Alibaba launches mobile chat app

Market becomes more crowded as leading e-commerce firm joins

China's market for mobile chat applications has never been so crowded especially after Alibaba Group Holding Ltd - the country's largest e-commerce company - officially joined the fray on Monday with the launch of its first social networking app.

The app named Laiwang, which means come and go in Chinese, is the first product unveiled to the public after the company announced an internal restructuring program earlier this month with a strong focus on the mobile Internet business.

"We're a company with strong e-commerce genes, but we simply want to build a platform to keep people closer and to meet their social networking demands in the mobile Internet era," said Jonathan Lu Zhaoxi, Alibaba's chief executive officer, who is now also leading the company's newly formed Internet communication division.

He said that the era of the personal computer has ended and that his company's expansion to social networking systems is a natural evolution driven by the public's growing reliance on mobile phones.

He denied rumors suggesting that Alibaba's new app launch was due to the success of WeChat, the reigning mobile messaging service in China, which is owned by Tencent Holdings Ltd, Alibaba's archrival.

Analysts agreed with Lu, saying that the main reason prompting many players to jump into the mobile chatting app market is because messaging apps, which are seeing "rigid demand" from consumers, can help companies to lock up a great number of mobile Internet users.

"Communication is a basic need. By launching those apps, companies can easily accumulate a lot of mobile Internet users. The apps work as an entry to the mobile internet era," said Wang Jun, senior analyst with Beijing-based research firm Analysys International.

Figures from the Ministry of Industry and Information Technology said that the number of China's mobile Internet users exceeded 800 million earlier this year.

Data from Analysys International showed that the accumulated number of mobile instant messaging accounts in China jumped 85.2 percent year-on-year to 1.22 billion in the first quarter of this year.

Alibaba is certainly not the only company to have discovered the importance of an entry point to the market. On Aug 19, Chinese operator China Telecom Corp Ltd unveiled its mobile messaging app, known as Yixin, in collaboration with Internet firm NetEase Inc.

Three days later, WeMeet, a messaging app that shares some features with WeChat, was launched by Hangzhou Kuyue Tech, which Sina Corp invested in.

The new apps have always been compared with Tencent's WeChat, the most popular mobile chatting app with more than 400 million registered users in China. And Alibaba's Laiwang is no exception.

Laiwang shares some features with WeChat, such as the ability to send messages and share pictures, but it also has some new features, such as a hand drawing sharing function and the possibility of automatically deleting messages right after the recipients view them.

According to Alibaba, the company developed the app for almost two years. And even though it was only officially launched on Monday, Laiwang was quietly released more than a year ago and it attracted more than 1 million users basically through word-of-mouth marketing.

Zou Mengrui, the head of the team in charge of developing Laiwang, said he is confident that the product will be a success.

"We hope we can attract 10 million users in the coming one to two months and exceed 100 million users in a year," he said, adding that is his definition of success.

However, to some industry observers, Laiwang's new features don't seem groundbreaking enough to attract the same number of users as Tencent's WeChat.

Zou was repeatedly asked at the press conference to launch the app why he thought that Laiwang can be such a success.

He said that WeChat's success is based on Tencent's large number of existing users and the company's rich resources.

"Alibaba also has hundreds of millions of existing users on Taobao.com or Tmall.com. And we also have a lot of resources and advantages," Zou said.

However, WeChat's popularity and its established reputation is not something which can be easily replicated by the increasing number of similar apps in the market, said Lu Jingyu, an analyst on the mobile Internet market with iResearch Consulting Group.

"It's very difficult to change users' long-term habits. People all want to join the most popular social networking system, which has the majority of their friends on it. The more users you have, the more users you will get," said Lu.

Apart from the large user base, the latest version of WeChat, which was released in early August and is the largest update since the app was launched in 2011, also showed that the service is near a breakthrough point in terms of developing a successful business model, Lu said.

The new features of WeChat 5.0, including social games, scanner tools and payment integration functions, are seen by many insiders as a good answer to the challenge of making money out of free apps, which has been a long-term challenge for China's Internet companies.

Lu, Alibaba's CEO, said that there's no business model for Laiwang at the moment.

"Our top priority is to improve the product so that it meets the demands of users. Any big business strategy can fail for some reason but a product that can meet people's demands can never fail," he said.

However, the company said it will not add game functions to Laiwang.

And though it's difficult to overtake WeChat's dominant position, Lu with iResearch Consulting Group, said that WeChat will unavoidably face a shrinking market share due to the increas-ing number of competitors.

However, Wang Jun, an analyst at Analysys International, said that it doesn't really matter whether Laiwang can defeat WeChat or not.

"I think that Alibaba's goal is to make Laiwang a platform that can help people improve their businesses online," Wang said.

"If Laiwang can attract a lot of users, they will eventually become customers of Taobao.com or Alibaba's other online marketplaces," Wang said.

He added that the success of the app will help Alibaba to complete its ecosystem of online-to-offline businesses.