Still growing at an explosive rate, online shopping is forecast by consulting firm McKinsey to triple from 2011 levels to $400 billion a year by 2015.
At the center of the transformation are Alibaba founder Jack Ma and his chief rival, Tencent founder Ma Huateng. Ma Huateng's net worth is estimated by Forbes at $13.4 billion and Jack Ma's at $10 billion.
“Neither one has succeeded by moving slowly or cautiously,” said Gilles Ubaghs, a researcher for consulting firm Ovum. “It's been a matter of, Let's throw everything at this and grow as fast as we can.”
In the next tier of competitors are entertainment portals Sohu.com Inc. and Sina Corp., security company Qihoo 360 that operates a popular mobile browser and video site Youku Tudou Inc.
Alibaba is the biggest spender, laying out $3.9 billion since the start of 2013. In March, it moved into Tencent's territory by paying $800 million for control of ChinaVision, a Hong Kong producer of films, TV programs and mobile games. The next month, the company, along with a fund run by Jack Ma, invested $1.2 billion in Youku Tudou.
Tencent moved into Alibaba's territory in February by paying $250 million for a 15 percent stake in China's No. 2 e-commerce platform, JD.com.
Baidu already controlled a video site, iQiyi, and has invested $2.4 billion since mid-2013 in an e-book store, a group buying site and a distributor of smartphone apps.
The latest battleground is in online payments and finance.
The volume of payments using mobile phones soared 800 percent last year compared with 2012 to 1.3 trillion yuan ($220 billion), according to research firm Analysys International. Alibaba's Alipay accounted for 70 percent of that, with Lakala, owned by computer manufacturer Lenovo Group, in second place at 18 percent.
Zhang Liqi, a 28-year-old employee at a fast food chain, said she always turns to her phone to check for restaurants with discounts before dining out with friends.
“And everyone just takes out our mobile phones to pay the bill,” she said.
Alibaba and Tencent, whose payments service Tenpay competes with Alipay, have expanded into online finance services with accounts accessible by smartphone that pay up to 6 percent interest. That is double the best rate offered by banks - and then only if money is locked up in a one-year certificate of deposit.
Along with eight other companies, Alibaba and Tencent were picked in March by the government to become investors in China's first privately financed banks since the 1949 communist revolution.
Updated on: May 08, 2014 23:25 IST
