Inside Tencent: What lies ahead for China’s internet giant?



See the original article written in Japanese

Some might suppose that Chinese internet companies would have their headquarters in the capital Beijing. But they don’t. Alibaba is headquartered in Hangzhou, while the country’s top game company Shanda is in Shanghai. And Shenzhen in the south is the home of Tencent.

I recently had an opportunity to visit Shenzhen to attend Infinity Venture Partners’ LP Summit 1, during which I had a chance to visit to Tencent. The company’s headquarters are located in the Science and Technology Park in the western part of the city, inside 37-story skyrise. Surprisingly, this gigantic building is a little small for Tencent, and they’re now building another 55-story, two-tower facility. That building (a model of which you can see below) is scheduled to open in 2016, and it will house 12,000 employees. The building is designed by NBBJ, also the designers of Amazon headquarters building in Seattle.


On the second floor there is a big screen that displays real-time access to Tencent’s QQ instant messaging software (see below). I saw over 170 million users accessing the service, which was probably light considering that it was a weekday morning.


Also on that floor was Ubox, a vending machine where people can buy things by paying with their mobile, either using AliPay (by Weibo) or TenPay (by Tencent). Here in Japan, there are an increasing number of vending machines accepting electronic money. In China, it seems services like Weibo and QQ are helping drive that trend too.


Virtual credit cards

Early in March, Tencent and Alibaba announced virtual credit cards within their apps WeChat and AliPay Wallet (respectively). WeChat and AliPay Wallet can be used for some things like taxi service Didi Dache and at some retail stores as well. The companies were both very excited about the launch, hailing it is an innovation in the credit card industry. But soon after launch, government authorities made them shut down the service. Tencent has made efforts to the launch its service by tying up with major banks in China. The background of the authority’s decision is not clear, but some sources say certain banks and credit-card companies were threatened by the rapid increase of virtual credit cards and may have put pressure on government.

Regarding its future strategy, Tencent aims to make financial services more accessible to general consumers by expanding to platforms like WeChat and QQ. The financial services they mention include not only credit cards but also stock exchange and other financial products. In such a big country, cities that have branch offices of a bank or financial services are still limited. So it would be a natural development for mobile apps to fill the void.

Tencent aims to provide financial services for WeChat users in China (where it’s known as Weixin), and so far has no plan to expand that to its overseas users.

Mobile app distribution

There are many homegrown mobile app distribution services catering to the Chinese market. Tencent’s MyApp has a 12% in the share in this space, falling just short of the top three, behind Baidu (38%), Qihoo (28%), and Wandoujia (15%) (as of December 2013).

Tencent’s top priority in this field is to surpass the top three players, and Tencent Open Platform represents its core strategy for doing so. Monkey Hou (pictured below) is the vice president of the Tencent Open Platform, and he brought us up to speed on their current situation.

According to him, Tencent has opened incubation spaces in 10 cities across China with the aim to incubate mobile app startups and bring more appealing apps to their platform. As part of the incubation programs, Tencent offers various benefits such as discounted cloud service, funding, and mentoring. The benefits change depending on the number of downloads for a given app.

Tencent Open Platform, vice president Monkey Hou

In China there are over 10 mobile app distribution platforms. Some wonder why an internet giant like Tencent cannot catch up other players. But Hou explained to us that there is no player with a majority share and China’s market is still really big. He seemed confident they would soon break into the top three.

In February, Japan’ Mixi partnered with Tencent to bring its popular Monster Strike game to China. This is one example of Tencent’s efforts to gain recognition as an app distribution platform. Although it requires localization changes, the Japan’s popular mobile games have good chances to do well in China. I think more and more Chinese platforms will actively try to partner with Japanese game developers in the future.

  1. You may remember my report on HAXLR8R, the Shenzhen accelerator specializing in hardware startups. ↩