Tencent celebrates its 20th anniversary, but Shenzhen-based giant had bruising 2018

20/11/2018

Pony Ma steers the company with new business plan. After seesawing 2018, Tencent CEO is reinventing the company again. What’s next? E-commerce, online gaming or mobile payments?

 

Last November 11, was what we called “e-commerce war day”, everyone in China was busy to buy products. And of course it was the day of Alibaba and JD. Both e-commerce platforms reached a new record. But with more than $55 billion total revenue, whole PRC online commerce break any previous record.

Anyway, that day was also a special moment for another tech company: Tencent. Shenzhen based tech giant just celebrated  its 20th anniversary. When we say “internet in China”, everyone minds immediately flights to Tencent. In 1998, Tencent was founded in an old building in Huaqiang North of Shenzhen. There are only 5 people in the company.

 

©千图网, Shenzhen, PRC first Silicon Valley, is home to tech manufacturing, automation, and the robots that will fill tomorrow’s factories.

 

And that “primitive” company, became PRC “hi-tech Great Leap” forefront. By 2018, Tencent has grown into an internet giant with the largest number of users and traffic. n this process, Tencent of course experienced crisis after crisis, but thanks to Pony Ma leadership, finally, it survived and became stronger year by year. According to data, QQ has more than 800 active users while WeChat, almost 1 billion active users. In addition, the active account of payment business has exceeded 800 million.

Thus, Tencent become one of China’s most celebrated companies. The first Asian company to breach US$500 billion in market cap, though the recent global sell-off has cut that valuation by almost half. The company’s success has propelled Pony Ma into the ranks of China’s wealthiest private entrepreneurs, with an estimated net worth of US$29 billion.

 

But what’s next? Can Tencent continue to write the future in the industrial internet agenda? WeChat is leader in fintech, but Shenzhen-based giant is facing challenges. Chinese’ internet giant has had a bruising 2018, and now the company is trying to change model of business.

 

Pony Ma, the 47 years old Tencent co-founder, chairman and chief executive, has shaken things up in time for its 20th anniversary. He’s ready to reinvent the company again. But why? Tencent is facing challenges.

“We believe that the first stage of the mobile internet, the consumer internet, is drawing to a close and the second stage, the industrial internet, is kicking off,” Ma wrote in an open letter at the beginning of November. “It became clear to us that if objects and services are not fully digitalised, the connection between them and people cannot be improved.”

The message it’s simple to understand: we should put in act “other businesses” instead of traditional gaming platforms. In fact, he company still derives over two-fifths of its revenue from gaming.

 

©123rf. Consumers already use WeChat to play online games, pay bills and even manage finances, but we continue to see new and creative ways where these products are monetised.

 

Today, Tencent “clutches” sprawled into all sorts of areas. From online lending (WeBank) and insurance (WeSure) to offline medical clinics (Tencent Doctorwork).Even entertainment (Tencent Video) But the company still derives large part of its revenue from online gaming. And here is the problem.

The strategic rethink comes amid a clampdown on its cash cow of online gaming by a government concerned that addiction to video games is enfeebling the young. The government suspension, which began in March, had been expected to ease in the autumn. But this time was enough to Pony Ma to put in act a “B plan”.

 

It will be Tencent’s first internal-restructuring plan since 2012, and it was already announced in September, offers a clue to the company’s thinking.

 

Pony Ma main project is to set out a long-term shift away from the consumer internet towards business services, marking “a new beginning for the company’s next 20 years”, as he stated. First it means set up a new unit for cloud and “smart” industries, combining all its on-demand software and online services for firms that seek to go digital. Tencent’s boss is conscious that the “main battlefield” for mobile internet is moving from consumers to companies.

In this field Tencent has a main challenger: Alibaba. Hangzhou based e-commerce giant has a strong lead in this arena. Last year Jack Ma took 45% of China’s fledgling cloud-computing market, with $10billion of incomes, compared with 10% for Tencent. Nevertheless this gap, this year Tencent doubled revenue in cloud services. Revenues from “other businesses” (ie, payments and cloud) overtook those from its social networks for the first time. Such a positive sign for Pony Ma’s new business strategy.

 

©Tencent. Tencent new HQ, Qianhai district, Shenzhen. Tencent lost $20 bln in value after China fights myopia with gaming curbs. Beijing new online gaming regulation let Pony Ma put in act a new business plan.

 

Experts estimate that Tencent can create large businesses in cloud computing since the market has lots of room to grow. And the company boasts powerful assets. WeChat is downloaded over four in every five Chinese smartphones, so offers a massive market for firms.

Last year Tencent introduced a cloud-based platform that allows companies to offer services to users in WeChat via “mini programs”, included e-commerce services. Actually here are more than 1m mini programs, used by over 200m people every day. The real problem, however, earning from this mini programs is still irrelevant.

 

“Tencent has no dreams and whole structure is aging”, this is the main accuse that hi-tech experts report to Chinese tech giant, and they are partially right. Comparing with Alibaba, Shenzhen based company just invested few amount of money in AI.

 

Without counting fintech, where Tencent is PRC forefront with WeChat Pay, research and the use of artificial-intelligence technology, are a thorn in Tencent’s side.

Comparing with Alibaba, Shenzhen based company just invested few amount of money. Of course Tencent Video, trough its big data, made very successful tv program such as “I am The Actor” and “Produce 101”, but is not enough.

 

©PengBofan. Robin Li, Baidu (left), Jack Ma, Alibaba (middle), Pony Ma, Tencent (right). The 3 China tech-leaders, also called BAT, are launching forays in many industries, and often end-up in fierce competitions.

 

WeChat is of course still one of the milestone app in PRC network, without it everyone is not able to survive in China, but netizens thinks that Tencent is not cool anymore. To increase its appeal to youngsters, Tencent in April revived a short-video app it had shut down, called Weishi, and made it a near-copy of Douyin, a  wildly popular app launched by Bytedance.

But the policy behind Weishi development was blamed by netizen and even by Chinese internet authority. Tencent was “accused” of unfair competition. Weishi has become the most popular free app in the Apple Store, just after the social media and gaming giant quietly allowed some of its WeChat users to directly. But users argued that Tencent stymie new rival products, including Douyin. In fact, Bytedance app and other popular platforms remain blocked.

 

The giant is under pressure, and seems to know it. “We have to stay awake”, said Pony Ma. Recently several young engineers employed in Tencent left the company to work for a newer tech firms like Bytedance and Kuaishou.

 

Compared with Jack Ma (Alibaba) and Robin Li (Baidu), Pony Ma prefers to keep a low profile. But the boss understood that the company is under pressure. Employees still admire Tencent’s boss – is actually the second richest man in China – but the lack of chances and channels for promotions of products made by young staff, let people lay-off the company.

Recently several young engineers employed in Tencent left the company to work for a newer tech firms like Bytedance and Kuaishou. In the hi-tech sector, without a “young prospective, your company is aging. This is the natural order”, said Peng Weidong, Professor at Beijing Jiaotong University.

 

©123rf. Tencent just changed Chinese people lives, from QQ towards WeChat, this company has grown into one of world largest social media company.

 

“I think Tencent needs a kind of ‘self-examination’ ”, said Mr. Peng. Tencent could win every battle. Shenzhen internet giant has numbers, know-how and technology. Tencent just changed Chinese people lives, from QQ as first PRC instant messaging application towards WeChat, this company has grown into China’s largest social network and world largest gaming company.

Thinks of it as Facebook meets Nintendo! Here’s Tencent.  But with more formidable competitors on the scene, the company will need to pick its fights more carefully and be brave and focus on young talents. Pony Ma deeply know it, because 20 years ago, he was one of those young guy that let PRC “hi-tech Great Leap” began.

 

 

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