Tencent turned 14 on the past Sunday, bringing home a not-inspiring-again report card (Tencent announces 2012 Q3 Results). To mark the age for the second grade of middle school, Pony Ma, its CEO and co-founder, and his management appeared in a video sent out to all employees through their own WeChat.

“In second grade of junior middle school, courses cannot be easy, especially the premium ones such as Mobile, Gaming, Online Media, E-commerce and SNS. At the same time you don’t have to feel too pressured since it’s time to build physical health. Health is the most important”.

To translate Ma’s lines: mobile is strategic, efforts are needed to keep revenue growth in gaming in line, online media still isn’t that strong though online video advertising added some revenue, e-commerce is in trouble but we cannot drop it, and, SNS stagnates.

Mobile is the thing.

At a time when people cannot see anything but mobile, WeChat (Weixin) wins. When everyone was speculating that the internet giant was losing to Sina in social media, the gaming business stagnated and its e-commerce division hadn’t figured out a way to see good profits, WeChat caught on. Passing a mountain peak and downhilling to the lowest in last year, Tencent’s stock price was pushed to a new high later on, with a 100% increase in a year.

The once Kik clone has evolved to a full-fledged mobile communication and media platform. It is invading markets, held by other IMs, telcos or players in other sectors, its big brother didn’t tap into; its international ambitions include 20 language versions, Facebook and Twitter integration and aggressive marketing in Southeast Asia; a media platform was established for news media and merchants to reach and interact with their audience; an API was released to enable third-party applications. It announced 200mn users in this September.

When it comes to mobile strategies, the company said they’d also allow for open QQ account login on third-party mobile applications and build a mobile open platform.

Couldn’t sound better. But before long people’d be eager to discuss about revenues. According to its Q3 earnings, most revenues the company made from mobile is from service subscriptions which increased 8.0% YoY. The increase comes from games and mobile books. The monetization of WeChat, as the management said, hasn’t began.

Pony Ma believes gaming will be a major revenue source on the mobile internet for a while. Most recently he started selling QR code-enabled O2O model. With the QR code scanner built in, he touted, WeChat could be an appealing tool to offline merchants for CRM. Doing business with the real economy sounds like they could, sooner or later, get revenue cuts or commissions at scale. It’s in line with a rumor that a mobile loyalty startup was acquired by Tencent.

How open is an open platform?

For whatever reasons, Tencent decided to “open up” at the end of 2010. Actually, QQ membership subscriptions, virtual goods packages on which Tencent made its first money in the early days, decelerated since 2010. The item-based virtual sales generated by third parties on the open platform became a new revenue source to offset, to some extent, the deceleration of membership business.

It has been proven powerful that Pony Ma announced that a total of more than 1 bn Yuan went to third parties till this October and KingNet, the No. 1 third-party partner in terms of revenue, received a monthly revenue cut of 20 mn Yuan, as reported.

But people doubt it’s a fair play and think the half-openness will hurt the company.

It’s not hard to imagine open platform players would choose applications with better performance and channel traffic to them, so that it can make more money for the both sides. An insider disclosed that most of the revenues Tencent open platform made were from the top 10 apps. It sounds no more than the very old business of the company’s: making about 40% of revenues from two top games.

Critics argue the company should be real open, or the platform will become a chaotic marketplace that bribes will happen and hurt the company.

Is there an alternative way in doing e-commerce?

Jack Ma, the steersman of Taobao, said those independent Chinese e-commerce players, who are competing for market shares and end up in bloody price wars, were all wrong. It’s true that when those names in the news have to introduce more funding to survive in the competitions, Taobao is making big safe profits from in-site P4P searches and AdSense-style marketing services.

Tencent took 80% stake in Yixun, an online retailer, and decided to bet on it. So far it operates in the way Jack Ma loathed. The difference, people would say, is Tencent has huge user base and absolute capability to push information in their face.

Pop-up windows, Tencent’s almighty weapon, visit me 3-5 times a day with marketing campaigns if I keep QQ IM logged in. The chances that users would click open one and eventually start shopping there seem big. But numbers don’t look so good. The revenues from transactions, most from Yinxun, in Q3 is RMB1.1 bn (USD183 mn) , which is only 1/17 of what happened on the single-day Tmall show last week. It might not be a proper comparison, but Chinese users really don’t see any reason for choosing to shop with Tencent over Taobao.

Tencent did start with a Taobao-style marketplace and still makes pocket money there. But the reality is users don’t use it. It sounds like talking about Soso, another service the company tried hard to build but failed on. It turned out that user base cannot do everything.

What Pony Ma hopes for is to have a ‘super e-commerce platform in five years’ by help B2Cs. Yes, apart from Yiyun, Tencent also made investments in a handful of B2C companies, Okbuy, Kela and others, who can leverage Tencent’s huge traffic and grow big. But we will talk about margins then.

(Disclosure: the author was working at Tencent from 2009 to 2011.)

Tracey Xiang is Beijing, China-based tech writer. Reach her at traceyxiang@gmail.com

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