Alibaba is an Asian giant, Flipkart is holding off Amazon in India and Yandex wins out over Google in Russia. Control over the web is not just about trade
di Simone Pieranni
When discussing the current scenario in the digital world, and the internet in general, in China, it’s necessary to begin with some particular facts. Today in China at least 800 million people connect to the internet. Of these, the overwhelming majority access the web via a smartphone. But “accessing the web” in China now has a very specific meaning: it is understood as using the most widespread application, Weixin, which we in Europe know as WeChat.
The app was launched in 2001 by Chinese tech colossus Tencent, which a few years earlier had created the QQ messaging service that in just a short time became the favoured messaging system of Chinese netizens. QQ was very similar to Microsoft’s Messenger that was used in Italy, especially at the end of the 1990s. When WeChat was launched on the market, however, almost no one in the West took much notice. In China on the other hand, it immediately began to gather momentum as more and more people signed up to use it. At the beginning of its life, WeChat appeared merely to be an app comparable to WhatsApp: for text and vocal messaging, chat groups plus the possibility to post like on Facebook.
In 2013 the number of its users grew to 300 million. At that point Tencent began to fine-tune its strategy. WeChat, today, is, in fact, a super-app, an app within which other apps began to spring up. With WeChat it is possible to book flights, meals in restaurants, medical appointments, massages, it’s possible to deal with bureaucratic matters, pay tax and in some Chinese regions it serves as an ID document. It all takes place within WeChat, a world capable of forcing everyone else to create apps within the WeChat “mega-app”.
In order to reach this point the decisive moment occurred in 2013. WeChat, for Chinese New Year, allowed its users to send virtual “red envelopes” – the traditional envelopes that are sent as an end of year gift by the Chinese – by enabling users to connect their WeChat profiles to their bank accounts. Millions of virtual red envelopes were sent but, more importantly, in the space of just a few hours 5 million people connected their WeChat wallets to their bank accounts. Jack Ma, boss of Alibaba and up until that moment the king of online payments with his Alipay platform, defined WeChat’s red envelope marketing promotion a “Pearl Harbour attack”.
This event marked the turning point in the rise of WeChat: today whoever you may be, in China you need to install WeChat because the app enables you to do everything. WeChat, moreover, through the app and above all through the possibility to pay for any service, not only online but also offline, has demonstrated an extraordinary capacity to capture data: today this is fundamental for user profiling and for designing with ever greater accuracy apps based on users’ needs. Guru of Chinese artificial intelligence, Kai Fu Lee, has often described China as the “Saudi Arabia of data”. And thanks to WeChat, Chinese data is not only abundant, it is also high quality because along with the registration of people’s online behaviour (likes, posts, videos, photos, navigation tracking and eventual online purchases) it also tracks users in their offline existence: if they book a holiday, buy train tickets, book a sauna, pay to rent a bicycle, send money to friends or take part in events in large shopping malls. In China there are vast quantities of data and what’s more, this data is much more useful for consumer profiling as it is not limited solely to users’ virtual lives. In Shenzhen, in the south of China, for example, you can even receive your driving license on your WeChat account. WeChat has become a world with many other worlds within it, a gateway to services, not just for the consumer but also for companies, managing a million business transactions each minute. Around the world it has almost a billion accounts, a number significantly higher than the total number of web users in China.
In Europe, however, WeChat has chosen to leave the consumer market to WhatsApp in order to specialize in the business-to-business sector. The services for companies mirror those for Chinese consumers in their ability to reflect the app’s guiding philosophy: to serve as a gateway to the world. So far WeChat has been very successful, it has generated a lot of money and is ensuring that WeChat is the de facto gateway for Chinese users to access online services.
WeChat is now so essential to people’s lives in China that even the Communist Party has had to develop a policy concerning its use by party functionaries. The CCP, well aware that its own staff use the app also to express their own ideas about what’s going on in the world (WeChat also has functions comparable to those of Facebook, Twitter and Instagram) decided to publish guidelines in October 2018 for party functionaries about what they can and can’t do on WeChat. The punishment in the case of improper conduct is severe: expulsion from the party.
di Stefano Grazioli
At the end of 2017, Vladimir Putin launched the idea to create, together with other BRICS countries (Brazil, Russia, India, China and South Africa) their own root name servers – intermediary domain name system (DNS) servers for denoting web addresses. These would bypass having to use the 13 existing name servers that are currently monitored by independent bodies such as ICANN (International Corporation for Assigned Names and Numbers). Putin explained that the goal is to create a sort of “independent internet” no longer controlled by the CIA but by others – the others being the FSB, Russia’s Federal Security Service and their BRIC counterparts. At the end of 2018 this idea seems to have disappeared from sight, in a striking similarity to the plan to de-dollarize the Russian economy regularly claimed by some in Moscow to be just around the corner, however, in reality the project is a chimera.
The question of control of the net and, more generally, of digitalization in the country, remains a key issue during Putin’s fourth term as president that concludes in 2024. Busy on one hand with the management of a sluggish political system, on the other is the digital economy, an area in which Russia can ill afford to be left behind by those countries racing ahead, such as the US and Sweden. Worth noting is that the Russian digital economy too revolves around the usual oligarchs and can grow only if the administration and the bureaucracy manage to avoid throwing spanners in the works. Corruption, though rampant, does not pose a problem from this point of view. What’s clear is that in Putin’s Russia, where there is very little glasnost (transparency) and the digital perestroika (reconstruction) is barely beyond the embryonic stage (Russia sits in 40th place in the IMD Competitiveness Ranking 2018), tech giants do exist and offer a domestic counterweight to the huge global power of GAFA.
Yandex, for instance, was founded one year before Google and today boasts a larger slice of the Russian market than its American competitor. One of its two founders, Arkady Volozh, who a couple of years ago became a citizen of Malta, is still CEO of the company that went public with a share offering on Wall Street in 2011. Today Yandex is worth more than 12 billion dollars. Well behind Yandex are the Mail.ru Group and Vkontakte, the equivalent of Facebook. A significant stakeholder in both companies is oligarch Alisher Usmanov, who this year ceded control when he was added to the US sanctions list in response to the Russia-Ukraine crisis. Holding the fort, so to speak, are Dmitry Grishin and Yuri Milner, the latter ranked number 40 in the list compiled by Fortune in 2017 of the World’s Greatest Leaders (a list that does not include Putin). A good friend of Mark Zuckerberg (he has invested hundreds of millions of dollars in Facebook), Milner is a very global player, as is demonstrated by his two billion dollar alliance with Jack Ma of Alibaba for a new e-commerce platform in Russia. Behind the two giants of Yandex and Mail.ru are companies such as Avito, Wildberris, Lamoda, and Ozon, which are growing and transforming the Russian digital market along similar lines to the changes in the West.
di Matteo Miavaldi
In the 2013 book An Uncertain Glory: India and its Contradictions, economists Jean Drèze and Amartya Sen described India as “islands of California surrounded by a sea of Sub-Saharan Africa,” to illustrate the disparity that today still separates the vast rural majority from the well-to-do urban elites. It is precisely this archipelago of the well off that in recent years has attracted the attentions of GAFA (Google, Apple, Facebook and Amazon), which have achieved various levels of penetration of the country’s already substantial market.
India already has the world’s most Facebook users (almost 300 million, ahead of the USA that has just over 200 million). The social media platform is enjoying constant growth thanks to the ever-faster spread of smartphone use in the country, estimated to reach a rate of 40% of mobile phone users by the end of 2019. This latter development means that next year almost one in two Indians will be a potential client of the online retailing that is transforming the global consumption companies.
This data has led Jeff Bezos to take an ambitious gamble on the growing Indian market, making investments worth 5 billion dollars with the aim of cannibalizing the local competition in the sector of e-commerce. The risk seems to have paid off. Amazon, according to a recent report by Barclays, last year exceeded the revenues of its direct local rival Flipkart, closing with gross sales of 7.5 billion dollars compared with Flipkart’s 6.2. But for the colossus from Seattle this is not enough. Amazon intends to hire a further two thousand staff, half in the tech sector, half non-tech, in order to increase its coverage of Indian national territory. The aim: to monopolize the swathes of the country that connect the hundreds of Indian Californias that, slowly but surely, are eroding the immense basins of poverty that surround them, and more importantly, to do this before the Chinese Alibaba, already a dominant power on the continent.
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