Tencent: We Will Not Make Smart Phones

You must have heard about the smart phone heat in Chinese tech companies. It’s still on, though Analysys International once reported that “Some Chinese phone vendors’ profit margin could only get as low as 10%.” Surprisingly, there is someone who sees this differently from others. On 18th July, president of Tencent’s Mobile Internet Group, Liu Chengmin said at Tencent Marketing Effectiveness Conference that the company will not make smart phones. (Editor, actually Tencent has tried once with Huawei, the phone is named HiQQ.) Liu has his own philosophy of mobile internet and smart phones.

Smart Phones ≠Access to Mobile Internet

Data said that by the end of 2011, Chinese mobile web users had hit 359 million, which sounds to be an inspiring number to most. Then we see Xiaomi Technologies drew the attention with its cheap and powerful Xiaomi phone, and then Alibaba, Shanda, Baidu and Qihoo360 all came up with their own smart phones.

Why making own branded smart phones getting so popular all of a sudden? The logic most tech companies have in mind is that smart phones are the access to the mobile internet, i.e. if you can have a control of the phones market, you would be able to reign the mobile internet later on. Tencent obviously doesn’t agree.

“Buying a phone doesn’t necessarily mean using its service. The charm of smart phone is that users can have the freedom of choice, they love to choose whatever service they like. ” He is more into the idea that tech companies should focus on offerings better service, and leave the users to make the choice.

He also added that,’”What we are doing should be valuable to our customers. If it’s only for the company’s sake to seize the first territory, it will become meaningless.” Currently in the mobile internet domain, Tencent is cooperating with manufactures by installing the Q services and giving marketing supports.

“Tencent’s advantage is our service. If we had to make phones, we would never had a share over 30% with Samsung and Apple being the big players. Moreover, Tencent would probably become the competitor of all the phone makers, which would not benefit to our services…”

Traffic ≠ Monetization

CNNIC data showed that Chinese mobile internet users were rising rapidly in the recent years and the user habits are also going for the mobile trend. Facebook’s survey said that in December 2009, mobile internet visitors covered 28% of the total active users. However in March 2012, it rose to 54%. And maybe that’s why so many tech companies can’t wait to expand its territory onto mobile.

Liu thinks that the business model of mobile internet hasn’t really been established and most advertisers still can not approve of ads on mobile. “If you are not making any money off services, how could you profit on hardwares? I don’t see this feasible.”

Actually Tencent has already made great efforts in the mobile internet. Currently, it has SNS platform, browser, safety service and games, all enjoying high traffic. Take QQ browser as an example, this application has generated over 4 billion page views per day already.

Liu also pointed that, the biggest problem of monetizing on mobile internet is caused by the fact that advertisers are not confident of it. That’s why Tencent wants to make a difference by talking to the advertisers. On the marketing effectiveness conference tour, Tencent will try to convey its philosophy of mobile internet to more advertisers, said Liu.