Is WeChat’s ability to directly complete Taobao shopping just the beginning of ecological integration?

Recently, the interaction between WeChat and Taobao has attracted widespread attention from the market. WeChat users can now access Taobao links and complete shopping directly within the app. This change is not only the beginning of cooperation between the two companies, but may also herald a broader trend of ecological integration.

On September 27 this year, Taobao took the lead in making relevant changes, from only being able to use Alipay for payment to also supporting the use of WeChat for payment.

Later, on October 10, after the National Day, WeChat App opened the internal link of Taobao. You can directly click on the Taobao link in WeChat to complete the order and payment, without even jumping back to the Taobao App. You can even go further and directly visit the Taobao homepage through WeChat. However, only WeChat payment can be used under this link. If you need to use other payment methods, you still need to complete it in the Taobao App.

In addition, Alibaba has also made an ice-breaking move with JD.com, a competitor in the e-commerce field. Recently, there are reports that the two sides have reached an agreement on cooperation in logistics and payment. Taobao Tmall will soon be connected to JD Logistics, which is expected to be launched in mid-October. After that, Taobao merchants can choose JD Logistics as the delivery method in the system. At the same time, JD.com will also be connected to Cainiao Express and Cainiao Post. In terms of payment, JD.com will also be connected to Alipay, which is expected to be launched before Double 11.

In fact, compared to this in-depth cooperation, in the past 10 years or so, closedness has been the norm for the Internet. If we go back to an earlier time, we will find that with the extension of business tentacles, the criss-crossing ecosystems built by Internet giants, and walled gardens have gradually become the new cornerstone of the Internet ecology.

1. Walled Garden

Specifically, in the Chinese Internet field, the starting point for the walled garden to be widely perceived by users was precisely Taobao. On September 8, 2008, Taobao officially blocked Baidu's search service for it, which meant that users would not be able to search for relevant information within Taobao on Baidu. Subsequently, the three giants at that time began to completely separate their respective ecosystems, until the famous "3Q War" in 2010 and the "3B War" in 2012, which further pushed the walled garden to the public.

With the advent of the mobile Internet era, walled gardens have not died down, but have become more and more intense. The only difference is that compared with the information blockades in the past, the "bans" at this time are almost all concentrated in the payment field and external link sharing.

Of course, the most typical example is Tencent and Alibaba, which have shaken hands and made peace today. Since August 2013, Taobao said that WeChat had closed the WeChat public account for Taobao products and merchant marketing, and at the same time cut off the data interface from Taobao WeChat. Since then, the two sides began a round of mutual bans, which continued until 2021.

Of course, in addition to these mutual bans floating on the surface, data, as the most important asset of digital marketing, is hidden underwater and is the key link of mutual closure. Around 2019, as digital advertising began to move from the early simple package sales of traffic to the pursuit of ROI and back-end operation, almost all digital advertising suppliers interviewed by Morketing at that time talked about a similar key - solving data silos.

When Morketing interviewed a senior industry practitioner before, the other party once said that when mobile Internet first emerged, many PC advertising technology companies also tried to switch to mobile, but at that time, it was difficult to say that the transformation of most companies was completely successful. After all, compared with the PC side, which can collect data across platforms in a variety of ways to complete the precise delivery of advertisements, it is not easy to implant SDK in mobile apps to complete data collection.

In general, in 2021, when the Ministry of Industry and Information Technology launched a special campaign to regulate the Internet, a large number of editorials bluntly stated that blocking external links and so-called walled gardens is essentially to use its own monopoly traffic advantage to achieve the purpose of resisting and restricting competition, thereby maximizing commercial interests. As Neil Weinstock Netanel, a professor at UCLA University, said, the focus of discussions on "walled gardens" is often more on "walls" rather than "gardens."

2. Ecological Integration

Of course, the building of a wall is not a one-day job, and the same is true for its demolition. But it is undeniable that ecological integration is obviously an inevitable trend, both from the perspective of supervision and from the perspective of the development of the Internet platform itself.

To some extent, this cooperation between Tencent and Alibaba was foreshadowed. As early as July 14, 2021, Alibaba and Tencent revealed that they might complete an open ecosystem between the two parties. Although from now on, the reason why the two parties chose to reveal such a signal at that time may have been largely based on the regulatory pressure of the special rectification campaign that year.

But it is undeniable that even with just one piece of news, the capital market at the time showed strong recognition. Alibaba rose by more than 2% that day, and Tencent closed up 1.53%.

But in the past three years, a large number of cooperations were almost just rumors without actual actions. However, as the competition landscape changed, Alibaba once again became the first to take action.

On the one hand, for Taobao, Alibaba urgently needs to consolidate its position through strategic shift, especially in the face of Pinduoduo's rapid catch-up. In his first letter to all employees after taking office in September last year, Alibaba CEO Wu Yongming said that Alibaba will take user needs as the starting point and seek the widest possible openness and cooperation, including companies with traditional competitive relationships.

On the other hand, on August 30, the State Administration for Market Regulation personally stamped Alibaba's completion of three years of rectification. The e-commerce giant, which once received a sky-high fine for its "choose one of two" monopoly behavior, needs some practical actions to prove this transformation to the market.

The market still holds a positive view. After the two parties reached a practical cooperation, several investment banks such as Morgan Stanley and Goldman Sachs quickly released relevant research reports, and also believed that this move would be a win-win move.

Of course, we can also use a more specific statement. From the perspective of consumers, according to the research reports of major investment banks, on the one hand, the current penetration rate of WeChat in the lower-tier cities is relatively high, which can largely support Taobao's entry into the lower-tier cities. On the other hand, for the elderly, most of them are also accustomed to using WeChat payment. In general, this move is more about Taobao's hope to use the capabilities of WeChat payment to further enter the lower-tier cities and the elderly before the Double 11 in 2024.

According to Morketing's inquiries to relevant stores, some of them clearly stated that after the payment and internal links were opened up, the number of customers in the 50-60 age group has indeed increased in a physical sense.

Going further, in addition to these intuitively perceived collaborations, the ecological integration of the Internet in the future may further penetrate into the deep waters of the past. After all, today's Internet environment is already different from the pattern of early Internet staking out territory.

Compared with the past, when platforms were able to gain sufficient competitive advantages through monopolizing traffic and ecology, in today's market structure, platforms that rely mainly on advertising revenue may find it difficult to rely on walled gardens to make profits. As the marketing environment becomes more and more complex, a single platform will have certain limitations at all levels, especially with the gradual development of digital technology. As platforms are unable to solve all problems in the consumer journey, openness will become a major trend under safe and compliant conditions.

For brands, they need to find new growth points, and so do platforms. In fact, as early as 2023, when Morketring interviewed the person in charge of an e-commerce platform, the other party said that in today's Internet environment, if we want to better solve what we now call on-site and off-site, as well as brand and effect, including solving some marketing concentration, accuracy, and user sinking assets, sedimentation, new users and other problems, it is difficult to solve them through a single product or platform. Instead, it requires better coordination between upstream and downstream to meet consumer needs in various scenarios.

Specifically, today's walled gardens are mostly for closed-loop traffic operation services. Although this means that the platform can deeply apply data capabilities, it also means that in the process of user reach, the platform's understanding of users and the total amount of traffic are relatively limited. If you want to reach people outside the walled garden, cooperation is an inevitable option.

Going further, compared to the past when people paid more attention to performance indicators such as ROI, today's advertising has been constantly postponing the assessment link. This means that in the subsequent attribution analysis, advertisers hope to have a more three-dimensional view of their consumers before, during and after the advertising, and to have a three-dimensional insight into consumers. At the same time, with the gradual integration of brand and effect, as well as the desire of advertisers to coordinate the brand marketing department and the e-commerce marketing department, it will naturally pose new challenges to the capabilities of a single platform.

In short, for digital marketing nowadays, returning to the consumer has become an increasingly important thing. But obviously, it is difficult to gain a three-dimensional insight into consumers from the perspective of a single platform, especially when consumers are outside the walled garden.

3. Conclusion

In general, although the actual significance of interconnection has not yet been revealed, its symbolic significance has already played a role. The same is true from the perspective of stock prices. After the news came out on September 26, JD.com's stock price rose by more than 10%, Alibaba's stock price rose by more than 7%, and Tencent's stock price rose by about 6%. It is undeniable that the truce embrace of the giants has made the market begin to look forward to the changes in the new environment after all parties move towards cooperation under the anxious atmosphere of traffic peaking.

Of course, breaking down the walls of “banning” and payment may only be the first step. For most practitioners in the digital marketing industry, perhaps what they are more looking forward to is whether the subsequent deeper integration can bring more new possibilities to digital marketing.

By Innocent Roland
This article is written by the author [Morketing] of Operation Party, WeChat public account: [Morketing]. It is originally created/authorized to be published on Operation Party. Reproduction without permission is prohibited.

The title image is from Unsplash, based on the CC0 protocol.