(Chinese Version)

On October 15th this year, Hurun Report released its Hurun Rich List 2015 that later set the whole Internet on fire for almost three hours. Owning 145 billion RMB, Jack Ma’s family drops from the first place to the second on that list, showing a 3% decrease of wealth compared to last year. However, there’s one thing that we should take notice here: Jack Ma’s another main asset, Alipay’s mother company, Ant Financial, has been doing incredibly great in the market. In July this year, Ant Financial had already completed its Series A round of financing and its market valuation hit 45 billion dollars after that.

Jack Ma has three main source of wealth: 6% of Alibaba’s share, 7.3% of Alipay’s share and other personal investment. Let’s do some math here. Since Alibaba Group’s share price has been going down, Jack Ma’s personal wealth is subsequently decreasing. At present, Ant Financial is valued at 45 billon dollars, meaning the 7% share that Jack Ma is holding can bring him over 20 billion RMB. If we say Alipay symbolizes Jack Ma’s dream of wealth, then Alipay also contains Alibaba Group’s dream.

Challenging WeChat, Alibaba aims to build its social platform

Alipay’s newest version is updated with a Living section, which is another major change after rolling out Friends and Chat function. In recent years, Alibaba has been investing in different social products including Sina Weibo, Momo, Laiwang and Dingding that Alibaba developed on its own to pursue its dream of entering the social media sector. Sadly, despite all the efforts Alibaba had made, these attempts turned out to be disappointing. However, Alibaba hasn’t given up yet.

Ever since the dawn of civilization, we have been social animals. We humans rely on communication to survive, to live, and therefore many new social concepts and social scenarios are nurtured in the modern world. In today’s society, social networking has become a basic level entry of the Internet industry. Whether it’s e-commerce, finance, or life service sector etc., they can all fuse with social products. The twist here is that it’s really difficult to add social function on already mature platform of other field, such as Alipay, a e-payment platform. That’s also why Alibaba doesn’t want to give up on the idea of adding social functions to Alipay.

Alibaba has amassed 600 million users using its e-commerce platform and Alipay and now it’s one of the most influential companies in China. But Alibaba’s success in e-payment limits the company from entering other sectors. That being said, Alipay has less potential then WeChat. But what if Alipay also has social functions? Could that make Alipay comparable to WeChat? To be honest, it’s hard to say. But if Alipay were to have social functions that are as good as WeChat’s, it would have to fix two problems first.

Firstly, transforming an e-payment app to a social app is a challenge. After all, nobody would want to open his or her “wallet” so frequently everyday.

Secondly, will a social app based on an e-payment app bring a good user experience? WeChat Payment’s success was mainly attributed to the Red Envelope function, which bears a special Chinese tradition and fits Chinese users’ habit. But I have to point out Chinese people at their core don’t like any kind of social life that’s based on money, and Alipay happens to be a payment platform, meaning, it’s based on money.

I don’t really know how Alibaba will solve these two major problems, but I will let my imagination flow. In the end it suddenly occurs to me that we are missing the point here. Social functions are not the ultimate goal that Alibaba is aiming at. If social functions can’t facilitate services, trades, then who will want to develop them? That being said, social functions must be able to generate value. Or else, no company will want to make efforts to make social products. For instance, if Momo still couldn’t make profits after three years, then it wouldn’t survive. Now let’s look at Alibaba. If Alipay were to base on profit-making, then it would probably become a social product of shopping. Taobao invested 2 billion RMB in rewarding Taobao’s section on TouTiao in hopes of building a Taobao public account. Alibaba made this move for two reasons. Firstly, Taobao wants to provide content for Taobao and make Tabao also a composition platform. Secondly, the company wants to use it to test the waters in the social sector for Alipay. WeChat’s strong power to keep its users is greatly contributed by the official accounts on its platform. Without content, social platforms will not be able to continue and attract new users and let alone keep them. Thus, we have this equation: Alipay social networking + content equals to Shopping social networking. 

Koubei.com paves way for Alibaba’s O2O dream

The local life service sector has always been a main target for different giants to aim at. In this particular sector, we already have giants like Meituan and Dazhongdianping, as well as competitive players like Nuomi, and therefore Alibaba’s Koubei will have almost no space to grow. In this case, integrating Koubei into Alipay is the only way to save Alibaba’s OTO project.

On the one hand, it’s known to all that the O2O sector, which was nurtured by the group-buying industry, is still in a chaotic state. Baidu’s investment of 20 billion in Nuomi indicates that Li Yanhong is treating the O2O sector as one of Baidu’s priorities. Meanwhile, Meituan and Dazhongdianping, two largest giants in this sector, reached a merger in order to become the dominating power in O2O. One analyst points out: “This merger will allow Meituan & Dazhongdianping surpass Xiaomi and Didi and enter the level that Baidu, Alibaba, Tecent and JD are in.” If this prediction is going to come true one day, then the competition in the OTO sector will only become fiercer than the past. Given these circumstances, Alibaba will have to try everything it has to offer to grab a share of this sector.

Let’s see all the OTO cards Alibaba is holding that are actually useful: Sina Weibo is suffering from Taobao’s weird advertisements; Momo has a weak foundation and it hasn’t been generating profits; Taobao is too enormous in e-commerce to enter the OTO sector; Alipay, well, it might work. Let’s say OTO is an entry point to services that also integrates and connects offline service providers and e-payment platforms. In this perspective Alipay will be a perfect entry point for Alibaba since the company has great resources in the latter two areas. The logic here is simple: users find the service providers they like, they pay for the service on the e-payment platforms, and they find new providers through the payment scenario. Basically it’s forcefully using e-payment platforms to guide users to form a certain habit. I am not saying that this is the best approach to enter the OTO sector, but the logic here is quite right.

The OTO sector is regarded as the next trading market with the e-commerce sector as the former. Its possibility of expansion is incredibly prominent. In other words, if one company loses the OTO sector, then it would also lose all those businesses that are related to this very sector. For instance big data is extremely valuable to many Internet companies. Future big data analysis and other intelligent industries’ development will need big data to progress. Big data is the very foundation. Without big data, these derived sectors will not be able to exist. Capital is the core of finance, and it’s what e-payment platforms have.

Baidu, one of the three most influential and powerful Internet company, is also investing heavily in the OTO sector. Baidu’s quaestor Li Xinzhe points out: “Baidu’s current businesses are all very promising. Now our OTO platforms include Baidu Nuomi, Takeout, and Qunar. Our ‘new businesses’ consist of non-search businesses like Zhida, Baidu Map, Baidu Wallet and Iqiyi.” It’s apparent that Baidu is using it map service to expand. All these new businesses are more or less location-based services. Baidu Map serves just like a connector that links all these service resources and sends them to the users.

In this case, Alibaba’s Alipay will be the crucial connector. But still, though Baidu Map and Alipay serve a similar role, Alipay will be quite different. For one, Alibaba might support Koubei and use it to penetrate the life service sector. For another, besides e-commerce, Alipay could bring new opportunities of Internet finance. Alipay can give Ant Financial conceptual support and gain momentum for Ant Financial’s financial businesses. After all, financial services are Ant Financial’s core businesses, meaning finance will be the next direction Alipay will go for.

Alipay is now overwhelmed by Alibaba’s big dreams

Besides all those dreams I have mentioned above, Alipay is also a carrier of Alibaba’s dreams in other sectors. What follows is Ant Financial’s business structure:

1. E-payment: Alipay (own)

2. Fund: Tian Hong Fund (holding, 51%), Fund123 (holding, 61%), Tebon Fund.

3. Financial service: Yu'E Bao (own), Zhaocaibao (own), Mayijubao(own)

4. Insurance: Zhongan Insurance (Original holder, 16%), Cathay Insurance (holding, 60%)

5. Bank: Zhejiang Mybank (Original holder, 30%), Postal Savings Bank Of China（shareholder soon to be）

6. Loan: Ant Micro Loan (own)

7. Credit investigation: Sesame Credit (own)

8. Equity-based crowd-funding: Ant Dake (own)

9. P2P: WJS (Original holder, 25%)

10. Financial service: Hundsun (indirect holding, 20.6%), Ant Financial Cloud (own)

Besides products mentioned above, Alipay’s ecosystem includes logistics. In April, 2014, Zhaijisong became Alipay’s first logistics company. Up till now there are over 50 logistics and e-commerce companies currently working closely with Alipay, including influential companies like Deppon, YTOExpress, EMS, Rufengda, Yhd, Dangdang, Jiuxian, Sposter etc. Among them, international logistics company DHL and FEDEX also support payment from Alipay.

This February, Ant Financial acquired 25% of Indian e-payment platform’s shares. Later in June, Ant Financial invested several hundreds of million RMB in marketing service provider Yzuo. In August, the company led the funding of Qufengqi and invested 200 million dollars. On October 15th, Ant Financial announced to make strategic investment in 36 Kr, a media platform that focuses on information and news about entrepreneurship and investment.

In many people’s mind, Alibaba is a giant company that’s so wealthy that it can buy all the way through the competition. Ant Financial, which runs the very Alipay and also belongs to Alibaba, is considered as one of the most successful cases in China as well even though Alipay hasn’t finished building its own ecosystem yet. However, Alipay is becoming more bloated than ever for its expansion in sectors such as the financial sector, OTO sector, logistics sector, and the media sector etc. Apparently, Alibaba doesn’t see Alipay as bloated so far, but rather regards it as a product full of dreams.

[The article is published and edited with authorization from the author @Yikedu, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at ECHO), working for TMTpost.