How the Chinese vs Western battle of internet giants will unfold

To the West, Google and Facebook not only dominate the news agenda, they strike fear into most businesses. With Amazon not far behind, any business looking for its own piece of the digital pie can look again.

Across the other side of the world there are a number of high-profile tech companies battling it out in order to be crowned King in China, Asia and quite possibly the globe. With Tencent now being valued higher than Facebook, pushing it into the top five most valuable companies in the world, it would appear that the West is due for a rude awakening.

China's BAT (Baidu, Alibaba, Tencent) dominate, but with the big three nearing saturation in China, they are increasingly looking elsewhere for continued growth, with their sights set on Amazon, Google and Facebook’s territory.

So, how likely is it that BAT can challenge Google, Facebook and Amazon’s dominance in the West?

Globalisation is Alibaba’s key focus, and while it recognises Amazon’s stranglehold on e-commerce across North America and Europe, it views the rest of the world as unclaimed. Southeast Asia and India appear to be Alibaba’s primary focus outside of China.

While Amazon has struggled to make inroads in China, it is well aware of the growth potential across Asia and has already been pushing aggressively across the region but Alibaba aren’t far behind. Further investments into Lazada, a leading e-commerce player in SEA, will help Alibaba build its local position in the region. Across India Alibaba took a different route to market by starting with digital payments but have since continued to make aggressive investments in ecommerce. Alibaba’s focus on digital payments and ecommerce go hand in hand, and will help them win over both customers and brands.

It will be interesting to see how Alibaba and Amazon fair against one another, especially in India which both players see as a must win market.

Tencent has always been open to partnerships, giving their customer base on WeChat access to third-party taxi-hailing apps, travel bookings and more to keep users in app. At the same time they have made a number of clever acquisitions and investments that put them in a great position to break into the West in the long term. This includes a $1.8bn (5%) investment in Tesla, online gaming company Supercell, plus a stake in music streaming service Spotify, opening the door to a whole new market. The recent “mini-program” feature in WeChat allows users to access services from other companies within the app; a move that could see it further develop partnerships and entice new global audiences into the app.

Meanwhile, Baidu seems to be concentrating more on its AI, big data and cloud computing services. This also puts them in a position to compete directly with Amazon, who are pushing their Amazon Business Services in North America and Europe, including a focus on its cloud offering.

Baidu recently announced a partnership with Xiaomi to position itself as a major player in IoT. This is a clever move for Baidu, which has have been hailed as China’s answer to Google, as it competes in a highly competitive landscape. Growing ecommerce and online travel-agent brands mean consumers are no longer going directly to search engines when shopping or planning holidays. This is eating into search revenue, so such diversification is key. Pairing with Xiaomi allows Baidu to offer a far superior product in IoT and AI, and puts it directly in competition with Google and Amazon.

The dynamics of doing business in China has helped BAT grow, but operating in only one market has limitations and the three companies are increasingly eager to scale abroad. These businesses are aligning themselves with Google, Facebook and Amazon’s offering without much risk of a counterattack. They have found their place in the market and are making major acquisitions, but the real risk to the West comes from them joining forces with other players to compete.

This combining of forces is something that we are unlikely to see in the West. In fact, we have already seen that Amazon and Google can’t work together, with Google pulling YouTube from Amazon devices. But with BAT increasingly open to collaborating with other companies, they could easily challenge the status quo in Western markets.

There is no doubt that over the next 12 months the Western big three will find themselves head to head with the Chinese internet giants, across ecommerce, brand partnerships and most notably AI. What’s not certain is who will come out on top and whether BAT can adapt to succeed in a different environment.