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Did the deal between Google and Tencent just break through the Chinese wall?

Will the future be shaped by Goocent or Tengle? Neither sound very appetising, but nonetheless, it’s an interesting question after the recent announcement about the patent cross-licensing deal between Google and Tencent. With a combined market cap of 1.39 trillion USD between Alphabet Inc. and Tencent Holdings, this makes for a very strong and deep-pocketed alliance. Both companies have been making strategic investments in each other’s part of the world, examples of this being Tencent’s investments in Snapchat, Spotify and Tesla, and Alphabet’s investments in Chushou and the opening of a new AI-lab in Beijing. So throughout 2017, a strategic game of Risk or Go (depending on who you ask, I guess) has been unfolding, with both attempting to gain territory and expand their world dominance.

While details of the deal remain to be fully disclosed regarding what services/products will be included, one might wonder whether this is solely a move towards establishing a mutually beneficial partnership that will result in a win-win strategy in its purest democratic sense, or whether one party has come to the point of surrender in terms of unlocking the potential of on-boarding the next billion users into their “walled garden”. For me, the jury is still out on that case. However, with Google’s vast amount of knowledge and experience in not only advertising, but more importantly in sectors such as energy, life sciences, urban innovation and artificial intelligence research, I might be inclined to rule for the latter in their favour.

One might wonder whether this is solely a move towards establishing a mutually beneficial partnership that will result in a win-win strategy in its purest democratic sense, or whether one party has come to the point of surrender in terms of unlocking the potential of on-boarding the next billion users into their “walled garden”.

alphabet
Regardless of who might have the upper hand (if any) in this strategic partnership, it’s fair to start questioning the future definition and sustainability of a “walled garden”, and whether or not this has finally opened a loophole (漏洞) for Alphabet to enter China. It is also worth pondering what this means for the likes of Facebook and Amazon in the 21st century re-enactment of “The Race to the Moon”. Similarly in China, with the dominance of the BAT (Baidu, Alibaba, Tencent), will this also give Tencent a leading edge? Have they come to the conclusion that they might require Western expertise and knowledge after all to leap past the Chinese wall?

Have they come to the conclusion that they might require Western expertise and knowledge after all to leap past the Chinese wall?

There is no question that Tencent owns the social networking and e-commerce space in China with WeChat, but outside of the Chinese ecosystem, their products and services crumble and fail to live up to Western standards and expectations, especially when it comes to providing great user experiences and usability. So, to close that gap, the partnership with Alphabet might just be the missing gem Tencent needed to unlock WeChat’s future growth, leveraging Google’s undisputed expertise in providing great user experiences, thereby leaving the BA in BAT to bite the dust.

But one other question still remains; how will Facebook, Amazon, Baidu and Alibaba respond to this? Have we reached a point where each company has reached their organic growth limit, requiring them to break-down their protected “walled garden” and establish strategic partnerships across the world in order to unlock future growth for their business? This will be one of the most interesting developments to follow this year, as I am certainly eager to find out who will ultimately come out on top. Nevertheless, let’s hope that names like Goocent or Tengle don’t gain any traction.

Have we reached a point where each company has reached their organic growth limit, requiring them to break-down their protected “walled garden” and establish strategic partnerships across the world in order to unlock future growth for their business?

P.S. “Loophole” was translated using Google Translate, so if it’s incorrect, let’s hope this partnership will fix it.

Source: Daniel Henriksen, technology and operations director at Omnicom Media Group Programmatic

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