Tencent Empire #03: Giant 2010–2016
3 enclosure movements and 7 weapons
There have been three “enclosure movements” in the Chinese Internet history. The first time was around 1999, with the news portal as the basic business form, Sina, Sohu and NetEase emerged, together compose the “Big Three”. After 2007, there was a big reshuffle with the application platform as the basic form. The three portals were stuck in a “mode dilemma” and there were a lack of growth. Meanwhile, Baidu, Alibaba and Tencent started in three directions respectively from search, e-commerce and instant messaging tools. The reverse transcendence was completed around 2010 and they became the “New Big Three”, which are collectively called BAT. Since 2012, smartphones have sprung up, and the focus of Internet users has shifted from the PC to the mobile, resulting in the third “enclosure movement”.
Tencent is the biggest beneficiary of the second “enclosure movement”. In the 2010 mid-year report, Tencent’s semi-annual profit was more than the sum of Baidu, Alibaba, Sina and Sohu, and it became the “enemy of the whole industry”. The doubts and attacks on it have been escalated before this. By the end of 2010, all the “angers” had erupted in the 3Q war. Despite the vantage position at the factual level, which the later judicial decisions proved, it was obvious to everyone that Tencent was precarious in the wave of public opinion.
The 3Q war changed Tencent’s strategy and even partially changed the character of Ma Huateng. He announced that Tencent entered the “half-year preparation period of strategic transformation” and promised to widen the opening up. In the later period, Tencent conducted 10 diagnostic meetings in a row, held the first open developer conference, and opened QQ zone and QQ application platform.
Interestingly, the 3Q war did not bring any substantial subversion to the Chinese Internet industry. On the contrary, it heralded the end of the PC era. Soon, all competitors are moving into the new mobile Internet battlefield. A new era has opened its curtain. At the beginning, Sina Weibo (like Twitter) was riding beyond dusty, seemingly got the opportunity to “change everything”. However, due to the accidental involvement of Zhang Xiaolong’s team, Ma Huateng was fortunate enough to get a reversal of the impasse .
For the three years from January 2011 to January 2014, it is the “solo dancer age” of WeChat on the big stage of the Chinese Internet. It starts from scratch, rises on the ground, and makes a staggering arrogance to become the most influential social tool star. It not only builds another platform-level product other than QQ, but also grabs the first “station ticket” in mobile Internet for Tencent, which makes Tencent truly integrate into the life and work of mainstream consumer groups in China.
WeChat official accounts platform belongs to the true sense of Chinese-style innovation. It takes a de-platformize way to make media people and businesses get vertical penetration in the social network. In the past four years, the number of official accounts opened has exceeded 20 million. Millions of companies have opened their own subscription accounts or service accounts. Almost all media publish their own content on the Wechat official accounts platform, and more and more young pioneers started a strange and novel we-media experiment. Since then, everyone who tries to succeed in the Chinese market has to ask himself or herself a question:
What is the relationship between me and WeChat?
Tencent’s strategic layout in the capital market should be attributed to Tencent’s president and former Goldman Sachs, Liu Chiping. Since 2011, Tencent has changed its previous investment strategy and began to use capital to achieve alliance-based openness. The rise of WeChat allowed Liu Chiping to hold the bargaining chip with all Internet giants eager for traffic. Tencent has successively invested in Dianping.com (like Yelp), JD.com and 58.com, and has carried out the largest M&A competition in history with Alibaba aggressively. In the duopoly arms race, Tencent and Alibaba built a high wall and dug a wide moat. In Ma Huateng’s words, “To curb or clamp opponents to avoid excessive approximation”.
Although still not sociable and unwilling to stand out in public, Ma Huateng is also quietly changing. In the past few years, he has made many speeches and made forward-looking statements on the future of the Chinese Internet. Those statements were circulated in the public opinion as “Ma’s 8 rules” and “Ma’s 7 points”. His “connecting everything” seems to become an axiom, and the reference to “Internet+” has been adopted by the Chinese government’s annual work report.
The character and talent of a founding entrepreneur will ultimately determine the personality of the company. Just as Apple always belongs to Jobs, Tencent only belongs to Ma Huateng in the sense of temperament and spirit.
In the case of Tencent, we saw the highly distinctive core competence formed by Ma Huateng’s team. I summarized it as “Seven weapons of Ma Huateng”, which include:
The 1st weapon: Product Minimalism.
Since it all started as a small IM (Instant Messaging) tool, Tencent has owned the concept of “product” since the first day involuntarily, and believes that “less is the most appropriate”, “Don’t make me think!”, “Let the functionality exist in the invisible”. Ma Huateng himself is a paranoid practitioner of “detail aesthetics” and “idiotism”, which is premature in the Internet community in China and even the world. In the PC era, its advantages were not obvious, but when entering the mobile Internet, it became the most lethal corporate philosophy. Tencent is also a specimen of the cultural fusion of engineer culture and product manager culture.
The 2nd weapon: User-driven Strategy.
As early as 2004, Ma Huateng proposed that Internet companies have three driving forces, namely technology-driven, application-driven, user&service-driven and Tencent will focus on the cultivation of the third. For quite a long time, the Tencent team explored and dug the virtual consumer psychology for Chinese users. They redefine “virtual props” as “emotional sustenance” of users. In terms of technology, Tencent has built a user feedback system under big data, and has provided many Chinese-style understandings in terms of application tool innovation.
The 3rd weapon: Internal horse racing mechanism.
Almost all innovations in the Internet world are subversive, often bursting on the edge and emerging from a negligible market. Large companies that are mainstream and successful are often difficult to perceive. In the 18-year history of Tencent’s development, several major product innovations, such as QQ Show, QQ zone and WeChat, which decide their fate, are not the result of the highest level of research and decision-making, but the independent breakthroughs from the middle and basic level. This unique scene benefits from the horse racing mechanism formed by Ma Huateng.
The 4th weapon: Trial and error iteration strategy.
Compared with the industrial economy characterized by standardization and precision, the most essential difference in the Internet economy is the rebellion against all perfectionism. “Small steps, iterations, trial and error, and running fast” are the secrets of all Internet companies that have succeeded. It requires the company to build a system that is completely different from manufacturing in terms of R&D, feedback and iteration. In this aspect, Tencent’s performance can be described as a paragon.
The 5th weapon: Ecosystem Cultivation Mode.
As one of the largest Internet companies in the world, Tencent provides Chinese experience in managing ultra-large companies. Ma Huateng is a fan of evolutionism and out of control theory. In the face of huge uncertainty, he tried to make Tencent a ecosystem organization with a blurry border. In the QQ era, he proposed to make the Internet “integrated into life like water and electricity”; around 2013, he came up with the idea of “connecting everything” and “Internet+”. In the both internal and external extension, Tencent has formed a flexible organization and competition model.
The 6th weapon: Capital Integration Capability.
Tencent was one of the first Chinese Internet companies to raise venture capital, but it was not until 2011 that it really formed its own investment style. Ma Huateng and Liu Chiping defined Tencent’s openness as traffic and capital, transforming and enlarging the former’s advantages and strategic vision into the latter’s driving force. Tencent is one of the largest and most aggressive strategic investors in Chinese Internet companies.
The 7th weapon: Focus on the Original Intention of Business.
Ma Huateng, started the business in the late 1990s, is a knowledge-based entrepreneur after the reform and opening up. In his early days of entrepreneurship, the need to improve the wealth situation gave way to personal interest and enthusiasm for transforming society. In 18 years, Ma Huateng almost abandoned all public performances and has been immersed in the product itself, which constitutes his most distinctive professional characteristics.
Previously on Tecent Empire
Tencent Empire #00: Who can freeze a volcano that is erupting?