It’s
not Twitter, Google+ or LinkedIn. It’s a company that...
most people in the West don’t know. That, however, is set to change, with the explosive growth of China’s Tencent and its mobile messaging app WeChat…
Last week, Facebook, the current king of social networks, admitted that it’s losing teen users, and that the overall growth in its monthly active users has slowed to 18% year-on-year. This isn’t helped by the fact that it and other Western social networks are banned in China. By contrast, Tencent recently announced that WeChat’s users have almost tripled from the 85 million of the year before.
And Tencent’s reach – unlike local Twitter-equivalent Sina Weibo and Facebook-equivalent RenRen – is not just restricted to China. WeChat was rebranded from the more Chinese-sounding Weixin to appeal to an international audience, and it’s now virally coming across here. In just four months between May and September 2013, its overseas users have doubled from 50m to 100m.
So, in an increasingly crowded mobile messaging, what is Tencent and WeChat doing right?
First, it has managed to differentiate its product with some killer features that keep users coming back for more. On the messaging side, users can “hold-to-talk” and send free walkie-talkie style messages that bypass the need for voicemail. Yet what keeps its network growing are fun discovery features that can connect users locally and across continents.
WeChat has neatly fused together the open approach of social networks such as Twitter, where anyone can follow anybody, and more closed networks such as Facebook, which rely on mutual friend connections. It’s growing virally through social connection and not just social media.
For instance, the ability to identify “People Nearby” can make the daily commute or a night out with friends much more interesting. Here is a quick summary of my results when looking for other WeChat users in London…
Alternatively, you can “shake” your smartphone, and be connected with other users anywhere in the world who are shaking their phones at the same moment.
In growing its international user base, Tencent has brought on board brand ambassadors, such NBA star LeBron James, soccer star Lionel Messi and Bollywood actors Varun Dhawan and Parineeti Chopra, who users can follow and interact with.
Massive Value Creation
Shaking and tapping on smartphones are not just gimmicks: floated on the Hong Kong stock-exchange in 2004 (the same year as Google), Tencent has far outstripped Google in the rate of appreciation of its share price, up 104 times on it IPO price compared to Google’s 8.5 times price appreciation.
With a $101bn US market cap (still some way off Google’s $343bn valuation), Tencent joins Yahoo!, eBay and Amazon among the world’s most valuable internet companies.
From Copycat To WeChat
Like many of China’s tech companies, Tencent’s roots lie in the “copycat innovation” and localization of what was happening in Silicon Valley. The company was founded in 1998 by Shenzhen University computer sciences graduate Huateng “Pony” Ma, and five classmates. Its first product, OICQ or Open ICQ, was a Chinese copy of the popular ICQ desktop instant messenger that had been acquired by AOL in the same year. When AOL filed a lawsuit in March 2000 for violation of its intellectual property, Tencent eventually lost the battle and changed the name of the product from OICQ to QQ, as it is still known today.
With an increase in user numbers but unable to cash in on its huge user base, Pony and his co-founders nearly had to sell the company. A big early success was in attracting venture capital – in 2000, Pacific Century CyberWorks and IDG invested $4 million for a 40% stake, proving to be the kick-start that Tencent needed.
A big part of the success of WeChat has been down to the fact that, when other companies continued to develop for the desktop, founder Pony Ma made a big bet on mobile. A CEO known for his understanding of and investment in long-term growth, a few years ago Pony made the smart move to shift more than half of its 20,000 employees to focus on mobile. Although Tencent’s mobile business has not been the source of its revenue (70% of its revenue is from user payments and the rest from commerce), Tencent expects that eventually “the real value is the connection of the phone with business offline.”
Pony is currently ranked third in Hurun Rich List and fifth in Forbes Chinese Rich List. Reflecting on the “copycat years”, he attributed his early success to a combination of copying and luck:
“When we were a small company, we needed to stand on the shoulders of giants to grow up.” Paraphrasing a quote attributed to Isaac Newton, he added, “If I have seen further it is by standing on the shoulders of giants.”
Read more: Linkedin
most people in the West don’t know. That, however, is set to change, with the explosive growth of China’s Tencent and its mobile messaging app WeChat…
Last week, Facebook, the current king of social networks, admitted that it’s losing teen users, and that the overall growth in its monthly active users has slowed to 18% year-on-year. This isn’t helped by the fact that it and other Western social networks are banned in China. By contrast, Tencent recently announced that WeChat’s users have almost tripled from the 85 million of the year before.
And Tencent’s reach – unlike local Twitter-equivalent Sina Weibo and Facebook-equivalent RenRen – is not just restricted to China. WeChat was rebranded from the more Chinese-sounding Weixin to appeal to an international audience, and it’s now virally coming across here. In just four months between May and September 2013, its overseas users have doubled from 50m to 100m.
So, in an increasingly crowded mobile messaging, what is Tencent and WeChat doing right?
First, it has managed to differentiate its product with some killer features that keep users coming back for more. On the messaging side, users can “hold-to-talk” and send free walkie-talkie style messages that bypass the need for voicemail. Yet what keeps its network growing are fun discovery features that can connect users locally and across continents.
WeChat has neatly fused together the open approach of social networks such as Twitter, where anyone can follow anybody, and more closed networks such as Facebook, which rely on mutual friend connections. It’s growing virally through social connection and not just social media.
For instance, the ability to identify “People Nearby” can make the daily commute or a night out with friends much more interesting. Here is a quick summary of my results when looking for other WeChat users in London…
Alternatively, you can “shake” your smartphone, and be connected with other users anywhere in the world who are shaking their phones at the same moment.
In growing its international user base, Tencent has brought on board brand ambassadors, such NBA star LeBron James, soccer star Lionel Messi and Bollywood actors Varun Dhawan and Parineeti Chopra, who users can follow and interact with.
Massive Value Creation
Shaking and tapping on smartphones are not just gimmicks: floated on the Hong Kong stock-exchange in 2004 (the same year as Google), Tencent has far outstripped Google in the rate of appreciation of its share price, up 104 times on it IPO price compared to Google’s 8.5 times price appreciation.
With a $101bn US market cap (still some way off Google’s $343bn valuation), Tencent joins Yahoo!, eBay and Amazon among the world’s most valuable internet companies.
From Copycat To WeChat
Like many of China’s tech companies, Tencent’s roots lie in the “copycat innovation” and localization of what was happening in Silicon Valley. The company was founded in 1998 by Shenzhen University computer sciences graduate Huateng “Pony” Ma, and five classmates. Its first product, OICQ or Open ICQ, was a Chinese copy of the popular ICQ desktop instant messenger that had been acquired by AOL in the same year. When AOL filed a lawsuit in March 2000 for violation of its intellectual property, Tencent eventually lost the battle and changed the name of the product from OICQ to QQ, as it is still known today.
With an increase in user numbers but unable to cash in on its huge user base, Pony and his co-founders nearly had to sell the company. A big early success was in attracting venture capital – in 2000, Pacific Century CyberWorks and IDG invested $4 million for a 40% stake, proving to be the kick-start that Tencent needed.
A big part of the success of WeChat has been down to the fact that, when other companies continued to develop for the desktop, founder Pony Ma made a big bet on mobile. A CEO known for his understanding of and investment in long-term growth, a few years ago Pony made the smart move to shift more than half of its 20,000 employees to focus on mobile. Although Tencent’s mobile business has not been the source of its revenue (70% of its revenue is from user payments and the rest from commerce), Tencent expects that eventually “the real value is the connection of the phone with business offline.”
Pony is currently ranked third in Hurun Rich List and fifth in Forbes Chinese Rich List. Reflecting on the “copycat years”, he attributed his early success to a combination of copying and luck:
“When we were a small company, we needed to stand on the shoulders of giants to grow up.” Paraphrasing a quote attributed to Isaac Newton, he added, “If I have seen further it is by standing on the shoulders of giants.”
Read more: Linkedin
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