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Weakness and Armor

Special author: Chen Xuning

Achilles, the hero in Homer's epic, is the son of the mortal hero Peleus and the sea goddess Thetis. When Achilles was young, his mother held him upside down and dipped him into the River Styx, thus making him immortal. However, his heel, which was held by his mother, accidentally exposed to the water, becoming the only fatal point on his body.

As an adult, Achilles became the backbone of the Greek army, winning many battles, but was eventually shot in the ankle and died. Later generations often use "Achilles' heel" as a metaphor: even the most powerful individuals or organizations have potential weaknesses.

For Alibaba, which strives to become "a good company that lasts 102 years", what is its "Achilles' heel"?

Let's look at a piece of news first. According to a report by Bloomberg in August, Tencent participated in the latest round of financing of more than US$300 million for the large-scale model unicorn company Dark Side of the Moon.

In the domestic market, the five companies, namely, Darkside of the Moon, MiniMax, Zero One Everything, Baichuan Intelligence, and Zhipu AI, are known as the “Five Tigers of Big Models” in the industry. Alibaba has invested in five of these “Five Tigers”, and Tencent has invested in four.

Alibaba took on all the responsibilities, and Tencent followed suit. Through this "selective investment" approach, almost all the top AI startups are within the reach of Alibaba and Tencent.

With the release of GPT-3.5 by Open AI in November 2022 as the singularity, four months later in March 2023, Baidu released Wenxin Yiyan, standing at the head start of the domestic competition. Now that four of the "Big Five" are jointly invested by Alibaba and Tencent, a new round of "land grabbing" wars in the Chinese Internet seems to have quietly kicked off.

Over the past 20 years, Internet giants represented by BAT, ByteDance, Kuaishou, etc. have shaped today's industry landscape through repeated battles and fights.

Starting from around 1998, there was a portal period of nearly 10 years. Sina, Sohu and NetEase were the three peaks of this period, gathering the largest number of Internet users and occupying half of the online advertising market.

In the second decade that followed, three major battles broke out in the Internet, which some industry observers called three "land grabbing movements."

The first land grab triggered the search war. During this period, Tencent and 360 developed their own comprehensive search engines, Google failed, and Microsoft Bing never entered the center of the battle. The winner was Baidu, which firmly controlled the PC traffic entrance. In 2011, its market value reached 46 billion US dollars, becoming the Internet company with the highest market value in China at that time.

The second land grab was the battle for the entrance to the mobile Internet. With the popularization of smartphones, the mobile Internet was divided into isolated information islands, and each app wanted to become an independent kingdom that could meet all the needs of users. The biggest winner was Tencent. WeChat was the first national-level app, and Zhang Xiaolong helped Ma Huateng secure the first ticket to the mobile Internet era. Behind WeChat, the other top 5-10 apps together accounted for more than half of the time users spent on their mobile phones.

The third time was the battle of algorithms. ByteDance attacked everywhere, with Zhang Yiming and Ma Huateng quarreling with each other in WeChat Moments and provoking the "Toutiao-Tencent War" as a representative event. ByteDance has had fierce clashes with major companies such as Baidu and Alibaba. The user time of Toutiao and Kuaishou has increased significantly during this period. "Algorithm + content" is the key weapon in this battle for supremacy.

Tencent, Baidu, and Byte all have their own weaknesses and growth demands. After all, the nature of capital is to expand and proliferate. All previous Internet wars have been life-and-death games around portals and traffic. In the era of stock games, if you want to grow, you can only snatch it from the other side.

As traffic has reached its peak, good projects in important tracks are rare. Early layout and betting on the hot spots are not only the key to determine the returns of VC investment institutions, but also the Shura field for Internet giants to compete with each other. The purpose of large companies' overseas investment is not only for financial returns, but also to build their own ecosystem to improve competitiveness. The latter is more important than the former.

But what is confusing is, can this kind of large-scale investment that bets on all the top unicorn companies in the field really buy a future?

Counterexamples abound.

Tencent once invested in Douyu and Huya at the same time, but the two brothers fell behind by more than an order of magnitude under the shadow of the later-emerging Douyin and Kuaishou. Baidu once acquired 91 Wireless for $1.9 billion, hoping to seize the entrance traffic of the mobile Internet. But then major mobile phone manufacturers began to develop their own app stores, and 91 Wireless withdrew from the stage of history four years later.

Throughout these three battles, Baidu, Tencent and ByteDance have taken turns to become the king through search, social networking and algorithms. Although Alibaba's e-commerce business has also successfully transformed to mobile Internet, it is still the one that lacks traffic the most.

What are the biggest traffic sources? Social and information.

The former is in the hands of Tencent, and the latter is in the hands of ByteDance (in the PC Internet era, it was in the hands of Baidu).

Artificial intelligence is considered to be a technology comparable to printing, electricity and computers, and it will bring about the fourth industrial revolution. No company wants to stand on the top of the wave. Alibaba's ambition and anxiety are understandable. It is investing in "top-notch" companies while increasing its efforts to develop large models. Although it has tried hard, it still cannot solve the core problem of the first three industry melees: where does the traffic come from?

If this problem is not solved, it is difficult to prevent "accidents" like WeChat Pay surpassing Alipay and Pinduoduo's market value surpassing Alibaba from happening again.

This may be Ali's real "Achilles' heel".

Cover image: Wenxinyiyan