Alipay's social networking dream
It is no secret that domestic e-commerce giant Alibaba Group Holding wants to be stronger in social networking. The company has made several major investments in the sector, but none has born much fruit. Meanwhile, Tencent Holdings, whose popular instant messaging app WeChat dominates the field, is encroaching on Alibaba's lead in mobile payments. Nonetheless, Alibaba isn't ready to give up on social networking, which remains an effective way to capture user loyalty.
Alibaba Group Holding's payment app Alipay is mulling over improvements for its social networking feature, according to recent media reports.
It has recently appointed a new executive to oversee its social feature, called Circles, media reports said.
Alipay declined to comment on these media reports on Monday.
Still, the news has received a great deal of attention, as Alipay's Circles stirred up something of a controversy when it was launched on November 24, 2016.
The controversy focused on two Circles groups open to all users: Campus Diary and White Collar Diary. Inexplicably, only female users were allowed to post photos in the two groups and only male users were allowed to comment under the posts.
There were more rules for male users, who were divided into two groups depending on their scores on Alipay's credit-rating system, Sesame Credit. Those with credit scores above 750 were allowed to comment under posts in the two groups, while those with scores below the threshold were limited to "liking" photos.
Soon after the launch, the two groups were flooded with racy photos. Users complained, accusing Alibaba of turning Alipay into a dating service.
Alipay responded on November 28, 2016 that its real-name registration system allows it to easily spot and deal with inappropriate content, according to a statement the company posted on the microblogging site Weibo.
On November 29, Peng Lei, CEO of Ant Financial, the Alibaba arm that runs Alipay, apologized for the suggestive content on Circles, and promised to shut down any offensive groups on the platform.
A social laggard
It is no secret that Alibaba, a leader in e-commerce and online payments, wants a stronger social networking platform. In has made several major investments in the industry over the past few years. It invested in the social networking app Momo in July 2012, and bought an 18 percent stake in Weibo in April 2013.
When voice-messaging became popular in China in 2013, Alibaba launched a platform called Laiwang in September 2013 to compete with Tencent's WeChat.
Later, in December 2014, Alibaba rolled out Ding Talk, a messaging app geared for corporate users. None of the apps has come close to being as successful as WeChat, which boasts around 768 million active users.
In the wake of the criticism, Alipay put Circles on hold. But with its reemergence, there is once again buzz about what Alipay might do in social media.
Because the credit score was the primary way that Alipay divided users into different groups in Circles, the app will try to capitalize on users' credit scores as it moves forward, said Tao Chuanliang, an industry analyst at the Beijing-based CCID Consulting.
"It is not yet clear how it will be done, but I think [Alipay's social networking effort] is all about the credit data," Tao told the Global Times on Monday.
The Chinese central government has been trying to build a nationwide credit score system, but it has yet to succeed, Tao said. But Alipay, with its access to the credit records of millions of users, has the potential to build one.
"People say that [Alibaba founder Jack] Ma Yun has always had a social networking dream, but I believe that social networking is not the ultimate goal," said Zhang Yi, CEO of Internet consultancy iiMedia Research. "User loyalty is."
Social networking has proved an effective way to gain users for services such as payments and e-commerce, Zhang noted.
Although Circles has received criticism, that criticism has also given it a lot of attention, which is a good thing for Alipay's future plans for social networking, analysts said.
Unexpected move
Alibaba and Tencent are rivals on many fronts in the tech industry, including social networking and payments. While Alibaba is pushing hard in social networking, Tencent has been making inroads on payments.
Over the past few years, the two companies have sought to promote their payment tools by launching promotion campaigns featuring virtual red envelopes containing money during the Spring Festival holidays.
During the 2015 Spring Festival holidays, with a strong red envelop promotion, WeChat users connected 200 million bank accounts to the app in two days - a feat that took Alipay eight years to accomplish.
This year, WeChat founder Zhang Xiaolong announced during a company event on December 28, 2016 that WeChat would not hold a red envelop promotion for the upcoming Spring Festival holidays, which will start on January 27 and end on February 2, 2017. The news surprised many, considering how successful the promotion had been in the past.
This doesn't mean that WeChat is placing less importance on payments, which remain crucial to WeChat's business.
"The purpose of the red envelope promotion was to gain users, but the promotion is no longer as effective because it can't gain as many users as it had in the past," Tao said.
Tao noted that it was a "reasonable" decision to drop the red envelope promotion in 2017.
Zhang from WeChat also said at the company event that the red envelope promotion has accomplished its "mission."
Although it appears that Tencent no longer cares enough to compete with Alipay during the Spring Festival holidays in 2017, it is still too early to say that Tencent has secured a leading position in both social networking and payment, analysts said.
In the third quarter of 2016, Alipay still held a 50.42 percent share of the mobile payment market.
Tencent's payment tools had 38.12 percent, according to a report released by Analysys International on December 27, 2016.
Besides, Zhang from iiMedia noted that Alipay still has advantages of its own. For instance, Alipay is better at building offline payment infrastructure, Zhang said.
The rivalry of the two companies in the areas of social networking and payments will be "long and tense," Zhang noted.
