Alibaba Group Holding Ltd is again challenging rival Tencent, this time for control over the “red packets” that Chinese people usually exchange on special occasions, including the Lunar New Year.
Last year Tencent introduced an application that enables its users to send virtual red envelopes to loved ones as the company attempted to upgrade the tradition of giving money during holiday periods.
However, this year Alibaba is looking to take away a share of the mobile payments as it recently launched a similar application that is linked to its Alipay system, which was released in 2004.
Both companies are looking to solidify their positions and increase their market share in internet finance, which is growing rapidly in China. Being dominant in the area would also reflect on the companies e-commerce and social network businesses.
The companies launched massive marketing campaigns in order to encourage consumers to use their payment applications when sending the traditional hong bao.
The electronic version of the age-old tradition has many advantages over bank transfers, including lower fees and no waiting time, and is quickly gaining popularity among Chinese consumers.
The market is also proving to be very lucrative, sparkling ferocious battle between the technology giants.
Alipays mobile application was intended to allow its users to send the red envelopes with one click through Tencents dominant WeChat, with over 600 million user, and QQ messaging applications.
However, in less than 24 hours Tencent removed that option, outlining efforts to increase it share in the mobile payment market, which at the end of September stood at 10% versus the 83% of Alipay, according to research group iResearch.
Additionally, Tencent banned Alibabas music application Xiami from WeChat.
Despite, Tencents efforts Alibabas developers quickly changed the application so it could allow transfers to be authorized by passwords send through WeChat.
Through its lottery-like holiday campaign Tencent has promised to hand out RMB 800 million in cash distributed as red envelopes, while Alipay said it would give away RMB 600 million during the ten-day period.
Estimations by iResearch also show that RMB 6 trillion were processed by third-party mobile payment solution companies in 2014, more than five times the amount in the previous period.
Alibaba lost 2.47% on Tuesday and closed at $86.85 in New York, marking a 7.60% decrease since the companys record IPO. The company is valued at $221.84 billion. The stock edged up 0.14% to $86.97 at 10:54 GMT during pre-market trading.
According to the Financial Times. The 34 analysts offering 12-month price targets for Alibaba have a median target of $112.50, with a high estimate of $136.00 and a low estimate of $72.00. The median estimate represents a 29.53% increase from the last closing price.
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