Another question people frequently raise about Tencent is whether it can dominate whatever area it choose to enter. If a company competes with Tencent, will it loss for sure??

The truth is there are many incidents that Tencent was defeated by its competitors. For examples, in search engine, Tencent’s Soso cannot compete with Baidu. It is not even as popular as Google in China. Another example is online auction. Market share of Tencent’s Paipai is tiny compared with Alibaba’s Taobao.

Even small companies can win over Tencent if they try hard enough. Recently, I visited a Beijing based company, called Ganji. It runs a classified site in China, just like Craigslist. Ganji started in 2005 and within a year, there were over 500 Craigslist-like classified sites in China. Tencent also started its own. But by 2007, consolidation came. Lacking economies of scale to sell advertisements, many smaller sites had to close or tried to sell themselves to larger competitors. Even Tencent’s classified site did not survive. Today, Ganji and 58.com are China’s largest classified sites. Together they might have over 70% of the market.

In fact, Tencent’s key advantage is its huge QQ user base (over 600 million register users). This allows Tencent to promote its other services very effectively and at a low cost. But if its service quality is not as good as its competitors’, users will not choose to use Tencent’s services.

In conclusion, I believe in a particular sector, if there are one or two very strong players, Tencent probably cannot dominate the sector. But if the sector is quite fragmented, Tencent can probably dominate it, with a few trials. For example, online game. There are over 10 listed online game companies in China. With a few years of hard work, Tencent finally became the largest one, with 2 major blockbusters, Crossfire and Dungeon and Fighter.