Tencent eyes car drivers for O2O ecosystem boost

May 07, 2014 16:48
Mapping services and navigation systems are a new focus area for Chinese internet players. Photo: Bloomberg

Mapping services are emerging as a key battlefield for Chinese Internet players, with firms such as Alibaba Group and Tencent Holdings (00700.HK) pouring in hundreds of millions of dollars to acquire stakes in mapping companies to support their online-to-offline (O2O) ecosystem development.

On Monday, Tencent announced that it will spend 1.17 billion yuan (US$187 million) for 11.3 percent stake in NavInfo, one of the country’s largest mapping firms, from state-run China Siwei Surveying and Mapping Technology Corp. The deal will make Tencent the second-largest shareholder of NavInfo.

The NavInfo partnership will help Tencent to speed up its mapping product development as it prepares to introduce its first navigation hardware for drivers -- Lubao Box.

Lubao Box is a small box that car drivers can install in their vehicles to collect information from the journey as well as diagnose any issues related to the car and the consumption of petrol.

It is the first hardware to be launched by Tencent in recent years to tap the O2O market. With the support of NavInfo mapping database, the box can provide additional navigation-related services to car drivers based on the data collected from the box.

Currently, Baidu, Alibaba and Tencent all offer online map services to internet users, using it as a foundation of their O2O ecosystems. But offering mapping information for free to users is not a sustainable business model yet.

Introduction of navigation box to car drivers can help Tencent establish its own vehicle user base, as drivers need map data for their journey and to look for facilities such as restaurants, gas stations and motels. The integration of the box and map data is the perfect match for drivers.

In fact, Tencent can bring new ideas to the current navigation box services, as the box is mainly used on the way to the destination. Once the driver leaves the car, it could be switched off. Tencent has developed a dedicated smartphone application for the box so that drivers can continue to use the navigation services on the phone.

Such combination can help Tencent collect users' data on the go more accurately as well as put the Lubao Box as part of its O2O ecosystem. As the box can track users’ locations, it will enable Tencent to implement location-based marketing campaigns for its partners or, for instance, call the insurance agent after accident.

In addition, Lubao Box and its application can also develop as a social network for drivers to share their driving experience, information on things such as the nearest petrol station and the shortest way to reach a particular destination. Users of Lubao could divert new traffic to other Tencent services such as Weixin.

This segment will see the next key battle among the big three internet giants in China. Right now, it is too early to say which companies will win this round.

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EJ Insight writer