Why is Tencent more innovative than Facebook?
Tencent just released its 2017 annual report: with a market capitalization of more than 525.685 billion USD, shares in the firm doubled last year and the company’s valuation has now firmly surpassed that of Facebook.
SEE ALSO: Chinese Tencent: the “social king” who earned 525 billion in 2017
We’ve always been talking about Tencent as “Chinese Facebook” but not vice versa. Before WeChat, Tencent is famous for its portfolio of “copycats” with its so called “Micro-Innovation” strategy. In fact, the success of many Chinese companies, across sectors, has depended on their ability to evolve and adapt foreign ideas for the mass market.
However, largely due to the success of WeChat, Tencent expanded into other innovative business models in social networking and mobile gaming. Tencent now leads in the world in terms of mobile app monetisation. The developments of Facebook Messenger, WhatsApp have shown a clear “reference” of WeChat’s strategy and functionalities.
So why exactly is Tencent more innovative than Facebook?
Business model: Advertising for Facebook, Gaming for Tencent
Facebook has very simple business model, which is advertising. More than 90 percent of Facebook’s revenue comes from advertising and the proportion is growing over the years.
One can only learn from its own pain, so as Tencent. After their battle with 360, Tencent executives realized QQ (including WeChat) was a social network built on underlying contacts. It would never be a source of money, but it could incubate future profitable products. Tencent tried many ways to enhance user retention.
During the presse conference 21 march 2018, Tencent’s board chairman Ma Huateng Pony said that Tencent is significantly increasing investment in video, payment, cloud, artificial intelligence and smart retail. “This will have some impact on our earnings in the short term, but we believe that these investments can bring us long-term value and growth opportunities.”
Company culture: internal innovation & employee policies
Internally, Tencent has a Cannibalistic Culture: the notion of “competition” is really droven their employees on a very early stage, they are encouraged to snaff out products from competitors/go to rival conferences/ always remain alert— there’s always other colleages working on the other products from other business unit inside Tencent. To facilitate the firm’s innovation activities, Tencent adapted decentalized small team structure and a very dynamic management —to sustain a competitive advantage, companies must establish yet continuously modify their goals to overcome dynamic market changes.
At the end of 2017, Tencent rewarded its employees with 17.87 million new shares worth USD620 Million. Tencent said it would implement the equity incentive to reward the employees for their contributions to the company, and to retain staff members who are instrumental to its sustainable development.
Facebook, one the other hand, prides itself on being a place where people love to work. According to Facebook, for starters, it comes down to a lot more than just offering free meals and transportation.
But, according to WIRED, for Fearnow and his team, contract employees hired through a company called BCforward, every day was full of little reminders that they weren’t really part of Facebook. One employee told WIRED that, watching Zuckerberg, he was reminded of Lennie in Of Mice and Men, the farm-worker with no understanding of his own strength.
China’s Internet dividend vs the rest of the world
Mencius said,“Opportunities of time vouchsafed by Heaven are not equal to advantages of situation afforded by the Earth, and advantages of situation afforded by the Earth are not equal to the union arising from the accord of Men.”
Tencent is one of the few companies that has wit-nessed and experienced the phases of Internet development in China’s online history.
Although Facebook can rely on the English language system and the world’s mainstream American culture. However, the national conditions and cultures of various countries still vary greatly. Although Facebook has a wide range of radiation, but the user’s scale is low, only highly adaptable products (such as WhatsApp) can meet the needs of all people, and WeChat relies on In China’s single market, users’ habits are highly consistent with the height of their infrastructure and cultural background. Users have a high concentration, and super-apps such as WeChat have a “popular” appetite for our large population.
The past year has also altered Facebook’s fundamental understanding about whether it’s a publisher or a platform. The company has always answered that question defiantly — platform, platform, platform — for regulatory, financial, and maybe even emotional reasons.
Today, Tencent has become a connection platform and entrance of traffic. Any App that wants to attract users cannot avoid Tencent. Tencent is not only service provider, but also a link between businesses and consumers. Tencent can pick out excellent startups and foster these companies as its ‘descendants’.
Tencent is a similar to Berkshire Hathaway. It relies on the existing business and hires reputed and experienced Internet and mobile Internet persons as managing partners of its Internet investment funds. The listings of China Literature Limited and Zhongan Limited started the harvest of Tencent investment, and there are more to come.
