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Tencent’s open strategy: SNS, Weibo, and IM (Q+)

Edit: Updated translation from Chinese

When foreigners discuss the Chinese Internet market, their general perception is that it’s an impenetrable market with only little room for success. Moreover, they are completely unaware of the players in the market, most specifically Tencent (Public, 700:HKG), which is a huge giant in not only the Chinese market, but also the global market. In fact it is actually the 3rd largest internet company globally in terms of market capitalization, 50 billion USD, after Google and Amazon.

In 2001, Tencent initially launched QQ as an IM service. Today, it integrates various internet and mobile services based on the platform of IM. In China, Tencent is an internet empire with a huge user base and healthy profits. Many other market players view Tencent as a ‘public enemy’ as its business successfully covers almost all types of internet and mobile services. The following key figures highlight Tencent’s strong market position:

  • 674 million active IM accounts, with 137 million peak current users (PCU) by March 2011
  • 505 million active Qzone (nickname-based SNS) accounts, and 101 million active Pengyou (real name-based SNS) accounts
  • 7.7 million PCU for QQ Games
  • 72.3 million Internet VAS paying accounts
  • 27.2 million mobile VAS paying accounts
  • 19.6 billion RMB or 3 billion USD revenue in 2011 with 41% net profit

The above figures explain the reasons for investors’ positive inclination toward Tencent, Inc.

 

Comparison of the performance in the stock market: Tencent, Amazon, Apple, Google, NASDAQ Composite.


Source: Google Finance, July 1st, 2011

Tencent’s ambitious goals include further growing its annual profits and growth margins. The firm also recognizes that it must base long-term success on the industry’s environment, rather than just relying on its own inside team.

At Beijing’s Tencent Partner Conference on June 15, Pony Ma announced the open platform strategy (video link, Chinese) and explained the basic rules. Summarily, Tencent’s open strategy focuses on the following three platforms:  SNS, Weibo and IM, which are described in more detail below.

SNS Open Platform
Tencent’s SNS includes two platforms, Qzone and Pengyou. Qzone’s General Manager, Peter Zheng, stated that by May of 2011, 270,000 websites enabled “share to Qzone,” and this number has been increasing by an average of 60,000 websites per month. In the two months following its initial trial stage, over 9,200 websites have integrated the “sign in with QQ account” feature.

Weibo Open Platform
In March of 2011, Tencent started the trial of the Weibo open platform. Its Weibo users increased from 100 million to 200 million in just the four months following the initial trial. Over 10,000 developers submitted applications, including nearly 200 who are published.

IM Open Platform: Q+, from IM to Application Platform
The IM open platform Q+ strategy aims to open the data and relations (the firm’s core resources) of 674 million users, making it the largest of the three steps for Tencent.

The Q+ user interface resembles that of a desktop. However, it can be switched to the OS interface with the simple click of a button. Also, five organizational pages are provided to categorize the 2,500 available applications into different types. For users, a unique account, which is QQ number, and a unique payment system enable all the services. For developers, Q+ provides users, CRM, payment, communication, cloud computing, and etc., all of which can be regarded as infrastructure of all the services.

User interface based on Q+ platform, MacBook Pro

Compared to the Apple App Store, the Q+ user interface is a similar ecosystem. The differences being: (1) it adapts multi-systems such as Windows, Mac, and Linux; (2) it is driven by an Internet company, which has an extremely strong user base.

Pony Ma emphasized the following three figures:

  • 4 billion RMB. Last year, 4 billion RMB, or 600 million USD, was shared with developers.
  • 100,000 developers. Currently, there are 20,000 developers on the Tencent platform. The firm expects to attract more than 100,000 active developers in the coming years.
  • 20 billion RMB. Tencent aims to reach 20 billion RMB in revenue shared with developers related to its open platform, essentially creating one more ‘Tencent.’

People are excited about the open strategy of Tencent, and in a sense, their enemy is opening the door to their 600 million users and becoming their supporter. This does however raise a challenging question:  How will Tencent deal with the relations between the external developers and Tencent’s internal ones? Tencent was established as a developer, as opposed to Facebook, which initially positioned itself as a platform. Tencent offers its users a variety of types of services, games, videos, e-commerce applications, search capabilities, music, and etc. Now Tencent’s internal business units will now face intense competition with external developers, bringing uncertainty to the future of Tencent’s internal developers. Though when challenged with this question, Pony Ma stated that he’ll choose the latter of whether this opening is “a change of company strategy or a change of company mission.”

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