Company Snapshot: Tencent-backed Meituan-Dianping vs. Alibaba-backed Koubei
How Meituan-Dianping and Koubei fit into Tencent and Alibaba's struggle for tech supremacy in China.
The social and gaming giant Tencent Holdings Ltd. (OTCMKTS: TCEHY) and the e-commerce company Alibaba Group Holding Ltd. (NYSE: BABA) are China's two largest technology companies, each with a market capitalization around $500 billion.
The question these days is which of the two giants will come out on top.
As can be seen in the chart below, both stocks have had a phenomenal year as each have roughly doubled. Tencent stock is selling for $49.03 a share, while Alibaba stock closed Friday at $174.61 a share, both of them pulling back from recent highs.
Both of them, however, are expected to recovery, and then climb some more. According to Morningstar calculations, Tencent has grown earnings over the past five years at a 32 percent compound annual rate, while Alibaba managed an even more impressive 59 percent compound annual rate. And, said Tipranks, two Wall Street analysts covering Tencent rate the stock a "buy," with an average price target of $59. And all 15 Wall Street analysts rate Alibaba stock a buy, with an average price target of $208.59.
The two firms compete in a variety of areas, and support competing apps, such as as Meituan or Koubei, to reserve beds in a hotel or hostel, order take-out, and book movie tickets. Tencent supports Meituan-Dianping, while Alibaba favors Koubei. Not only are the local services apps similar in function, they are also strikingly similar in design.
Alibaba invested in Meituan in 2011, and Tencent invested in Dianping in 2014. The two merged in October 2015, and Alibaba sold its stake shortly thereafter, shifting its support to the food delivery service ele.me and Koubei, a rival of Meituan-Dianping.
Why are China's two biggest tech firms so interested in connecting brick-and-mortar shops with smartphone users via apps such as Koubei and Meituan?
Alibaba and Tencent have branched out and compete in a variety of areas, including mobile payments. Each wants their mobile wallet to be #1 in China. Currently, Alibaba's Alipay holds that spot. According to Zigor Aldama of the South China Morning Post (which is owned by Alibaba founder Jack Ma), Alibaba's Alipay boasted a 54 percent market share. Tencent's Tenpay came in second, with a 40 percent market share.
Of course, China is a very large market, so even if these mobile wallets charge users a very small fee they will be bringing in significant amounts of money.
A Desire for Data
Both Tencent and Alibaba also compete over users, and the data and revenue they generate. Ma understands the importance of data, and has spoken about this. Alibaba collects data about user buying patterns, and can use this to sell predictive analytics to its merchants.
The more data you collect, the better you know a person, especially if that person does almost everything, including ordering lunch, hailing cab rides, and shopping everyday using your app. Companies can then use this insight into the behavior, habits and needs of their users to sell them products and services, including loans.
Apps such as Koubei, Meituan, Alibaba, and WeChat feed data about a person's spending habits to the parent company, which can use this information to make decisions about a person's creditworthiness when they apply for a loan using WeChat or Alipay.