In today’s ‘WeChat Essential Tip’, brought to you by China Channel, we will give you the lowdown on Tencent. Tencent is the company which created WeChat and is one of the largest Internet companies in the world. Today you will find out:
- Which African company owns 1/3 of WeChat?
- How did Tencent become so big?
- Which well known Western chat app is partly owned by Tencent?
- Why are Western internet companies looking with jealousy at Tencent?
Owned from Africa?
Tencent, (and thus WeChat) is 34% owned by a South African media company called Naspers. Naspers was one of the very early investors into Tencent in 2001. This single investment of $32 million has grown in value to nearly $66 billion, making Naspers the most valuable company in Africa.
When you open WeChat, you might have noticed that the picture of the globe doesn’t feature either America, Europe or China as would usually be expected. Instead Africa, in particular South Africa, seems to take pride of place. A subtle nod to their early investors perhaps?
QQ: Bigger than WeChat
Tencent’s flagship service isn’t actually WeChat. It’s a desktop and mobile based instant messenger program named QQ. The number of people in China using QQ is significantly more than any other social network including WeChat. It’s rare to meet a Chinese adult under 35 almost anywhere in China who doesn’t have a QQ account. Can WeChat take QQ’s crown? In the long term, probably yes, but it will surely take time as QQ is still immensely popular across rural and less developed parts of China.
The iconic QQ penguin character can be seen all over China from school bags to stationary and snack foods. Licensing of the penguin logo is a significant revenue generator for Tencent. The same can’t be said for the WeChat bubble logo which isn’t as merchandise friendly.
Gaming: The Cash Cow
QQ dominates the Chinese online games market and despite the fact that most people in the West have never heard of Tencent, it’s now the world’s largest games company. Revenues in the forms of in game micro-payments are a critical part of Tencent’s business. These payments might seem too small to amount to such significant revenue. However the immense scale of player number across China makes this business model very lucrative.
QQ Farm (QQ农场), was massively popular across China for a period way back in 2009. The Western Facebook version ‘Farmville’ was interestingly a shameless rip off of the earlier Chinese version.
Tencent have their fingers in a lot of pies. They invest in newer, smaller internet businesses almost on a weekly basis. Some of the higher profile and more interesting investments they have made include:
Snapchat – unknown. Tencent made a small early investment into Snapchat’s series B funding. Tencent aren’t the only Chinese internet company to invest in Snapchat. Alibaba group also made a $200 million investment in March 2015.
Dianping – $1 billion+ Dianping’s ‘Yelp meets Groupon’ service is now fully integrated into WeChat allowing us to search for locations nearby to eat.
Didi Kuaidi – $2.7 billion (across two rounds). The taxi hailing service giant is also now integrated directly into WeChat.
Kakao (KakaoTalk) – $62.9 million. Kakao Talk is the number 1 instant messaging app in Korea. It has been previously estimated that 93% of South Korea’s population use KakaoTalk on their smartphones. The service has 48 million monthly active users.
JingDong (JD) – $214 million. JD is the second biggest eCommerce company in China after Alibaba. This investment was very important as it provides Tencent with a way to fight Alibaba group’s dominance in this key area.
The birth of WeChat back in January 2011 was a brave and, at the time, unconventional strategy. The obvious thing would be to leverage Tencent’s huge existing QQ user base already dominating the desktop instant messaging market. Instead Tencent took the decision to start from a blank slate. They took this route knowing that if WeChat was successful it would end up cannibalizing it’s own QQ user base.
WeChat was born mobile unhindered by the legacy of desktop. It has been able to leverage the possibilities of mobile in a way that Western apps rarely manage: shake, QR codes, voice messaging, voice recognition, location based services are all inherently mobile.
For many years Tencent received criticism for simply being a copy cat of other people’s ideas. Yet with the evolution of WeChat into a platform far beyond social media it’s clear that Tencent is now leading the world in mobile commerce. Western internet companies such as Facebook must now be looking on with intrigue and perhaps a tinge of jealousy at the way Tencent has managed to integrate WeChat into people’s lives and businesses in a myriad of different ways, turning WeChat into the ‘super app’ for life in China.
Join us tomorrow for our next article from the China Channel ‘WeChat Essential Tips’ series. Follow us on WeChat by scanning the QR code to follow our official account.