their wastes into four categories and dump them in designated places at certain times. Noncompliance can lead to fines. Companies and properties that don’t comply risk having their credit rating lowered.

The strict regime became the talk of the city’s more than 24 million residents, who criticized the program’s inflexibility and confusing waste categorization. Gratefully, China’s tech startups are here to help.

For instance, China’s biggest internet companies responded with new search features that help people identify which wastes are “wet” (compostable), “dry,, “toxic,” or “recyclable.” Not even the most environmentally conscious person can get all the answers right. Like, which bin does the newspaper you just used to pick up dog poop belong to? Simply pull up a mini app on WeChat, Baidu or Alipay and enter the keyword. The tech firms will give you the answer and why.

wechat garbage sorting

A WeChat mini program that lets users learn the category of cash

Alipay, Alibaba’s electronics payment affiliate, claims its garbage-sorting mini app added one million users in just three days. The lite app, which is available without download inside the e-wallet with one billion users, has so far indexed more than 4,000 types of rubbish. Its database is still growing, and soon it will save people from typing by using image recognition to classify trash when they snap a photo of it. Alibaba’s answer to Alexa Tmall Genie can already answer (in Chinese) the question “what kind of trash is a wet wipe?” and more.

If people are too busy or lazy to hit the collection schedule, well, startups are offering valet trash service at the doorstep. A third-party developer helped Alipay build a recycling mini app (“垃圾分类回收平台”) and is now collecting garbage from 8,000 apartment complexes across 11 cities. To date, two million people have sold recyclable material through its platform.

Ele.me, Alibaba’s food delivery arm, added trash pickup to its list of valet services its fleets offer on top of “apologize to the girlfriend” and dog walking.

Alibaba’s food delivery & local service platform https://t.co/Yh95Bt0DPG just rolled out a “throw out the trash” service for $2. The delivery guy can also “apologize to the girlfriend” on your behalf among other things #DigitalEconomyinChina $BABA pic.twitter.com/C2ey1ePDvJ

— Krystal Hu (@readkrystalhu) June 24, 2019

Besides helping households, companies are also building software to make property managers’ lives easier. Some residential complexes in Shanghai began using QR codes to trace the origin of garbage, state-owned media outlet Xinhua reported. Each household is asked to attach a unique QR code to their trash bags, which will be scanned for sources and classification when they arrive at the waste management station.

shanghai garbage

Workers at a waste management station in Shanghai scan codes on trash bags to check their source (Screenshot from Xinhua feature)

This way, regulators in the region know exactly which family has produced the trash — although the city’s current garbage regulations do not require real-name tracking — and those who correctly categorized receive a small reward of 0.1 yuan, or 1.45 cents, per day, according to another report (in Chinese) from Xinhua.

Warburg Pincus announces new $4.25 billion fund for China and Southeast Asia

By Jon Russell

Warburg Pincus, the private equity fund with over $60 billion under management, is doubling down on Asia after it announced a $4.25 billion fund dedicated to China and Southeast Asia.

The firm has been present in China for 25 years, and it has invested over $11 billion in a portfolio of over 120 startups that includes the likes of Alibaba’s Ant Financial and listed companies NIO (a Tesla rival), ZTO Express (a courier firm)among others. The new fund will work in tandem with the firm’s $14.8 billion global growth fund which was finalized at the end of last year.

What’s particularly interesting about the new fund is that it has expanded to include Southeast Asia, where internet adoption is rapidly expanding among 600 million consumers, for the first time. It is the successor to Warburg Pincus’ previous $2.2 billion ‘China’ fund and, with the addition of Southeast Asia, it’ll aim to build on initial investments in the region that have included Go-Jek in Indonesia (although it is going regional) and Vietnamese digital payment startup Momo from its Singapore office.

Indeed, the firm’s head of Southeast Asia — Jeff Perlman — said in a statement that Southeast Asia is “exhibiting many of the strong investment themes and trends which have driven our China business over the last 25 years.”

While there is plenty of uncertainty around China, and more widely Asia, due to the ongoing trade battle with the U.S. — which has ensnared Huawei and other tech firms — Warburg Pincus said it had received strong demand for LPs whilst out raising this new fund.

Though it declined to provide details of its backers — and you’d wager that few, if any, are U.S-based — it said it surpassed its initial target of $3.5 billion for the China-Southeast Asia fund. That’s despite evidence suggesting that China’s investment space is experiencing a slowdown in total funding raised despite more deals.

In terms of target investments, the firm said it intends to focus on areas including consumer and services, healthcare, real estate, financial services and TMT — technology, media and telecommunications.

Warburg Pincus is already one of the largest investors in Southeast Asia in terms of potential check size, although it has been fairly selective on deals at this point. The fund’s move to include the region alongside will be a boon for companies looking for growth-stage deals that are hard to find in the current venture capital ecosystem.

More broadly, it is also a major endorsement for Southeast Asia as a startup destination. The region has long been seen as having immense growth potential, but it often sits in the shadows of more mature regions like India and China.

Pinduoduo cements position as China’s second-largest ecommerce player

By Rita Liao

Alibaba and JD.com have been in a war over the Chinese e-commerce space for a decade or so, but a third player called Pinduoduo has managed to shake up the duopoly in recent times. The startup, which was founded in 2015 by an ex-Googler and went public on the Nasdaq last July, has further flexed muscles during the recent “6/18” shopping spree.

According to data provider QuestMobile, Pinduoduo’s daily active users have outnumbered JD’s for at least the past 12 months, and it came out of the mid-year sales festival — first popularized by JD as a counterpart to archrival Alibaba’s “11/11” shopping day — with 135 million DAUs.

JD, in comparison, ended with 88 million DAUs and Alibaba’s Taobao retained its top spot at 299 million. That result further solidified Pinduoduo’s position as China’s second-biggest ecommerce company by number of users.

The boom of Pinduoduo is in part attributable to ties with its investor Tencent — also a backer of JD — which enables it to sell via WeChat’s lite app and tap the giant’s vast social network. Alibaba, on the other hand, has for years been prevented from selling through WeChat.

In terms of sales, Pinduoduo still remains some miles behind JD, which focuses on large-ticket items like home appliances and targets China’s urban, deep-pocketed shoppers. Pinduoduo took a more rural tack and has built a reputation for hawking ultra-cheap goods at small-city consumers.

In 2018, Pinduoduo racked up 471.6 billion yuan ($68.6 billion) in gross merchandise volume, a somewhat problematic term for gauging sales as it totals the value of orders placed, regardless of whether they are actually sold, delivered or returned. (Alibaba stopped revealing GMV a few years ago.) JD’s GMV was almost four times that of Pinduoduo at 1.68 trillion yuan ($243.9 billion) last year.

One has to keep in mind that JD is a 21-year-old firm born out of the PC era, whereas Pinduoduo has been up and running on mobile for less than four years. The startup’s continued growth is undeniable. In a March report, investment bank UBS’s Evidence Lab predicted that Pinduoduo could overtake JD in GMV as early as 2021.

But Pinduoduo’s story is not all roses. Currently trading at $20.54, its stock has plunged about 35 percent since a March high. The online marketplace has also been chided for selling counterfeits and subpar goods, an endemic problem that’s long plagued Chinese e-commerce. This year Pinduoduo was put on the U.S. government’s “notorious” blacklist alongside rival Alibaba for selling fakes, while the company claims it’s actively working to root out problematic listings.

Splyt wants to connect the world’s ride-hailing apps for easy international roaming

By Jon Russell

The vision of a universal global ride-hailing service is over. Uber’s decision to exit markets like China, Southeast Asia and Russia coupled with the failure of its rivals to develop a proposed roaming system, means that global travelers must install multiple apps if they are to take advantage of on-demand taxis. That’s unless a little-known startup can turn a bold plan into reality.

In the world of ride-hailing and its billion-dollar investment checks, an $8 million capital raise may not be a big deal but it does represent a coming-out for Splyt, a UK-based startup that is aiming to help make global ride-hailing roaming a reality — and not just within ride-hailing apps.

The four-year-old company announced this week that it closed an $8 million Series A round from a range of undisclosed (and existing) family offices and angel investors. In addition, the round included participation from Southeast Asian ride-hailing company Grab, the firm valued at $14 billion which acquired Uber’s regional business last year.

The deal will see Grab become a Splyt partner and it comes hot-on-the-heels of a similar rollout with Alipay, the digital wallet app run by Alibaba affiliate Ant Financial.

In both cases, Splyt is hooking Alipay and Grab up to its ride-hailing networks to allow users to book (and take) a taxi from another provider within the Alipay or Grab app.

Splyt allows users of Alipay to book taxis on the Grab network in Southeast Asia without downloading Grab’s app

The integration is already live within Alipay for Southeast Asia — Grab is scheduled to work overseas from early 2020 — and it means that users can book and manage rides directly from the payment app thanks to Splyt’s system. In other words, Alipay users can take rides through Grab without having to download the Grab app.

Splyt is not visible to the consumer’s eye. Instead, it lurks behind the scenes acting as the interconnecting services. In that respect, it is much like digital banking services that provide the infrastructure that enables banks to offer digital services. In Splyt’s case, it provides connections for ride-hailing services outside of their markets, but beyond them it allows other apps to access ride-hailing booking features, too.

Relationships are the key part of this offering, beyond Grab and Alipay, Splyt has partnerships with Chinese travel app Ctrip, Careem — the Middle East-based service being acquired by Uber — Gett and car rental service Cartrawler, which added ride-hailing via the tie-up.

“There’s a long way to go to get comfortable with where we are and how close we are to our vision,” Splyt CEO Philipp Mintchin said, admitting that the goal is for all major ride-hailing firms to join.

That said, the existing partner base already gives Splyt reach into some 2,000 cities. The deal with Grab, in particular, will help allow Alipay and Ctrip — two popular services — to open up ride-hailing in Southeast Asia, a region that is an increasingly popular travel destination for Chinese tourists.

Indeed, such is the focus on Asia at this point that Splyt has opened an office in Singapore. Mintchin told TechCrunch that he expects headcount in Singapore will reach 15 this year, mostly on the tech side, while overall the company is predicted to grow to 50 people by the end of this year.

“Most of our business and partners are based out of Asia,” he added of the new office.

Splyt Team

The Splyt Team at the company’s office in London

While connecting ride-hailing services and popular apps makes absolute sense for consumers who can enjoy the convenience of roaming, navigating and securing partnerships is not straightforward in today’s ride-hailing world. Aside from a network of complicated relationships — Uber and Didi, in particular, are investors in many competing services and each other — many companies are also developing new features behind simply taxis.

Mintchin declined to discuss potential deals but he did tease that Splyt is working to onboard a number of new partners this year.

“In this industry, everyone is talking to everyone,” he said of the partnership push.

Mintchin admitted that the “politics of the ride-hailing industry” mean that some companies refuse to work with others — no names named, alas — and others prefer to work with specific firms, too. Then there’s also an element of trust involved with giving a third party access to a service which ends up being used by yet another third party.

“We are here to partner and benefit each other rather than to try to steal a fleet and run our own app,” he said of Splyt’s neutral position and its role as the behind-the-scenes integrator. “We are not all of a sudden going to influence the partners we work with… the partners make decisions.”

It’s a patient game, but already Splyt is seeing growth double on a weekly basis since May. In some areas, Mintchin said that the service is seeing a 90 percent repeat use through its partners. Going forward, he added, the Series A funding will go towards closing those supply gaps to make the service more usable in more locations.

It’s an audacious vision but, given the balkanization of the industry in recent years, it remains the best hope that travelers have of delivering on the vision of using their favorite ride-hailing app anywhere in the world.

Carrefour sale shifts the balance of power in China’s new retail battle

By Jon Russell

Hot on the heels of Amazon’s decision to shutter its local marketplace, Carrefour — another global commerce giant — is switching up its approach to China, and shifting the balance of power between the country’s tech giants.

Carrefour, which is Europe’s largest retailer, sold a majority 80% stake in its China-based business to Chinese retailer Suning, according to an announcement made this weekend. The deal is worth €620 million — that’s RMB 4.8 billion or $705 million — and it is set to close by the end of this year.

Beyond a retail story, the news also has a strong tech angle given the convoluted relationships of the parties that are involved, and it’s a reminder of the power that Chinese tech giants have grown to command.

Ties to Alibaba

Suning has had close links to Alibaba. The e-commerce giant owns a 20% stake in Suning courtesy of a $4.6 billion investment in 2015 and Suning, in turn, invested 14 billion yuan ($2 billion) in Alibaba a deal that kickstarted Alibaba’s ‘new retail’ strategy.

Suning started in 1990 as a home appliance retail store and is now one of China’s largest retailers with an extensive brick-and-mortar reach and an e-commerce share trailing behind Alibaba and JD.com . While it worked closely with Alibaba on merging offline commerce with online a few years back, the pair have gradually distanced themselves from each other in recent times.

Suning last year cashed out and cut its stake in Alibaba from an initial 1.1% to 0.51%. Since the Suning deal, Alibaba has continued to back old-school retail chains that would ramp up its offline operations through mega-deals like the $2.88 billion offer for Sun Art in 2017.

In other words, Alibaba has gone from being an ally to Suning to a potential competitor in the omnichannel commerce space.

The Carrefour deal is tipped to up the arms race as Carrefour China’s retail presence could boost Suning’s offline reach. Carrefour numbers 210 hypermarkets and 24 convenience stores and generated €3.6 billion — RMB 28.5 billion or $4.09 billion — in sales last year. Suning, meanwhile, has over 8,880 stores across 700-plus cities in China.

Alibaba’s Hippofresh store combines online and offline commerce [Image via Alibaba]

Tencent’s attempt

If the sale’s relevance to tech sounds far-fetched, consider that Carrefour China previously had a “strategic partnership” with Tencent, which is, of course, Alibaba’s arch-rival.

Chasing Alibaba’s shadow, Tencent’s retail footprint is most closely associated with its alliance with JD.com — we visited their flagship store last year — but Tencent also ran hybrid stores in partnership with Carrefour in Beijing.

Indeed, the FT reported that Carrefour had tried to sell a minority stake in its China business to Tencent but those talks are now over.

Instead, the Suning deal will give Carrefour “several liquidity windows to sell its remaining 20% stake in Carrefour China,” according to a statement provided to the FT.

That’s the interesting power swing, Carrefour’s allegiance appears to have moved from away Tencent.

It certainly goes against the grain and what you might expect. Tencent and JD.com — its own proxy — have tended to do deals with international retailers.

Walmart sold its China-based business to JD.com as part of its exit from the country in 2016, and Walmart has remained a partner with deals that include leading a $500 million investment in Dada-JD Daojia, an online-to-offline grocery business which is part-owned by JD.com. Other investment-led relationships include an investment in JD.com from Google, which itself has developed partnerships with Tencent.

It is likely too early to know what impact the Carrefour deal will have, but it sure seems significant that the operations will cross a hard line and switch between China’s internet tribes.

Alibaba’s Ant Financial and Hellobike team up on $145M e-bike battery JV

By Rita Liao

Shared e-scooters aren’t just gaining popularity in the United States; they’re hitting the streets of China, too. Recognizing the possibility that some people just don’t want to pedal that last mile, China’s transportation startup Hellobike is setting up a 1 billion yuan ($145 million) joint venture with Alibaba’s financial affiliate Ant Financial and battery maker CATL to provide battery-swapping services for scooters.

That’s according to an announcement from Hellobike on Wednesday, though it did not specify individual shares of the three partners.

Hellobike, backed by Ant Financial, has evolved from a bike sharing service into a one-stop app to include ride-hailing and other transportation means. That puts it in competition with car-hailing leader Didi Chuxing and Mobike, the bike sharing service now owned by Meituan Dianping.

Three-year-old Hellobike claims it’s now serving more than 200 million users in some 360 cities around China. It has its eye set on electric bikes for some time, especially when it comes to capturing users in smaller cities where buildings are more spread out. Its existing battery-swapping service, according to the announcement, can fulfill the energy need of more than two million bikes daily, and the JV will potentially give its network a boost.

Contemporary Amperex Technology, or CATL, seems like a key partner for Hellobike as it’s China’s largest battery maker for electric vehicles and has years of experience supplying to local carmakers as well as more recently international players Volvo and Toyota.

“China is ‘a country on two wheels,” said Yang Lei, Hellobike’s co-founder and chief executive officer, adding that there are one billion trips that are completed on two-wheelers in China each day. For some context, the country has a population of about 1.4 billion.

Many people in China own electric scooters. Food delivery workers ride them to navigate through rush hour traffic. Grandparents send their grandchildren to school on sun and rain-proof e-bikes. The problem, Hellobike claims, is that private bikes and their batteries can get stolen and charging stations are hard to find. What’s more, most batteries for scooters on the market currently fail to meet international environmental standards.

The three-way joint venture hopes to solve these issues by putting up battery-swapping infrastructure across the country. Users will scan a bar code at one of the swapping stations, take out a fresh, charged battery to replace their drained one, and pay via Ant’s e-wallet, which claims to have one billion users so most people can access the service without downloading a new app.

Moving deeper into enterprise cloud, Intel picks up Barefoot Networks

By Jonathan Shieber

When it launched out of stealth just three years ago, Barefoot Networks was hailed as a company that would transform the way a generation of computing giants like Facebook, Alphabet, Amazon and Microsoft would function while making chip manufacturers like Intel and networking companies like Cisco take notice

Now, Intel has not only taken notice, it’s acquired Barefoot Networks for an undisclosed amount.

It’s a sign of just how important cloud computing has become, and an opportunity for Intel to stake more of a claim in the networking space after losing ground to the GPU manufacturers whose chipsets have been in demand since the rise of gaming, graphics, and artificial intelligence made them ascendant.

Essentially, Barefoot Networks chips allow its customers to program whatever functionality they need on to the networking chips that Barefoot sells them. 

Previously, companies could customize network architecture down to everything BUT the chipset. The lack of programmable chips meant that network architectures couldn’t be quite as responsive as a company like Facebook, Microsoft, or Google would want, because they were always working around chipsets that had been designed for specific functions.

Based in Santa Clara, Calif., Barefoot Networks was launched from stealth in late 2016 by Dr. Craig Barratt, a former Stanford University professor whose work was critical to the development of the networking architectures that allowed Alphabet, Facebook and others to operate at the massive scale they now have.

As these companies demanded more customized hardware ranging from chipsets to enable their various machine learning algorithms to manage and monitor content (and win Go games), to the servers and routers that they’ve put up in their own internal networks Barratt realized they’d need chipsets that they could modify.

With the acquisition, Intel adds a core knowledge set around p4-programmable high speed data paths, switch silicon development, P4 compilers, drivers oftware, network telemetry and computational networking.

It also provides another bulwark against rival chip manufacturer, Broadcom .

No word from some of Barefoot Networks investors on the result for them in this acquisition. The company raised $155.4 million from investors including Tencent Holdings, DHVC, Alibaba Group, Dell Technologies Capital, Hewlett Packard Enterprise, and Lightspeed Ventures.

Alibaba, Mail.Ru, Megafon form AliExpress Russia JV to double down on e-commerce in CIS

By Ingrid Lunden

After announcing plans in September 2018 to build a joint venture together, today Russian internet giant Mail.ru,  Megafon and China’s Alibaba announced that the deal has closed. With support also from Russia’s sovereign wealth fund RDIF, the three are forming a new operation called AliExpress Russia JV — which will include business assets and investment from all three — to double down on building e-commerce services to serve consumers and businesses in Russia and neighboring countries. The joint effort is estimated to have a value in the region of $2 billion.

The operation has several moving pieces, which is one reason why it’s taken nearly eight months to bring it all together and close the deal:

  • Alibaba Group will invest $100 million and contribute AliExpress Russia into the joint venture. Alibaba says this includes Alibaba Group’s current Russia-based domestic and cross-border operations of the global retail marketplace business of AliExpress.
  • MegaFon will sell its 9.97% economic stake in Mail.ru Group to Alibaba Group. It will then own 24.3% of the AliExpress Russia JV with 30.2% voting rights.
  • Mail.ru Group will also contribute its Pandao e-commerce business and cash investments of $182 million in exchange for a 15% stake in the AliExpress Russia JV with 18.7% voting rights.
  • RDIF will invest $100 million into the AliExpress Russia JV “and may further acquire additional shares of the joint venture from Alibaba Group for $194 million.” Upon the exercise of the option to purchase the additional shares in the AliExpress Russia JV, the RDIF will own economic and voting stakes in the joint venture of 12.9% and 9.6%, respectively.
  • Alibaba and Mail.ru will respectively nominate a CEO each for the JV and they will run it jointly.

But while the business will largely be built on e-commerce know-how from Alibaba, it will be majority-controlled by Russian entities.

The deal underscores the potential of the Russian-speaking market, but also at the challenges of building a new e-commerce entity, or conversely expanding an established one into the market without deeper local knowledge. You could argue that Uber faced a similar challenge before forming a joint venture with Yandex to continue building out a combined ridesharing business.

Indeed, this is largely how the deal is being characterised by Alibaba:

“This partnership will enable the AliExpress Russia JV to accelerate the development of the digital consumer economy of Russia and CIS countries in ways that no one party could accomplish alone,” said Daniel Zhang, CEO of Alibaba Group, in a statement. “Together, we are uniquely positioned to offer consumers in Russia and neighbouring countries an innovative shopping experience by combining social platforms with commerce, as well as enabling regional brands and SMEs to sell their products locally and globally. Alibaba’s mission is to make it easy to do business anywhere. This JV is an important part of Alibaba’s international expansion and step toward our goal of supporting 10 million small businesses reach profitability and serving 2 billion consumers around the world.”

Megafon, the mobile operator that is an investor in Mail.ru, is not contributing an e-commerce business into the venture like Mail.ru and Alibaba are, but the fact that so much mobile commerce has moved to mobile creates some interesting possibilities for what they may contribute strategically in the longer term.

“MegaFon is pleased to enter into this partnership with global technology leaders Alibaba Group, RDIF and Mail.Ru Group,” said  Gevork Vermishyan, CEO of MegaFon, in a statement. “This agreement is in line with our digital strategy of ‘driving digital world’ aimed at creating new opportunities for over 76 million customers. E-commerce is a perfect fit for our rapidly developing ecosystem of partnerships to furnish best-in-class financial services, media, and other consumer offerings. This combination is beneficial for all parties, providing unparalleled access to the Russian consumer base.”

Russia and China have both been in the crosshairs of countries like the US over cybersecurity allegations. This is a turn away from that very messy issue and focuses attention on the role of Russia as part of the “BRIC” bloc of large, emerging markets with lots of potential for growth.

“Mail.ru Group is looking forward to leveraging the synergies within a leading social commerce joint venture in Russia and CIS countries,” said Boris Dobrodeev, CEO of Mail.ru Group, commented. “AliExpress Russia JV will become an undisputed leader in Russian e-commerce and create an unparalleled social commerce offering for our users. This partnership is in line with our strategy of bringing together people and businesses, as we will offer customers richer social experience and provide entrepreneurs with a platform for growth. We hope that the successful realization of the deal will strengthen our cooperation with local and global technology leaders. This is a major milestone for the Russian e-commerce market, and we believe it will promote the development of the digital economy.”

“This landmark partnership will bring both significant benefits to customers and create unprecedented opportunities for services growth,” said Kirill Dmitriev, CEO of the Russian Direct Investment Fund (RDIF), in a statement. “RDIF continues to support the acceleration of the digital transformation of the Russian economy through the expansion of the e-commerce market. Bringing together the expertise of the companies at the forefront of social commerce and global retail opens a new era for the Russian market.”

 

Alibaba pumps $100 million into Vmate to grow its video app in India

By Manish Singh

Chinese tech giant Alibaba is doubling down on India’s burgeoning video market, looking to fight back local rival ByteDance, Google, and Disney to gain its foothold in the nation. The company said today that it is pumping $100 million into Vmate, a three-year-old social video app owned by subsidiary UC Web.

Vmate was launched as a video streaming and short video sharing app in 2016. But in the years since, it has added features such as video downloads and 3-dimensional face emojis to expand its use cases. It has amassed 30 million users globally, and will use the capital to scale its business in India, the company told TechCrunch. Alibaba Group did not respond to TechCrunch’s questions about its ownership of the app.

The move comes as Alibaba revives its attempts to take on the growing social video apps market, something it has missed out completely in China. Vmate could potentially help it fill the gap in India. Many of the features Vmate offers are similar to those by ByteDance’s TikTok, which currently has more than 120 million active users in India. ByteDance, with valuation of about $75 billion, has grown its business without taking money from either Alibaba or Tencent, the latter of which has launched its own TikTok-like apps with limited success.

Alibaba remains one of the biggest global investors in India’s e-commerce and food-tech markets. It has heavily invested in Paytm, BigBasket, Zomato, and Snapdeal. It was also supposedly planning to launch a video streaming service in India last year — a rumor that was fueled after it acquired majority stake in TicketNew, a Chennai-based online ticketing service.

UC Web, a subsidiary of Alibaba Group, also counts India as one of its biggest markets. The browser maker has attempted to become a super app in India in recent years by including news and videos. In the last two years, it has been in talks with several bloggers and small publishers to host their articles directly on its platform, many people involved in the project told TechCrunch.

UC Web’s eponymous browser rose to stardom in the days of feature phones, but has since lost the lion’s share to Google Chrome as smartphones become more ubiquitous. Chrome ships as the default browser on most Android smartphones.

The major investment by Alibaba Group also serves as a testament to the growing popularity of video apps in India. Once cautious about each megabyte they spent on the internet, thrifty Indians have become heavy video consumers online as mobile data gets significantly cheaper in the country. Video apps are increasingly climbing up the charts on Google Play Store.

In an event for marketers late last year, YouTube said that India was the only nation where it had more unique users than its parent company Google. The video juggernaut had about 250 million active users in India at the end of 2017. The service, used by more than 2 billion users worldwide, has not revealed its India-specific user base since.

T Series, the largest record label in India, became the first YouTube channel this week to claim more than 100 million subscribers. What’s even more noteworthy is that T-Series took 10 years to get to its first 10 million subscribers. The rest 90 million subscribers signed up to its channel in the last two years. Also fighting for users’ attention is Hotstar, which is owned by Disney. Earlier this month, it set a new global record for most simultaneous views on a live streaming event.

Alibaba reportedly mulling to raise $20B through a second listing in Hong Kong

By Rita Liao

Massive news just dropped for Hong Kong’s capital markets. Alibaba, one of the world’s largest tech companies, is considering raising $20 billion through a second listing in Hong Kong, Bloomberg reported on Monday citing sources.

Unnamed people told Bloomberg that the money raised in Hong Kong is intended to help Alibaba “diversify funding channels and boost liquidity.” The Chinese ecommerce behemoth is aiming to file a listing application confidentially as early as the second half of 2019, according to the report. That would come five years after Alibaba famously snubbed a record $25 billion listing on the New York Stock Exchange following Hong Kong’s refusal to approve its filing due to rules around company structure.

But the Hong Kong Stock Exchange is becoming an increasingly popular destination for public offerings that put Chinese tech businesses closer to investors at home, as my colleague Jon Russell explained in 2017. The turning point came when the bourse finally introduced dual-class tech stock listings last year, a major appeal that helped HKEX attract such tech darlings as smartphone maker Xiaomi and food delivery service Meituan Dianping.

The news also arrived at a time when Chinese tech firms are coping with increasing hostility in the US amid a series of prolonged trade negotiations. Just last week, China’s largest chipmaker announced that it would delist from the NYSE and focused on its existing Hong Kong listing, although the company claimed the plan had been brewing for some time and had nothing to do with the trade war.

TikTok parent Bytedance is reportedly working on its own smartphone

By Rita Liao

It’s been a busy couple of months for Bytedance, one of the world’s most valuable startups and the operator of globally popular video app TikTok. The Beijing-based company has continued to grow its list of apps to include the likes of work collaboration tool Lark, an instant messenger called Feiliao as well as a music streaming app, and now it appears to be taking a bold step into the hardware realm.

Bytedance is planning to develop its own smartphone, the Financial Times reported (paywalled) citing two sources. A spokesperson from Bytedance declined to comment on the matter, but the rumor is hardly a surprise as smartphone pre-installs have long been a popular way for Chinese internet companies to ramp up user sizes.

There’s also urgency from Bytedance to carve out more user acquisition channels. After a few years of frantic growth, Bytedance failed to hit its revenue target for the first time last year amid slowing ad spending in China, according to a report by Bloomberg.

Some of Bytedance’s predecessors include selfie app maker Meitu, which builds smartphones pre-loaded with its suite of photo editors and recently sold this segment to Xiaomi as the latter tries to capture more female users and newcomers, including Snow-owned camera app B612 and Bytedance’s Faceu, close on Meitu’s heels.

Others have taken a less asset-heavy approach in the early days of the Chinese internet. Baidu, Alibaba and Tencent — known collectively as the BAT for their supremacy in China’s tech world — all worked on their own custom Android ROMs, which come with extra features compared to a stock ROM pre-installed by a phone manufacturer.

Alibaba’s ambition also manifested in a $590 million investment in Meizu in 2016 that saw the eommerce giant take up the challenge to develop a tailored operating system for the handset maker. More recently in March, WeChat owner Tencent teamed up with gaming smartphone maker Razor on a number of initiatives that cover hardware.

There were early clues to Bytedance’s smartphone endeavor. The company confirmed in January that it has acquired certain patents and some employees from phone maker Smartisan, although it said at the time the deal was done to “explore the education business.” That was a curious statement as Smartisan’s business has little to do with education. At the very least, the tie-up confers hardware development capability on the mobile internet upstart.

Indeed, a source told the Financial Times that Bytedance founder Zhang Yiming “has long dreamt of a phone with Bytedance apps pre-installed.” Nonetheless, this is tipped to be an uphill battle, at least in China where smartphone sales are cooling and competition intensifies between entrenched players like Huawei, Vivo, Oppo, Xiaomi and Apple.

Bytedance has built a leg up away from home, thanks to its empire of mobile apps. The company is one of the few — and many would argue the first — Chinese internet startups that manage to gain a meaningful foothold globally. TikTok has consistently topped the worldwide app ranking in the last handful of months, though it’s also encountered a few stumbling blocks in some of its larger markets.

In the United States, the Federal Trade Commission imposed a fined on TikTok for violating children’s privacy protection law. The government of India, which has driven much of TikTok’s recent growth, also took issue with the app to temporarily ban it on account of illegal content.

While the US market may be difficult to penetrate given Washington’s concerns around the security threat that Chinese companies may present, India is now crowded with Chinese brands. A research done by Counterpoint found that in the first quarter, Chinese manufacturers led by Xiaomi controlled a whopping 66 percent of India’s smartphone market. That means Bytedance, alongside its potential ally Smartisan, is not only up against local rivals in India but also the familiar faces from its home market.

Tencent’s latest education push is a nod to new collaborative structure

By Rita Liao

When Tencent announced it had formed a new education brand this week, the internet giant wasn’t just flexing the muscles to conquer China’s booming online education sector. The new initiative is also an early result of Tencent’s long plan to foster more internal collaboration at a time when its core businesses, the lucrative video gaming segment and the billion-user WeChat, are under attack.

Called ‘Tencent Education’, the new brand consists of 20 products across all six of the firm’s business groups, announced executive senior vice president Dowson Tong at the company’s annual ecosystem summit on Wednesday. According to Tong, Tencent has over the years served some 15,000 schools and 70,000 educational institutes, giving it a reach of over 300 million users in the sector.

What this means is when it comes to making education products, there will be more teamwork among Tencent divisions, from the one overseeing WeChat to the entertainment-focused unit operating some of the world’s most played games. The catalog of services ranges from face recognition technology to monitor students during class time (I know, it makes me cringe), to personal development classes for adults.

This level of cross-department cooperation had been rare at Tencent until recently. For years, the Shenzhen-based company fostered a competitive culture it compares to horse races. On the one hand, internal rivalry spawns innovation. The success of WeChat has demonstrated Tencent’s willingness to let a new product eat into its legacy social network QQ. The strategy doesn’t always work, though. To contain TikTok’s rise, Tencent has churned out a dozen short video apps, but none has reached their rival’s supremacy.

Competition, on the other hand, produces internal silos and hurts collaboration. This is a critique that has often come at Tencent, although Tong refuted the notion in a recent interview with local news outlet Yicai, saying that Tencent actually had a history of keeping a data system for internal collaboration.

Meanwhile, its rival Alibaba has gotten more credit for structuring business units under one cooperative umbrella. When founder Jack Ma set up an “underlying unified data, safety, risk management and technology foundation” almost seven years ago, his goal was to tear down “internal corporate walls.” The integration was targeted at customers as well. For instance, Ma envisioned a future where a merchant on Alibaba’s consumer-facing marketplace Taobao would directly source from 1688.com, its business-to-business ecommerce arm.

Tencent is undergoing a similar transformation. In October, the company announced a sweeping reorganization that saw it knit together a few disparate business lines primed for synergies. Take the Platform and Content Group. The newly minted group consolidated all non-WeChat social and content services — spanning QQ, an app store, a web browser, two news apps, an esports platform and several video services — under one single division.

Historically, Tencent has derived a bulk of its income from video games and a handful of popular social media apps. But the cards are increasingly stacked against these ventures as China exerts more control over the gaming sector and Bytedance seizes more online attention, so part of the October reorg was aimed at fending off imminent competition from new rivals by better utilizing internal resources, as it’s the case with PCG.

The other part of the agenda is set for what’s further down the road. Tong told Yicai that the time is ripe for ‘the industrial internet,’ a buzzword in China that refers to the upgrade of traditional industries with technology. Tencent wants to be a leading force in the revolution, and the plan is to open up its technology to other enterprises, as Tencent has done through the education initiative.

“In the age of the industrial internet, I think the ultimate job is to be open… so we are opening a lot of the technologies we’ve accumulated in the past and integrating them for the use of other companies,” said Tong.

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