The Story of Tencent 1998 – 2016

The Evolution of the Chinese Internet Company

This the story of Tencent. Unique is quite the word to describe the internet market of China, so much so, no internet corporation giant has been successful in China.

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Why?

Maybe government policies played a significant role, however, some might point to the failure of these companies failed to understand the Chinese consumer. A look into Tencent history might help us to understand the complexity of the Chinese market and learn some fresh perspective on the story of Tencent.

Pony Ma Huateng in the Story of Tencent

Known to be modest and shy but he is also obsessive and meticulous when it comes to computer engineering and managing products. While still in college, Ma developed a graphical user interface for a stock analysis system and sold it for ¥50,000 [$7,578].

After graduation, he built computer networks when China’s Internet was in its infancy. By doing so, he became acquainted with the 100 most active China netizens at the time including Ding Lei (founder of Netease) and Zhang Xiaolong (creator of WeChat).

The Beginning of the Story of Tencent

In 1998, he founded Tencent with four partners. The company got off to a rocky start and struggled to stay solvent. After pitching to messaging client ICQ, Ma led his team to develop a product called Open ICQ (OICQ) based on ICQ’s software. It was when three major web portals dominated China’s Internet industry were Sina, Sohu and Netease.

OICQ, as a messaging tool, didn’t attract much attention. But nine months after OICQ launched its first version in February of 1999, the messaging service had more than one million users. In every aspect, Tencent localized its instant messenger service with a series of micro-innovations that left competitors in the dust.

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For example, OICQ moved the user’s contact list from the client-side to a back-end server. This way, Chinese users still had access to their contact list when they logged into OICQ from a computer at an Internet café – as Chinese Internet users commonly did at the time.

Tencent also compressed the size of its software from about 4MB down to 220KB, which increased efficiency due to decreased download time and used UDP (User Datagram Protocol) technology as a communication protocol. Although UDP is more difficult in terms of development, it lowers the number of servers needed. Since Tencent was thinly stretched financially, saving money on servers was essential.

Started Making Significant Profit

By early 2001, Tencent launched its mobile QQ business. Users who paid a fee and linked their QQ accounts with their phone numbers could send and receive QQ messages on their phones. Tencent’s mobile QQ was instantly popular; by the end of 2001, Tencent collected nearly ¥50 million in revenues and made a gross profit of more than ¥10 million.

QQ Show became another moneymaker. QQ users can purchase virtual clothing, accessories, character backgrounds and scenarios in the QQ Show Mall to customize their avatars. QQ Show launched in 2003 and was instantly successful: In just six months, more than five million people made purchases, spending an average of about ¥5 per person.

Since QQ Show didn’t rely on an external telecommunications provider, it offered more room for creativity. The launch of QQ Show changed Tencent’s organizational structure. The company created a product management system favourable to computer engineering culture: Once a project gets the green light, a team forms that is independent and completely devoted to the completion of the project.

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Story of Tencent Going Self Sufficient

To become fully independent of telecom companies, Tencent launched Mobile QQ – preinstalled software on Nokia and Motorola mobile phones – and Super QQ – an SMS portal through which users could receive news and weather forecasts and which also offered games and entertainment. By the end of 2007, Tencent had built two mobile portals that it fully controlled.

Tencent president Liu Chiping – who had a background in investment banking – helped Ma determine that the company’s core strategy should be to provide users with a varied set of online services encompassing information, communication, entertainment and commerce.

Over the next five years, Tencent went on the offensive and fought many tough battles to solidify its dominant position in the world of instant messaging

Pony Ma’s Product Philosophy

Ma places great value in paying attention to the user experience and finding solutions to users’ pain points. Which were the core of Ma’s product management philosophy as well as Tencent’s strategy for attracting users. He likes getting involved in the process of optimizing and upgrading the product.

He participated in the research and development of almost all of Tencent’s products, often exchanging thousands of emails with each product team. Ma describes Tencent’s innovation process as “small steps at fast speeds, trial-and-error iteration.” When Tencent comes out with a product update, it’s never perfect. But by discovering and fixing one or two little problems every day, the company creates a work of art in less than a year.

Great philosophy. Such an approach, without doubt, will increase our probability of success.

Read Ma Huateng and Tencent: A Biography of One of China’s Greatest Entrepreneurs

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Author: Muhamad Aarif

A notorious book addict by night and an oil and gas executive by day. As Mark Twain said, "The man who doesn't read good books has no advantage over the man who can't read them." So, read, read, and read some more.

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