In the script of interoperability, businesses are merely supporting characters.

Author|Wang Chi

Editor|Yang Zhou

Three months into interoperability, big tech firms tasted the first sip of growth in the era of stagnating user base.

First, on November 13, during Tencent's earnings call, regarding interoperability with Taobao, Tencent responded that this collaboration would enable them to generate more revenue from payments, while Taobao could achieve higher user conversion rates, and users would have more payment options.

According to broker estimates, if WeChat Pay achieves a 20% penetration rate on Taobao platforms, charging a fee rate of 0.4%-0.5%, WeChat could collect approximately RMB 6.8-8.5 billion in transaction service fees. For this reason, Tencent executives stated that it would take some time to observe the ultimate impact of this strategic collaboration and were currently "very satisfied" with the results.

Then, on November 15, during Alibaba's earnings call, discussing interoperability with WeChat, Wu Yongming stated, "After the collaboration is established, we believe there is still considerable potential for growth in the platform's user base, which will significantly boost the platform's monthly active user growth."

Regarding this collaboration, Wu Yongming said, "This requires medium to long-term investment and must be aligned with our user growth strategies. We hope these users will stay on our platform. Our goal is for these retained users to increase the platform's GMV market share."

As a traffic channel, Tencent was the first to receive tolls; as an e-commerce platform, Alibaba was the first to benefit from traffic dividends. Both agree that greater commercial potential requires time to materialize. Compared to Alibaba and Tencent's interoperability, which drives user acquisition growth, JD.com, which opened up logistics cooperation with Alibaba, did not reap significant surprises from this collaboration.

During JD Logistics' earnings call on November 14, discussing this collaboration, JD Logistics executives believed, "Currently, the first wave of growth on Taobao does not stem from an increase in shipping customers but rather from businesses hoping to outsource their Taobao operations to us. Previously, they could only outsource Douyin and other platforms to us; now, Taobao can also be outsourced to us. This is a process of increasing ARPU for existing customers and does not require additional integration as we already have contracts in place."

Regarding new customer growth, unlike the natural growth from Alibaba and Tencent opening the floodgates, JD Logistics still needs to compete based on its strengths.

JD Logistics stated that future growth potential primarily comes from customers who have not previously used JD Logistics, and they will reach out after Singles' Day. Revenue will increase significantly, but the figure should not be substantial. They are confident in rapidly increasing penetration and effectively capturing market share.

Different dividend opportunities indicate that, although all are forms of interoperability, collaborations vary based on each platform's resource endowments.

A collaboration between equals is a powerful alliance; one where one party seeks favors from another is called sycophancy. JD Logistics' concerns are similarly shared by Alibaba. Enabling WeChat Pay may seem like a win-win collaboration, but as the weaker party, Alibaba must also bear more of the aftermath of interoperability.

01 Campaign-style Interoperability

'Enabling WeChat Pay was almost forcibly pushed through by Taobao.' According to Taobao merchant Zhang Xun, WeChat Pay was inexplicably enabled three days after the announcement. 'Once enabled, it cannot be disabled. I never had a choice from start to finish.' In response, Taobao told merchants that as a basic platform function, WeChat Pay cannot be disabled.

Under the rhythm of interoperability where merchants have no choice, Taobao's integration with WeChat Pay was astonishingly fast. On September 4, Taobao and Tmall issued a public consultation announcement; then, on September 12, Taobao announced that WeChat Pay would gradually be opened to all sellers; subsequently, over 90% of Taobao and Tmall merchants supported WeChat Pay starting from September 27.

For comparison, the merchant AI management tool Full site promotion , released in April this year, currently has a penetration rate of about 10% and plans to reach 30% within the next year. This core function of Alibaba's commercialization underwent a three-month testing period during its promotion and was officially launched in full volume in July.

Taobao's integration project with WeChat Pay was undoubtedly a campaign-style interoperability effort. However, while rapidly enabling WeChat Pay brought more potential new users to Taobao, it also harmed the operational autonomy of small and medium-sized enterprises.

In the past, the interoperability between Tencent and Alibaba has always been shrouded in the aura of the antitrust era. However, in the view of Jiao Haitao, a professor at the School of Civil and Commercial Law and Economics, China University of Political Science and Law, based on the main boundaries of interoperability clarified from global related cases and domestic platform anti-blocking practices, interoperability between giants is not necessarily an outcome of antitrust to a certain extent.

He pointed out that interoperability is primarily an obligation for large internet platforms, representing their interoperability with small enterprises. It is neither ecological openness between large enterprises nor a requirement for small enterprises. Interoperability is mainly about the interoperability between complementary products and should generally not impose requirements on the interoperability between substitutes, as this may harm the operational autonomy of enterprises.

From an antitrust perspective, the main purpose of interoperability is to foster competitors, weaken the network effects possessed by large internet platforms, lower market entry barriers, and thereby encourage more small enterprises to enter the platform economy and participate in market competition. Interoperability is mainly manifested in the acceptance of small enterprises by large enterprises, meaning that large enterprises should not refuse when small enterprises make requests. Whether small enterprises interoperate with others is up to their own decision.

From this perspective, the current ecological openness between Alibaba and Tencent may not be the primary content of interoperability. Interconnectivity between large platforms is merely a conspiratorial growth game. Under this efficiency of interconnection, Taobao also gained many new users before Singles' Day.

A report from QuestMobile shows that in the month when Taobao announced support for WeChat Pay, the number of newly installed app users increased by 55% year-on-year, reaching the highest level in the past four years. Based on the compound annual growth rate over the past six years, Taobao's monthly active users are expected to increase by 82.17 million next year, with the total monthly active user base expected to exceed 1 billion for the first time.

02 Poor Experience with Payment Interoperability

Whether campaign-style interoperability driven by platform willpower can bring new growth dividends to businesses is still unknown, but it has caused many operational troubles for them.

'Money received through WeChat Pay cannot be directly used; it goes to the aggregated account on the Qianniu platform and requires card binding for withdrawal. The card-bound account needs to match the business entity, but I registered my Taobao store using a friend's entity a long time ago, so it's difficult to withdraw money from this account now,' complained Wang Xin.

When the strict regulations of WeChat Pay meet the lax management of Taobao, the conflict between these two management systems becomes a new problem for businesses to solve. In the eyes of some payment practitioners, the integration of the Taobao ecosystem with WeChat Pay can only be considered a half-finished project.

From a complete product logic perspective, payment tools can be divided into two ends. One is the consumer-facing front end, where customers place orders and complete purchases, requiring interaction and page jumps to respective payment platforms to complete payment. The other is the operator-facing back end, which constructs different systems or digital mid-platforms to adapt to front-end presentations based on different channel requirements.

Taking Pinduoduo, which supports both WeChat Pay and Alipay, as an example, in terms of the back-end business operation experience for merchants, funds from both payment channels are unified management ed in the Duoduo Wallet. Meituan also has a similar aggregated wallet mechanism. Unlike platforms that natively support both payment methods, Taobao currently manages funds from its two payment channels separately.

Regarding the back-end business operation experience for merchants, after enabling WeChat Pay, funds from the WeChat channel cannot be used for store operations, and income and expenditure statements are not interoperable with Alipay. This functional limitation, which only allows for collection and withdrawal, inconveniences business operations and significantly diminishes the significance of interoperability.

What causes this current situation? On the one hand, it may be due to the lack of testing and verification between WeChat and Taobao's interoperability, which Directly enter the full openness phase, leading to issues arising from campaign-style interoperability.

For comparison, JD Logistics' interoperability, which underwent longer negotiations, ultimately achieved the following experience: The front end ensures consumers have a faster and higher-quality shopping experience, while the back end requires JD Logistics to open up full-chain merchant data to Alibaba, including fulfillment timeliness analysis data, logistics cost analysis data, etc., realizing fully integrated cooperation between front and back ends.

Besides the difference in timing, the more significant reason may be Taobao's weaker position when collaborating with WeChat Pay.

Discussing this collaboration with Taobao, Tencent executives revealed in the latest earnings call, 'What may not be immediately apparent is the considerable effort we put in to ensure user experience is not compromised. For example, to prevent merchants from over-promoting and spamming, we made many adjustments in design and agreements. Additionally, in terms of compliance, we ensured all merchants went through compliant onboarding processes.'

From the final outcome, in this negotiation on interoperability collaboration, WeChat may have gained a greater say.

03 Altered Projects Amid Intensifying Growth Competition

Where there is collaboration, there will be a battle for the right to speak.

However, when the struggle for the right to speak becomes dominant, big tech's 'wall-breaking' negotiations evolve into each platform holding something back from the other. This aftermath of interoperability, rooted in competitive logic under a growth mindset, is not about breaking thinking inertia for interoperability.

When growth is the enterprise's anchor goal, it can either promote interoperability in a campaign-style manner or form greater monopolies.

When news of Alibaba and Tencent's ecological interoperability was announced in 2021, China's two leading SaaS e-commerce platforms, Weimob and Youzan, immediately entered a 'plunge mode.' Youzan's share price fell by 12% within a day. Unlike the open spirit narrated on the internet, many are also concerned about whether interoperability between giants will exacerbate monopolies.

Zhong Hongjun, director of the Digital Economy Research Center at Shanghai University of Finance and Economics, believes that China's Anti-Monopoly Law and other market competition laws and regulations have two core and fundamental purposes: First, to promote a healthy competitive environment; second, to encourage innovation. When discussing whether to pursue interoperability, we must also revert to these cores for discussion.""'If interoperability between the two giants enables the large e-commerce enterprise Alibaba to further consolidate or strengthen its monopoly position in the e-commerce sector, this is something we need to consider.' In Zhong Hongjun's view, interoperability between Alibaba and Tencent may strengthen the leadership positions of both platforms in certain businesses or markets, 'which is actually something that requires vigilance.'""In the past, this vigilance was overshadowed by big tech's antitrust narrative. Now, campaign-style interoperability aimed at user acquisition and growth is re-exposing more issues.

Essentially, interoperability between big tech firms is theoretically beneficial for reducing overall transaction costs, including monetary and time costs in buying and selling, and is conducive to stimulating innovation in the internet industry. It can prevent some internet enterprises from closing their systems, ensuring ecological openness and sharing. However, when user acquisition and growth become the initial intentions of platform enterprises sitting at the negotiating table, the altered interoperability is far from these goals. Growth is the fruit, not the cause, of interoperability. If breaking barriers is merely due to growth pressure, then interoperability is merely a new, intensified growth project centered around growth.