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PRD pioneers: Tencent

“In the south, you do your own thing” Tencent boss Pony Ma once told Bloomberg, the news agency. “You do your talking through your product.”

Ma, who was born in Shantou in eastern Guangdong, was responding to comparisons to some of the more flamboyant tech tycoons, like Jack Ma, the founder of Alibaba. Despite his lower-profile, the Tencent boss has built an equally impressive company to Alibaba, starting out from Shenzhen with an instant messaging platform called QQ in 1998. Later he diversified into online games, before introducing China’s first social networking site Qzone.

A titan of the Chinese internet, Tencent was founded by Pony Ma in Shenzhen in 1998

A titan of the Chinese internet, Tencent was founded by Pony Ma in Shenzhen in 1998

Tencent’s success has been driven by the mantra of ‘customer progression’: transporting hundreds of millions of its users through each new stop on the internet journey, based on the knowledge that its gigantic scale gives it a huge competitive edge. But Ma’s reputation is more as a man who delivers on the details, rather than waxing lyrical about the bigger picture. Or as he once told a tech conference in the United States: “Ideas are not as important in China – but execution is.”

650 million

Number of users of Tencent’s popular WeChat online service

The jewel in Tencent’s crown is WeChat, China’s killer mobile app, which has about 650 million active customers, many of whom use it throughout the day. Comparisons of WeChat with the likes of WhatsApp and Facebook are difficult because it offers a range of services that far exceeds its international peers. The commercial model is also different, with adverting sales accounting for only a fifth of its revenues (Facebook relies almost entirely on income from ad sales, for instance). Traditionally, Tencent has drawn heavily on player payments for its online games, and the sale of online add-ons like emoticons and virtual gifts.

Ma’s strategy is to make WeChat the dominant gateway for wider activity on the mobile phone, so that people choose it to talk to their friends, play games and watch videos, check out advertisements and even do their shopping. In fact Tencent’s rise is bringing it into direct competition with China’s king of e-commerce, Alibaba. The battle is going to be fiercest in mobile commerce, where WeChat is well positioned for the advent of the O2O (online-to-offline) era in which people use its payment tools to purchase goods and services. According to Tencent’s own data, 420 million people sent each other lucky money with WeChat’s payment service during this February’s Chinese New Year celebrations. In total more than 8 billion ‘red envelopes’ were sent via WeChat, or eight times more than last year. To put this into context, PayPal reported 4.9 billion transactions over 2015, less than half of the monetary transactions made on WeChat in the one-week holiday period.

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