BAT vs TMD: Who Will Lead China’s Internet Future?

Looking back to 2016, the Chinese internet sector has entered a new phase; many entrepreneurs and investors have failed, and the fierce competition among the giants appears to be fading.

In June, the internet community saw renewed debate when Meituan‑Dianping (referred to as MeDa) CEO Wang Xing revisited Alibaba’s equity episode, while Ele.me’s founder challenged his view, and Ctrip founder Liang Jianzhang reignited the discussion on MeDa’s diversification versus specialization. The underlying question is: who will inherit the BAT legacy?

“Shaping Competition” vs. “Participating in Competition”

The common trait of BAT is their ability to shape competition.

BAT’s strategies are built on existing user bases and operational capabilities, whereas TMD’s strategies focus on user acquisition. BAT has already exhausted traffic bonuses and is evolving toward deeper, multidimensional strategies, while TMD still pursues the early‑stage competitive advantages of BAT.

Thus, TMD’s strength lies in participating in competition, while BAT’s calm stems from already shaping it.

Financially, apart from Baidu’s slightly weaker performance, BAT maintained strong growth in the past year. Alibaba’s FY2017 revenue grew 56% to ¥578.71 bn, Tencent’s 2016 revenue grew 48% to ¥561.17 bn, and Baidu’s 2016 revenue grew 11.9% to ¥116 bn. MeDa’s 2016 transaction volume was ¥2400 bn, projected to reach ¥3600 bn in 2017, indicating it is still in a validation stage without scalable profit.

MeDa’s gross margin is around 5%, far below BAT’s average of over 20%. TMD continues to chase new users, increase tool stickiness, and boost GMV to lower marginal costs, showing a strategic disadvantage compared to BAT’s ecosystem‑driven growth.

BAT is TMD’s Teacher

Strategically, BAT creates competition within their ecosystems, achieving higher profitability, while TMD’s business models face scalability and innovation challenges.

Below is a strategic modeling comparison of TMD and BAT:

Alibaba

Alibaba’s early strategy was traffic‑sharing (often called traffic wholesale), later evolving into financial barriers and a cloud‑intelligent strategy that drives high‑margin growth and international expansion.

Tencent

Tencent transitioned from simple traffic sales in the QQ era to a multi‑layered “smart pyramid” in the WeChat era, building infrastructure across communication, content, applications, and entertainment, thereby shaping competition.

Baidu

Ba​idu’s early traffic‑sharing ecosystem was effective but limited; under CEO Li Yanhong and former CTO Lu Qi, Baidu shifted focus to AI‑driven decision‑making services, aiming to become the most technically advanced BAT member.

Overall, BAT’s true competitors are not the aspiring TMD firms but cross‑industry giants in the emerging industrial‑internet era that can reshape competition at a higher level.

In this new “industrial internet” phase, companies like Tesla and Huawei are moving competition from consumer‑grade internet to industrial‑grade platforms, challenging the dominance of BAT.