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Beware The BAT!

Mon, 11/05/2018

Chinese tech giants Baidu, Alibaba & Tencent are spreading their wings

By Glenn Osaki, President, APAC, MSL

A frequently shared video from Davos 2018 showed Alibaba founder Jack Ma warning audiences to change the way they teach, otherwise 30 years from now we will all be in trouble. “Everything we teach should be different from machines, “he warned. The earliest audience for Jack Ma’s prophetic statement looks to be the communications industry, as this summer Alibaba announced its AI copywriter – a machine that can produce 20,000 lines of copy per second AND it passed the Turing test to demonstrate behavior indistinguishable from a human.

The AI copywriter is just the latest in a long line of innovations introduced by Chinese tech giants Baidu, Alibaba, and Tencent (or “BAT”). Their collective might is a constant reminder to Western counterparts Facebook, Amazon, Netflix and Google (“FANG”) that innovation is no longer the exclusive domain of American companies.

Together, BAT have a collective market capitalization of more than US$1 trillion. Financial markets have rated each company glowingly because their innovation in the world’s largest retail market is transforming China into a cashless, mobile economy that is writing the future of the world.

A 2017 Forrester Research report, Keep an Eye on Baidu, Alibaba, and Tencent, asserts that BAT “have shifted Chinese commerce from cash-heavy to cashless” by introducing e-commerce and digital payments; innovating with peer-to-peer fund transfers; promoting the widespread use of codes for in-store mobile payments; and investing in innovative businesses that boost digital lifestyles.


In particular, Baidu is investing heavily in artificial intelligence. From joint facilities in Beijing, Seattle, and Silicon Valley, Baidu Research is developing AI capabilities in everything from an in-home ecosystem powered by AI to self-driving cars. In July 2018, Baidu launched Baidu Brain 3.0, a central platform that helps enterprises adopt AI solutions more quickly and easily – without programming knowledge. This no-code approach allows SMEs to readily apply face recognition, natural language understanding and video analysis into their retail, logistics and manufacturing operations.

With 800 million Chinese online, far more than double the number of connected Americans, the digital trail of information accessible to search giant Baidu surpasses even Google’s fuel to power the algorithms need- ed to develop AI. Furthermore, the Chinese government’s stated ambition to lead the world in AI technology over the next decade adds public pressure (and government support) to move even faster.


If Baidu is charting the world’s AI future, then Alibaba is leading the edge in robotics. Chinese e-commerce giant Alibaba is already making drone deliveries in Shanghai through its subsidiary. Users order food through the app and Alibaba’s drones grab meals and other packages and fly them between delivery points.

But even beyond an advanced metropolis like Shanghai, Alibaba is testing deliveries into rural China via drones and driverless vehicles through its subsidiary Cainiao. The World Bank estimates some 43% of Chinese consumers live outside of urban areas, with many in remote areas inaccessible via highways or trains. This robotic delivery network is truly transformational for those villages and will give Alibaba access to millions of new customers.

In addition to robotic delivery and autonomous logistics, Alibaba is constantly championing “new retail” strategies that make the transition from online to offline channels as seamless as possible through IoT devices, augmented reality functions, and machines that can substitute for humans by replicating human actions. Alibaba has even opened robotic restaurants where diners interact through apps and QR codes, and robots determine where to sit, show how to order, deliver your cooked meals, and take your payment when done.


But despite the leadership Baidu and Alibaba exhibit in AI and robotics, Tencent is the farthest ahead in new consumer technology because of WeChat, its mobile, social and commerce super app in one. As the fastest ever to one billion monthly active users, WeChat attributes its rapid adoption to an unrivaled focus on user experience (UX).

This seamless UX keeps consumers within the WeChat ecosystem through mini-programs that offer every imaginable feature, from communicating

to commerce, from task management to entertainment, from your personal lifestyle to the workplace. The resulting loyalty and conversion available through WeChat makes the platform absolutely indispensable for consumers. It has fueled China’s digital economy beyond what experts could imagine and is “paving the way for the world’s digital frontier in coming decades,” according to a McKinsey Global Institute report.


In 2016, Alibaba spent $1 billion dollars to win control of Lazada, Southeast Asia’s biggest e-commerce platform. In the same year, Jack Ma persuaded the leaders of the G20 Summit to endorse his proposal for an “electronic world trade platform” (eWTP) to make it easier for small businesses to trade across borders.

As part of that initiative, Alibaba launched a “digital free-trade zone” in Malaysia in March 2017 where simplified logistics and payment systems facilitate the growth of SMBs.

Alibaba is already among the world’s leading providers of cloud infrastructure and related services. But its marquee platform for going global is Ant Financial, the world’s largest fintech firm with the largest online payment platform Alipay (870 million active users), and the largest money market fund Yu’e Bao (1.5 trillion RMB portfolio). Ant Financial has overseas investments in online payment firms in India, Thailand, Philippines, Singapore and South Korea.

Furthermore, in Q4 2017 Alibaba launched a $15 billion-dollar R&D initiative focused on quantum computing, AI, and other emerging techs. The DAMO Academy (Discovery, Adventure, Momentum, Outlook) operates out of five overseas labs in San Mateo, Bellevue, Moscow, Tel Aviv, and Singapore, covering areas like data intelligence, IoT, financial tech and human-machine interaction. Key real-world applications already include machine learning, network security, visual computing and natural language processing.

But Jack Ma’s firm is still playing catch-up to Baidu, the early leader in AI overseas, having developed machine learning in 2010, well before Alibaba, Tencent, or even Google. Announcements in the last couple months to spin out Global Du - the unit responsible for utility apps and its mobile ad business - and Du Xiao- man - the financial services arm - are indicative of Baidu’s vision to sharpen its focus on AI. According to Baidu, it will set up a new unit around its AI-powered services including recommendation engine PopIn, keyboard app Simeji and other services in the U.S. and Southeast Asia, which will allow these services to work more closely with Baidu’s AI labs.

Tencent is also making aggressive investments abroad. It led a consortium to acquire Finland’s Supercell, maker of Clash of Clans mobile game, in 2017 for US$8.6 billion, turning Tencent into the world’s biggest online gaming company. Together with Taiwan’s Foxconn, it invested US$175 million into Hike Messenger, the Indian equivalent of WhatsApp.

Even more impressive, Tencent opened an office in the U.K. in March 2017 to introduce its WeChat payments system in Europe, and within six months, BNP Paribas had rolled out WeChat Pay to French retailers, and subsequently across Europe.

Critics argue that the BAT can’t fly in the West amid the sharp teeth of FANG. Yet analysts like Gartner have changed their descriptors from saying “Alibaba is the Amazon of China, “to saying “Facebook is trying to become the WeChat of the West.” The next few years will validate how China has evolved from “copycat“ to “pioneering BAT”!

USC Annenberg


This article originally appeared in the 2019 Relevance Report which was published by USC Annenberg in November 2018.

You can download their complete report here:

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