What is currently planned at Alibaba, Tencent, Sina, and Baidu worth an additional paper. My duty is to continue the story published last year and called “Chinese Internet industry ready to grow beyond borders”.
Some of my readers were quite skeptical in 2008 when I announced that China was a country good at disruptive innovation following a trip in Beijing. At that time, I bet for a Chinese Internet becoming almost the only alternative to American Internet. Who would have imagined at that time that it would accelerate as soon as year 2012?
China has the world’s largest Internet audience thanks to its population, the world’s biggest with more than 1.3 billion people. With the strong increase of its Gross Domestic Product, extraordinary engineering talent, plenty of venture capital, Chinese entrepreneurs and large firms have now the resources to compete worldwide.
Looking at social behaviors, there is a main difference between American people and Chinese people: in the U.S.A. and Europe a majority of online users are “Spectators” while a majority of users in China are “Creators”. China is a market more active and users generate a lot of content every day. This behavior explains part of the success of QQ games, a service of Tencent focused on online games.
More people than anywhere else, and a more active profile than European and American users enables the development of robust Internet firms. Now that China is an Internet giant, time to grow beyond borders is coming.
Strategic investments before 2012
In 2011, Tencent formed several strategic partnerships in China: among them, Kingsoft Corporation Limited., a firm providing software focused on Internet security and eLong, Inc, a leading online travel service provider in China. Outside China, in addition of being active in the U.S.A., Russia, India, Vietnam, Thailand, Tencent acquired a majority stake in Riot Games, a Los Angeles-based developer and publisher of online video games.  In 2010, Tencent invested $300m in Digital Sky Technologies (DST) of Russia, bringing two internet powerhouses of the emerging markets together in a long-term strategic partnership. In 2009, Sanook of Thailand became a partner of the Chinese firm.
Alibaba prepared the future of Alipay reaching an agreement with Yahoo!, and SoftBank. Alipay is a leader in China in providing payment processing services. Alibaba also developed operations in the U.S.A. and formed a partnership with Turkey’s Logo Group to reach Turkish companies.
Among others, Renren and Dangdang are listed on the New York Stock Exchange. We can expect more US IPOs by Chinese companies. There are at least 10 Chinese Internet companies who have made confidential filings through the Security Exchange Commission. Those Chinese tech companies aiming to IPO are also growing their business through innovation.
Development of operations outside China: starting to use the powerful strength of overseas Chinese presence
The strategy to develop operations outside borders is focusing on emerging countries with growing markets or developed countries where Chinese people and Chinese firms are well established. Expand abroad is a service for overseas Chinese and for non-Chinese users a form of outreach to Chinese audiences.
The service developed by “QQ International” division of Tencent is an instant messenger in either English, French or Japanese. This new service, launched in 2010, allows non-Chinese speaking people to use the service and communicate with Chinese people easily: they can talk to local Chinese people and stay connected with them in case they go back home.
The same is true with the English version of Sina Weibo microblogs. Sina Weibo has not only built a platform for interaction in China public, but Sina Weibo’s influence has also extended abroad. Recognizing Weibo’s importance, almost all foreign missions have started their Weibo tweets to highlight their activities and policies of their countries. Microblogging enjoyed explosive growth and emerged as a major social media contender in China. Taobao is the e-commerce firm that benefits the most from clicks on Sina Weibo.
There are 2 million Chinese living in Western Europe. To expand abroad and explore new markets, Chinese companies target the Chinese communities. The nation’s third-largest wireless carrier, China Telecommunications Corp, facing an intensifying competition at home, has started to expand in Europe with the U.K. targeting more than half a million Chinese citizens living in the country since May. The company will become the first Chinese operator to start a mobile virtual network outside China. The service, aimed at Chinese residents, might expand to France in 2013 if it’s successful.
Alibaba aims to reach the whole world and to turn the services into a global marketplace for importers and exporters. The successful business model can work almost anywhere. The firm is establishing partnerships with other companies well established in other emerging countries, Turkey being one of them.
Alibaba is able to challenge eBay and Amazon.com for the top spot in e-commerce around the world.
Baidu is positioning itself as an access to mobile commerce in China, therefore it is a way for non-Chinese companies to reach the Chinese markets. To differentiate from the competition (mainly Google), the company focuses its efforts on emerging markets (Brazil, Argentina, Egypt among others). The firm is currently expanding all over the world directly or through partnerships including China Search International (UK, Singapore, Australia, USA).
Tencent launched in January 2011 Weixin (微信), a free mobile application for instant communication. Weixin supports mobile instant communication through photo and video sharing, voice chatting (one to one and group chatting), and of course traditional text messages. Weixin’s success in China is explained by the integration of all Tencent communication tools including QQ, e-mail and Tencent’s Weibo platform. Moreover, comparing with telecommunication operators’ services, the use of the app is free for its users. The social feature allows to find if a contact or another Weixin user is nearby. VALUE2020 is aware Tencent has an ambitious plan to connect people beyond China. Weixin will become a new type of social network.
The international version is called “WeChat” since April 2012 and users cannot guess the service is Chinese. Strategy for WeChat is to customize the product to local markets, rather than simply translating into local languages. After successful official launches in Thailand, Vietnam, India, and Singapore, the service is now marketed in Malaysia.  For Tencent, Malaysia is a new country and the firm continues its growth outside China (Indonesia, & Taiwan should be the next targets for local marketing efforts). We can expect over 200 million users at the end of the year.
After creating the big user base, VALUE2020 predicts Tencent will likely monetize the traffic through micro-payments first, then with mobile commerce through partnerships, and later business as usual both within & outside the app.
Partnerships of US firms with Chinese firms
We could believe there is a business war between Chinese companies and US companies. This is not always true as they seek to cooperate in several projects.
In December 2011, in China, Dell has unleashed the Dell Streak Pro, an Android handset with a special feature. This device uses “Baidu Yi”, the Operating System (OS) from the Chinese search giant, that is modeled and built on top of on Google’s mobile platform. In this case, “Baidu Yi” replaces Google’s options for many of the handsets core functions, such as the search engine, instant messenger, ebook reader, and the app store.
American firms are investing money and time in reaching the Chinese market what could be helpful for Chinese Internet firms to expand abroad through partnerships. In China, Microsoft is using its new partner Nokia to gain market share in the internet industry in China investing in Ganji.com, and creating location-based services with Sina Corp and Tencent.
We are likely to see a greater cooperation and competition all over the world.
The Chinese Internet industry through innovation, but above all, a very good understanding of what a user values, is on the road to globalization. This process can count on other existing Chinese firms already well-established outside China, on overseas Chinese and on the universal need for a quick and friendly Internet.
Mobile commerce, through the power of social commerce and other strategies of combined business models, is the long term goal for the current efforts for being a place of interactions. Through QZone and Weixin, Tencent is well positioned in China and Asia. Facebook is dominating the social network market outside China. What can we expect from the Chinese industry in the years to come?