The Ecosystem War Among Giants Of Internet Industry Is Merely About Closed Systems

  • Post author:
  • Post category:IT
  • Post comments:0评论

(Chinese Version)

2

Editor’s Note:

Several Internet giants have been fighting for a share of the Lucky Money service market. WeChat also provoked great controversy by forcing its users to stop using certain products from other companies. More details on TMTpost weekly edition: WeChat, a typical Virgo.

The concept of ecosystem, which can also be seen in other giant companies’ future development plans, is often mentioned during this war. Everybody in the industry is trying to build an ecosystem, but what exactly is that? According to Wei Wuhui, a columnist at TMTpost, the first company that has successfully built an ecosystem is Alibaba. Besides Alibaba and Tencent, there is no other company in China to have achieved such accomplishment, not even Baidu or Xiaomi. Microsoft also has its ecosystem, but Nokia is off the list. An ecosystem has a very important characteristic: people depend on it, and will have a very hard time without it. Investing around can’t help you build an ecosystem. Every ecosystem is based on one particular center. In this case, an ecosystem must strike a balance between openness and monopoly. This is a moat for an ecosystem, or to put it in another way —it’s a system that’s similar to the galaxy.

Here’s an exclusive analysis from Wei Wuhui. He aims to providing the readers with a clear understanding of the digital ecosystem war taking place in China

I.

As a matter of fact, the first company in China that started to operate an ecosystem was Alibaba. But in this ecosystem, most active participants are not traditional Internet companies.

Taobao is an enormous ecosystem. Up to now, it has millions of sellers running their businesses on this e-commerce platform. There seems to be a sense of “career planning” in this ecosystem. This platform has become a platform for people to have a career, offering a tremendous number of positions to the public.

I have a friend who happens to be one of the earliest sellers on Taobao. After running her business on Taobao for several years, she got tired of it (it’s not that she’s not making money, it’s just too exhausting to run it). Then she became a lecturer at Taobao University to teach students her techniques and experiences on running a business on Taobao, all of which turned out to be popular among students since they came from years of operation on Taobao. Later on, she changed her job again and went into the field of CRM.

II.

An ecosystem has a very important characteristic: people depend on it, and will have a very hard time without it.

Once an ecosystem is built, it will be difficult for it to fall. There are just too many people depending on the ecosystem, therefore they will instinctively prevent it from falling and declining, or try to slow the tendency down. Windows operating system is the very example for this case. There have been massive criticisms against Microsoft all along, but Windows still survives, with millions of people relying on its platform to make a living.

Again to take a look at Nokia, it’s certainly not an ecosystem. Few people are relying on Nokia (except for some upstream and downstream companies). Nokia did have a prosperous period, but it fell from the sky very quickly in the end. Similarly, Apple is an ecosystem as well, but it fails to include manufactures in China since they rely solely on Android. The same goes for Xiaomi, who’s been boastful about building its own ecosystem.

I don’t understand why some companies think they are building an ecosystem simply because they are investing in different areas. Sequoia Capital invested a number of companies that later became leading giants in their respective industries. But nobody is saying that this firm is building an ecosystem.

Miui is a very important distribution channel, but the world won’t be moaning if it disappears one day.

III.

Tencent didn’t have an ecosystem before. It has always been denounced as a company that thrives on the fall and blood of others. Clearly, its operation strategy doesn’t fit the profile of an ecosystem, even though huge profits can be made out of it.

However, the war between Tencent and Qihoo360 changed everything. It violently shook how Tencent thought, forcing it to really reflect on its development strategies. Eventually, Tencent realized that arrogating all the resources to one hand won’t do any good to the future development of the company.

This war also brought forth great changes to the Internet industry in China. And now open platforms have become a rather heated topic among the public. Internet enterprises with millions of users all announced that they would start building their own ecosystems, including Renren, a company that has already been struggling to survive as many people fathom. But still, announcing it is one thing, but to actually practice is another.

And Tencent, as a matter of fact, did go for it.

Tencent doesn’t make huge profits from QQ, the most popular social software in China. And obviously, this situation was holding Tencent back. WeChat then changed the tide for the company. WeChat is like a piece of white paper, therefore Tencent was able to try as many things as possible to build an open platform and shape it into the ideal form. Currently, WeChat has over 8.5 million official accounts on its platform, and it fits the characteristic of an ecosystem: there are just too many people relying on Tencent.

IV.

Commercial ecosystem is nothing like a natural ecosystem. A natural ecosystem does not seek profits, even if it does, it all depends on Nature’s call, and we mortals won’t be able to understand what she really wants.

Commercial ecosystem is just a business strategy, a tool to boost business. Every company builds an ecosystem for one purpose, to maintain its ongoing development, which is perfectly reasonable and logical. Therefore, an ecosystem must have a single core. That’s why I mentioned that an ecosystem is more like a galaxy, for they both have a center.

V.

There are two things that ecosystem builders are alert for.

One is that, theoretically speaking, there could be countless planets and satellites orbiting around one star, but even just an extra star can disrupt the whole system. In reality, business giants are allowing, or even, welcoming and encouraging other small players, the extra stars, to enter their systems. But as for other giants that possess equivalent strength, it’s quite the opposite.

The second thing is, and more importantly, that things that could damage the system’s business model, or, strategic layout, should not be permitted to enter the system.

As is mentioned above, Alibaba is the first Chinese Internet company that had successfully built an ecosystem. It got rid of Baidu spider long ago, for the fact that its business model is based on advertising for the sellers. Therefore, if you can find a certain product via Baidu, then the business model of Taobao will crumble to the dust.

It’s the same for Tencent. The company tried quite a few things on WeChat that have never been on QQ before. For instance, the space on QQ’s interface is extremely limited and Tencent only put its own things on it. But the situation for WeChat is different. Contents from third parties, such as the streaming contents from official accounts, can be included on WeChat.

VI.

Now, let’s talk about the heated war in Lucky Money service market, another fierce confrontation in the industry.

What’s the true intention of launching Lucky Money service? Giving out lucky money is the thing we all do during Spring Festival. And the service allows users to give out lucky money at a small amount. Providing a platform where users are willing to make small transactions through mobile payment is exactly the best case for these companies.

What about the true intention of launching mobile payment? The answer would be to boost Internet finance. Saving and loaning money, and making transactions in financial industry are based on payment. To Alibaba and Tencent, the financial sector is a target that they must get.

Alibaba has the intrinsic power to run financial business. As a retailer, Alibaba has the advantages to start a financial business. Finance was born because retailers were trying to find ways that could make trading and transaction easier.

Unlike Alibaba, Tencent doesn’t have that intrinsic energy, since it doesn’t have any retailing genes in the company. However, Tencent does have one very powerful weapon: its gaming division.

Truly, games can bring tons of profits. Some people even consider games as the digital version of heroin. Selling games is just like drug dealing, it’s incredibly profitable.

But games in China still possess no social value. Chen Tianqiao, board president and co-founder of Shanda Interactive Entertainment Limited, became the richest man in China by making and selling games. After that, he wanted to revolutionize his company, but ultimately failed to make the transition. Tencent might have a different ending.

Alibaba and Tencent also once competed against each other in the market of taxi service apps for the very same reason: to win over users and encourage them to use their payment softwares to make small transactions.

Once the ecosystem’s owner detects a powerful intruder that wants to attack on its essential market, the owner will certainly put up a violent fight against the enemy. Alibaba and Tencent’s ecosystems are closed systems for each other. It would be extremely unwise for either one of them to open its ecosystem. This is just how the business works.

VII.

Some lawyers said this war suggessts a degree of unfair competition. But is that true?

To be honest, there’s no solid answer for this question. First, according to regulations made by the Ministry of Industry and Information Technology, Internet service providers are not allowed to force their users to use or not to use certain Internet services. But, here’s a twist, this rule doesn’t work in the situation where the providers have justified reasons to do so.

Do Alibaba and Tencent have justified reasons to push each other out of their ecosystem? Well, we can find tons of them in just a minute. For instance, if I suspect the other company for leaving bugs in their program deliberately that will leak users’ personal information, then I got the justified reasons to push their program off. That company will have to give me access to their code. If they don’t comply, then sorry, they can’t get into my ecosystem.

Justified reason is the biggest weapon in the publicity war between both companies. But in my opinion, making its own ecosystem better is the most urgent thing.

Offering an ecosystem as a selling point is just like providing infrastructures. But in the mobile Internet sector, no company has the confidence to say it has achieved such goals. Therefore they are on high alert of their rivals and try their best to push each other away.

As this point, personal value and personality are not important anymore. The overall interest of the organization is everything, and it also translates into overall business interest.

VIII.

Ecosystem is a business on a higher level.

But at the end of the day, it’s still a business form, not some neat freak that pushes everything away.

Since business in China has been developing only for about forty years, it still has great potential and space to make progress.(The article is published and edited with authorization from the author @Wei Wuhui, please note the reference and hyperlink when reproduce.)

发表评论