Tencent Lets WeChat Users Buy Online Amid Alibaba Block

Aug. 6 (Bloomberg) --Tencent Holdings Ltd. (700), China’s biggest Internet company, yesterday began allowing its WeChat users to make online payments, less than a week after Alibaba Group Holding Ltd. said it blocked the messaging app.

Users in mainland China -- which excludes Hong Kong, Macau and Taiwan -- can buy goods as well as virtual items on games, said Jerry Huang, an investor relations director for Tencent in Shenzhen. Accounts abroad will be limited to buying animation stickers, he said. WeChat has more than 300 million users with those registered outside of mainland China exceeding 70 million.

Tencent is counting on the chat application as it challenges online mall operator Alibaba for dominance over Internet retail in China, which McKinsey & Co. estimates will triple to $395 billion from 2011 to 2015. Alibaba, which is heading toward what may be the biggest initial share sale since Facebook Inc., has been buying stakes in mobile apps as users spend more time and money on smartphones and tablets.

“Online games and e-commerce are both very important as it is a new source of growth,” said Ricky Lai, an analyst at Guotai Junan International Holdings Ltd. in Hong Kong. “This will help Tencent compete against Alibaba.”

Photographer: Tomohiro Ohsumi/Bloomberg

WeChat has more than 300 million users with more than 70 million registered outside of mainland China. Close

WeChat has more than 300 million users with more than 70 million registered outside of mainland China.

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Photographer: Tomohiro Ohsumi/Bloomberg

WeChat has more than 300 million users with more than 70 million registered outside of mainland China.

Tencent rose 1.2 percent to close at HK$375.60 in Hong Kong trading, reversing from an earlier decline, as the Hang Seng Index dropped 1.3 percent. The stock has gained 51 percent this year, compared with a 3.2 percent decline for the benchmark.

Internet Juggernaut

Closely held Alibaba, China’s largest e-commerce company, hasn’t kept up with WeChat, billionaire Chairman Jack Ma said in March, even as his Internet juggernaut started developing its mobile business three years ago.

Still, Tencent’s profit growth will probably be slower than the average of the previous five years, according to the average of analysts’ forecasts and data compiled by Bloomberg.

WeChat offered its latest version on Apple Inc. (AAPL)’s app store yesterday, Huang said. The Android version isn’t available yet, he said in an e-mailed statement yesterday.

The instant-messaging system, which allows users to send text, images or audio messages, was introduced by Tencent in January 2011. The audio message function is similar to an application from WhatsApp Inc. WeChat’s photo-sharing function called “Moments” operates with a timeline and cover-photo layout similar to that of Facebook Inc.

Alibaba on Aug. 1 said it blocked sellers’ access to WeChat, citing security reasons. Shoppers have instead been offered to log on to the Taobao Marketplace using their Weibo accounts.

Some sellers on Alibaba tried to steer transactions away from its Taobao Marketplace and Tmall.com platforms, and disturbed customers through promotions on WeChat, Alibaba said in an Aug. 1 statement.

Alibaba agreed to buy a stake in Sina Corp.’s Weibo unit in April. About 76.5 percent of the 49.8 million daily active users of Weibo accessed the service through mobile devices in March, according to an earnings call in May.

To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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