Tencent Strategy to Expand Overseas: Build a Cash Cow

Tencent is a Chinese company providing Internet services to hundred of million Chinese people. QQ, first popular product, is an instant messenger service everybody knows in China. Chinese Internet products lack of international recognition: this situation should change.

Current Transformation to Seize Opportunities

Since 2009, executives in charge of the strategy at Tencent have been working on the transformation of the company from a Chinese firm which services are still accessed through desktop computers for chat and games to an International firm providing mobile services and performing exceptionally well thanks to innovation and continuous efforts to  improve the user experience.

As explained last year, Tencent and Baidu want to follow the path of Alibaba group becoming a global leader.

The Largest User Base in the World after Facebook

An important asset of Tencent is the huge user base the company has. Current growth rate of WeChat is higher than Facebook 24 months after launch.

wechat growth compared to FB months after launch

WeChat, the Key Product both for global expansion through smartphones and for major cash cow

WeChat was designed to be a success not only in China but also in the whole world. For the people who know the Chinese culture, we can expect more and more. Commercial launches by Chinese companies are very different from American companies.

Tencent doesn’t communicate the split of the user base per country. However, TechinAsia published our work showing growth in Singapore, Thailand, Malaysia, India.

WeChat in the World by VALUE2020 - JAN2013

Monetization will not be a problem at all. VALUE2020 is one the first firm who believed in the marketing potential of WeChat: access to e-commerce, games, advertising, CRM with one to one relationship and many other reasons.

Threats from Fierce Competition Fought with Innovation, Strong Partnerships and maybe Acquisitions

All Internet players are now focused on doing their best on mobiles and tablets. With the growth of WeChat, almost all the competitors are improving their respective service: Line, Kakao, Viber, Whatsapp, Facebook Messenger… We might expect also a new product from Google.

wechat competitors

To win, Tencent develop strong partnerships in several countries and if necessary, the firm is ready for acquisitions.

Existing Risks related to Content and Sustainability

The State bans on the Internet unlawful content about illegal deals, pornography and drugs. If Tencent keeps respecting instructions, some users may feel unhappy to experiment limits in the service. This situation is a weakness against other players like Facebook.

Another long term risk is the lack of environmental strategy for Tencent like several other Chinese Internet players (for example, Amazon, Alibaba). Google is far more advanced.

Conclusion

Thanks to WeChat, Tencent is builiding a New Mobile Cash Cow. The current mobile strategy is similar to desktop strategy with QQ Instant Messaging in the past, and QQ Games today.

On WeChat product, the Question Mark of 2011 became a Star in 2012 thanks to a continuous high growth rate (better than Facebook, Twitter, Line…). After getting the highest market share possible in 2013 or 2014, the Star will become a Cash Cow 🙂

Print

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s