It’s not Twitter, Google+ or LinkedIn. It’s a company
that most people in the West don’t know. That,
however, is set to change, with the explosive growth
of China’s Tencent and its mobile messaging app
Last week, Facebook, the current king of social
networks, admitted that it’s losing teen users,
and that the overall growth in its monthly active
users has slowed to 18% year-on-year. This isn’t
helped by the fact that it and other Western social
networks are banned in China. By contrast, Tencent
recently announced that WeChat’s users have
almost tripled from the 85 million of the year
Source: WorldOfCEOs, JPMorgan, Credit Suisse,
Bloomberg & company announcements
And Tencent’s reach – unlike local Twitter-
equivalent Sina Weibo and Facebook-equivalent
RenRen – is not just restricted to China. WeChat
was rebranded from the more Chinese-sounding
Weixin to appeal to an international audience, and
it’s now virally coming across here. In just four
months between May and September 2013,
its overseas users have doubled from 50m to
So, in an increasingly crowded mobile messaging,
what is Tencent and WeChat doing right?
First, it has managed to differentiate its product
with some killer features that keep users coming
back for more. On the messaging side, users can
“hold-to-talk” and send free walkie-talkie style
messages that bypass the need for voicemail. Yet
what keeps its network growing are fun discovery
features that can connect users locally and across
WeChat has neatly fused together the open
approach of social networks such as Twitter,
where anyone can follow anybody, and more
closed networks such as Facebook, which rely
on mutual friend connections. It’s growing
virally through social connection and not just social
For instance, the ability to identify “People Nearby”
can make the daily commute or a night out with
friends much more interesting. Here is a quick
summary of my results when looking for other
WeChat users in London…
Alternatively, you can “shake” your smartphone,
and be connected with other users anywhere in the
world who are shaking their phones at the same
In growing its international user base, Tencent has
brought on board brand ambassadors, such NBA
star LeBron James, soccer star Lionel Messi and
Bollywood actors Varun Dhawan and Parineeti
Chopra, who users can follow and interact with.
Massive Value Creation
Shaking and tapping on smartphones are not just
gimmicks: floated on the Hong Kong stock-
exchange in 2004 (the same year as Google),
Tencent has far outstripped Google in the rate of
appreciation of its share price, up 104 times on it
IPO price compared to Google’s 8.5 times price
With a $101bn US market cap (still some way off
Google’s $343bn valuation), Tencent joins Yahoo!,
eBay and Amazon among the world’s most valuable
internet companies.
From Copycat To WeChat
Like many of China’s tech companies, Tencent’s
roots lie in the “copycat innovation” and localization
of what was happening in Silicon Valley. The
company was founded in 1998 by Shenzhen
University computer sciences graduate Huateng
“Pony” Ma, and five classmates. Its first product,
OICQ or Open ICQ, was a Chinese copy of the
popular ICQ desktop instant messenger that had
been acquired by AOL in the same year. When AOL
filed a lawsuit in March 2000 for violation of its
intellectual property, Tencent eventually lost the
battle and changed the name of the product from
OICQ to QQ, as it is still known today.
With an increase in
user numbers but
unable to cash in on
its huge user base,
Pony and his co-
founders nearly had
to sell the company. A
big early success was
in attracting venture
capital – in 2000,
Pacific Century
CyberWorks and IDG
invested $4 million for
a 40% stake, proving
to be the kick-start
that Tencent needed.
A big part of the success of WeChat has been down
to the fact that, when other companies continued to
develop for the desktop, founder Pony Ma made a
big bet on mobile. A CEO known for his
understanding of and investment in long-term
growth, a few years ago Pony made the smart move
to shift more than half of its 20,000 employees to
focus on mobile. Although Tencent’s mobile
business has not been the source of its revenue
(70% of its revenue is from user payments and the
rest from commerce), Tencent expects that
eventually “the real value is the connection of the
phone with business offline.”
Pony is currently ranked third in Hurun Rich List and
fifth in Forbes Chinese Rich List. Reflecting on the
“copycat years”, he attributed his early success to a
combination of copying and luck:
“When we were a small company, we needed to
stand on the shoulders of giants to grow up.”
Paraphrasing a quote attributed to Isaac Newton, he
added, “If I have seen further it is by standing on
the shoulders of giants.”
Pony is known to pay attention to details that most
big companies ignore, drawing comparisons with
the late Steve Jobs. Indeed, even Jobs owned up to a
degree of copycat innovation in launching new
products – when he unveiled the iBooks app at the
launch of the iPad in 2010, he acknowledged that it
bore similarities to Amazon’s Kindle: “Amazon’s
done a great job of pioneering this functionality
with the Kindle. We’re going to stand on their
shoulders and go a little further.”
However, Pony didn’t want to stop with copying,
A company veteran added: “it was
entrepreneurship, concentration and passion that
helped Pony succeed.”
Despite WeChat’s frightening domestic and
overseas exponential growth rate, it doesn’t have it
all its own way in the global market. Martin Lau,
President of Tencent, acknowledges that the US
remains something of a sticking point, commenting
at a conference at Stanford University last month,
“US is a very tough market. You have your free SMS
which takes away the cost appeal of microchat. You
have [Apple’s] iMessage… We will try to find ways
to provide differentiated services.”
WeChat is also up against WhatsApp, a
hypergrowth American startup that also almost
doubled its monthly active users to 350m from
200m in April. Other competitors, such as Viber and
Japan’s Line exist, but tellingly, they won’t reveal
their monthly user figures.
So there’s an interesting global battleground
setting up: both between Facebook, Tencent and
WhatsApp in global social media and messaging,
and Amazon, eBay and Alibaba in global e-
commerce. LinkedIn is currently the leading
professional social network and doesn’t have a
recognised global direct competitor: it will be
interesting to see if one emerges from China or
I’m confident that Tencent will overtake Facebook,
although partly because China’s population is
bigger and partly because it has an unfair
advantage over Western competitors blocked out of
the Chinese market. This needs to change.
My overall prediction for the next few years is
that Tencent will build a significant global
business of great value: with products and
brands we’ll increasingly come to know,
interact with – and maybe even love.
Over To You

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