BAT (Baidu, Alibaba, Tencent) + ByteDance – Tech- Giants in China (Part 1)

BAT (Baidu, Alibaba, Tencent) might be the three best-known tech companies in China from the perspective of the Western world. Three to four years ago, most of us believed that no one could challenge BAT in China and that BAT’s dominance would continue for a very long time. Who could have imagined that ByteDance would emerge as the number-three tech company in China? In this post, I’d like to compare the business model of BAT and delve deeper into ByteDance’s business model.

Market Cap

It’s pretty clear that Baidu is lagging behind the two other BAT giants. At the end of 2018, Baidu’s market cap was around $100bn. Many other tech companies have a higher market cap than Baidu, including ByteDance. Why did Baidu lose its competitiveness against the other two?

Business Model

It’s very interesting to see that both Tencent and Alibaba don’t rely much on ad revenue. The most successful tech companies in the US, such as Google and Facebook, derive over 95% of their revenue from advertising.


Baidu’s core business is very similar to that of Google. For a very long time in China, Baidu has had the number-one share in the search business. As a result, most of Baidu’s revenue comes from search ads and display ads. Baidu owns the majority of iQIYI, which is like Hulu in the US. In addition, Baidu has business units working on AI (the most famous one is called Apollo – Autonomous Driving Tech) and Baidu Cloud.

Google has an undeniably dominant presence as a tech company. How can Baidu’s decline in recent years be explained? There might be a few reasons.

  • The large amount of internet traffic did not start with search in China. Similar to the situation with Amazon in the US, most Chinese internet users start their shopping activity directly from Taobao or other e-commerce websites. This behavior is pretty common for news, video, games, and other categories as well. As a result, the relative importance of search in China is low.
  • Baidu had multiple very bad PR crises over the course of the year. Baidu has a very strong sales culture which led them to advertise something they shouldn’t have advertised. At one point, over half of its advertising revenue was from questionable private clinics and hospitals. In addition, Baidu is notorious for changing the search rank based on the ad revenue from each client. This significantly impacts consumers’ trust in Baidu.
  • Baidu’s business model has not changed much over the last 10 years. Lots of people blame Robin Li (CEO/Founder of Baidu) for this matter. In the last 10 years, Tencent grew WeChat into the biggest social platform in China. Both Alibaba and Tencent have a very large presence in the payment space. Tencent is making a good effort to grow its revenue internationally.


Tencent is best-known for WeChat, its flagship communication tool in China. However, its business is far more complex and well positioned than that of Facebook.

Tencent started its business by launching a PC app called QQ. It was a direct copy of ICQ, a popular PC chat application at that time. QQ quickly became the number-one PC chat app in China. Interestingly, Tencent let Allen Zhang create WeChat and disrupt its own QQ. Allen Zhang joined Tencent from the acquisition of Foxmail.

Social platforms come and go. Tencent tries hard to reduce its dependence on the social platform business. It grew its gaming business to become the biggest in the industry. It’s far bigger than Microsoft, Sony, and Nintendo. Over 30% of the gaming business comes from markets other than China. In China, Tencent also operates the largest platform to play and download games in the absence of Google Playstore. Tencent charges the average game developer a 70% to 90% fee for publication of their game on the Tencent platform.

Tencent is also a very sophisticated strategic investor. It is the first big tech company in China to set up a formal fund and team to invest in start-ups across the globe. By the end of 2019, Tencent had invested in more than 700 companies, including 122 unicorns. Many successful tech companies (JD, Dianpin, PinDuoDuo, Nio, etc.) in China are partially owned by Tencent. It certainly helped Tencent to develop strong partnerships with these companies and reinforce its Tencent ecosystem.

By leveraging WeChat, Tencent has also built a huge Fintech business—as big as Alipay of Alibaba in China now. In China these days, it’s very rare to see anyone uses cash to make a payment. Almost all payment transactions are handle by either Alipay or WeChat Pay. 


Alibaba’s business is the most similar to Amazon. The majority of its business is e-commerce. The biggest difference is that Alibaba is mainly a platform for third-party sellers. The third-party ratio has been increasing on Amazon, though it’s still only about 50% of Amazon’s business.  

Alibaba also doesn’t have its own logistics service. Alibaba built a company called Cainiao, of which Alibaba owns 63%. The rest is owned by the major logistic companies in China. At this point, most of the logistics players are part of Cainiao. Alibaba accounts for over 80% of all packages in China. As a logistics company, it has no option but to join Cainiao. Alibaba helped Cainiao introduce an automated warehouse (similar to Kiva) and a data platform to manage all transactions. Cainiao’s goal is to deliver any packages within 24 hours in China.

Similar to AWS, Alibaba Cloud is the leading cloud computing service in China (close to 50% of the market share).

Another interesting similarity between Amazon and Alibaba is their culture. Both Amazon’s and Alibaba’s core management team members have over 20 years of tenure and are very loyal to the company. Jack Ma built a Wuxia (Chinese martial heroes)-oriented culture, which is very challenging from a Western investor’s point of view. For people who want to learn more about Alibaba’s culture, I recommend watching “Crocodile in the Yangtze”. Director Porter Erisman was a VP at Alibaba from 2000 to 2008. Jack Ma had 18 co-founders. None of them had any impressive professional and academic background—including Jack Ma himself. It’s very impressive that, to date, some of them are still leading Alibaba.

In the next blog post, I will do a deep-dive into ByteDance.

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