Quick quiz: Who are the three largest Internet companies in the world by market capitalization?
If you guessed Google and Amazon you got two right, but I’m betting few of our American readers guessed the third. I certainly wouldn’t have a year ago. It’s not eBay or Yahoo; it’s Tencent. If you are in the Web space and haven’t heard of them, read this post, because Tencent’s cutesy penguin mascot is only going to cast a larger shadow in the global Web world in coming years. → Read More
Back in March I thought that Google pulling out of China would hurt Google’s Chinese employees and shareholders more than anyone. The search engine was a distant number two in the market to Baidu, and many of the people already using Google in China, I assumed, were doing so through VPNs anyway, meaning the government blocking it wouldn’t immediately change much in terms of users’ experience. Beyond that, I figured startups in China’s thriving Web scene would rush in to fill any void.
But I underestimated one big thing: The impact the lack of Google would have on China’s Web businesses. By essentially handing Baidu a short-term monopoly on keywords, user acquisition costs have gone through the roof, infuriating many of the people who were originally sympathetic to Google’s case just a few months ago. “They should have just not come into the market to begin with if this is how they were going to act”—if I heard that statement once in the last two weeks I spent in China, I heard it a dozen times.
This wasn’t all Google’s fault. Frankly put, the company didn’t have enough market share to wreck things on its own. But it was icing on the cake of an increasingly unsustainable situation. → Read More
Today is a big day in Asia’s Internet industry. Earlier today, Korea’s NHN said it will buy major Japanese portal Livedoor, and now Tencent, China’s largest Internet company, has announced [PDF] it plans to invest $300 million in cash into Russian investment firm Digital Sky Technologies (DST).
DST itself has been in the news repeatedly over the last few months, especially after investing $200 million in Facebook and $180 million in Zynga last year. On its homepage, the firm claims its portfolio companies command 70% of all page views on the Russian speaking web.
Tencent racked up $1.8 billion in revenues last year [PDF], with operating profit reaching a staggering $882 million. The Shenzhen-based company’s key service is instant messaging platform QQ, which boasted no less than 523 million active users at the end of last year. Tencent also operates a web portal (QQ.com), a social network (Qzone) with nearly 400 million active users (self-reported), a gaming portal (QQ Games), a search engine (SOSO), and a number of other services.
Tencent will get a 10.26% stake in DST, 0.51% of total voting power and the right to nominate “one observer” to DST’s board of directors. Both companies also said they’ll be entering a strategic partnership, without providing details. → Read More
Despite China’s massively growing internet market, international giants like Google and Facebook are having trouble making gains with the 300 million Chinese online users. China’s netizens are on average very young – 66.7 % of them are younger than 29 years old and 35.2 % of them are teenagers—with social networking and entertainment applications being the most popular.
While companies like Facebook struggle to conquer market share in China and to create viable business models everywhere, their Chinese clones have built lucrative cash machines literally earning billions of dollars a year. Unfortunately, adopting Chinese methods may not help American social networks due both to cultural differences in Chinese user behavior and industry practices. Our analysis of the Chinese social networking scene after the jump. → Read More
Tencent, China’s largest Internet portal mostly known to us for its hugely popular instant messenger product QQ, published an updated report on the user numbers of its social networking service QZone last week. The report was only available in Chinese, but the folks over at Web2Asia were kind enough to translate it.
And if the self-reported numbers are not too much of an exaggeration, they’re nothing short of mind-blowing.
Even taken with a healthy grain of salt, the stats Tencent are presenting deserve a mention: the report claims more than 200 million people were using QZone as of January 31, 2009, surpassing international players like Facebook (which recently announced 175 million registered users) and MySpace. → Read More
In China, the money isn’t in Web advertising. It is in micro-transactions. At least that is the case for Tencent, which operates the largest instant-messaging network in China and is one of the largest overall portals. Tencent—which includes the QQ IM service, QQ Show (an avatar social network modeled after Korea’s Cyworld), and QQ Pet (virtual pet portal)—is the No. 21 Web property in the world and the second largest in China after Baidu (the two keep switching the No. 1 and No . 2 spots). According to comScore, it attracted 66.2 million unique visitors in February, half a million less than Baidu and about 10 million less than all the sites run by New York Times Digital (which includes NYTimes.com, About.com, Boston.com,and a bunch of other newspaper sites). Tencent is publicly traded. In 2007, it made $523 million in revenues, and $224 million in operating profits. That gives it a 43 percent operating margin. In contrast, Yahoo’s operating margin is 10.4 percent. A big reason for the difference in this profitability is that advertising makes up only 13 percent of its revenues. The rest are in micro-transactions for digital goods, online games, and other services that Chinese Web surfers gladly pay for, as well as mobile services. Here is how Tencent’s revenues break down: Internet services (digital goods, games, micro-transactions): $344 million (66%) Mobile services: $110 million (21%) Online ads: $67 million (13%) Total Revenues: $523 million Digital goods are a big revenue driver for Chinese Web companies and are extremely profitable. In the U.S., with a few exceptions (the virtual economies in virtual worlds and online video games), Web surfers don’t really like to pay for digital goods. Is this a cultural thing, or can it change? It is important to remember that there are other ways to make money on the Web besides advertising. CrunchBase Information TenCent Information provided by CrunchBase → Read More
San Francisco, CA
