Tencent: Inside China’s ‘Killer App’ Factory(2) (腾讯：中国“杀手级应用”制造大厂（二）)
More generally, content-specifically exclusive, copyrighted content – is a top priority for Tencent. It operates on a “freemium”revenue model,offering some content free and charging at the premium end.
This, Mr. Tsang says, plays into “the increasing propensity of China users to pay for content”-something they initially shunned, turning instead to pirated moviesand music.
“Over the past two years the government has cracked down on pirated content and even the ones you still get, the quality is so bad relative to what you can get from Baidu and the others,” he says. “And the operators have got smarter about putting quality content behind the paywall.”
Thus Tencent, which has exclusive coveragein China of the NBA basketball championships, can charge viewers Rmb22 a monthfor a basic subscription and Rmb60 for premium viewing.
Like Alibaba, Tencent “has gone well beyond copying {the west},”adds another banker, “They are inventing and reinventing what their businesses should be”. Tencent’sMoments feed on WeChat prefaced Facebook’s addition of Messenger and the $22bnacquisition of WhatsApp.
Payments are another case in point. China’sonline third-party smartphone payments market dwarfs that of the US: iResearchestimates it to be worth Rmb15.7tn in 2016-28 times the $62.5bn forecast byeMarketer for the US in 2017 – and Rmb28.5bn in 2018.
It is dominated by Alipay, which isoperated by Alibaba affiliate Ant Financial and has more than half the market,but TenPay ranks second with a 38.3 per cent share in the third quarter, accordingto Citibank.
Tencent’s Mr. Ma said in May that the averagenumber of mobile transactions exceeded 500m a day, and that over Chinese new year– when it is traditional to hand out hong bao, or red envelopes of money – morethan 2.5bn virtual packets were distributed across its platform.
Tencent favours a cautious approach to monetisingits database of active monthly users. Rather than blitz Moments with ads andrisk the sort of backlash dished out to Facebook, Tencent has restricted itselffor now to a maximum of one ad per user each day.
UBS estimates WeChat Moments’ ad load at about1 per cent of non-advertising content, compared with 7-10 per cent for Facebook,leaving big scope for growth. In 2015, online advertising made up 17 per cent ofrevenues.
China’s mobile ad market was worth Rmb90bnin 2015, according to iResearch, up 178 per cent year on year, and is forecastto grow at a compound annual rate of 54 per cent from 2015 to 2018.
Yet monetizing the subscribers – and its database– offers the real keys to the kingdom for China’s BAT contingent and theirglobal peers.
Native ads are increasing in China, as elsewhere,and Tencent is helping to rewrite the rules of engagement for digitaladvertising. Take the entertainment show A Date with a Superstar, produced by L’Oreal,whose cosmetic products twirl across the screen. Ad Age describes the show as “essentially a giant commercial”.
Other consumer goods companies are followingsuit with similar partnerships. “They’re attracting the big spenders who havebeen active in TV and are now embracing online advertising,” says one analyst. Noteveryone buys the monetisation story. Mr. Windsor argues that Tencent’sdifferent platforms make it harder to aggregate and exploit the big data theyare sitting on. QQ and WeChat have yet to be fully integrated, for example.
“I don’t see Tencent being ready to grabthis opportunity in 2017, and so in the short term a slowdown looks inevitable,” he says.
Looking for unicorns: Buying spree putsValley VCs in shade.
Tencent is an avid dealmaker. In the past18 months the company has spent $37.65bn on acquisitions, according to Dealogicdata – more than the $26.6bn spent by Sequoia, the Silicon Valley venturecapital group, over the same period.
Supercell, the Finnish games group behindClash of Clans, tops Tencent’s list. But there is a long tail of smallerincubation-style deals. “They’re out there looking for unicorns,” as one bankerputs it.
That makers it distinct from Alibab, whichis less on minority stakes.
But there is another difference, notesElinor Leung, an analyst at CLSA: Tencent is building a social network whileAlibaba has a business ecosystem and is building a social platform.
Tencent’s stakes in China’s tech world includeDidi Chuxing, the taxi hailing app now part owned by Uber and Apple; ecommercewebsite JD.com; the Craigslist-style 58. Com; and food delivery app Meituan-Dianping.All of these sites accept TenPay.” They are just putting everything on their platform,”says Ms. Leung.
Tencent is helped in its investment endeavoursby having bankers at the top. Both Martin Lau, president, and James Mitchell,chief strategy officer, are Goldman Sachs alumni.
Rival lawyers and investment bankers expressrespect about Tencent’s approach to cutting deals. “No renegotiations, nodramas,” says one party who has sat around the table with them.
Adds another: “They are very principled,very progressive. and Chinese to just the right level.”
词汇总结
Subscriber n.订户；签署者；捐献者
Weixin，along withthe WeChat app outside China, has 846m active monthly subscribers.
Investment portfolio 投资证券组合
Tencent also has a huge multibillion investmentportfolio, ranging form stakes in Didi Chuxing, China’s biggest ride-sharingcompany, through to start-ups.
Monetise v.使货币化；把…定为法偿币
They started with distribution and now theyare monetising everything they can.
High-tech park 高科技园
Pirated adj.盗版的
Mr. Ma started Tencent in 1998 as themessaging service QQ-not in a garage, Silicon Valley-style, but in a high-techpark in Shenzhen, jammed between hustlers selling pirated phones and PCrepairs.
Coverage n.承保范围，承保险别；保证金
Thus Tencent, which has exclusive coveragein China of the NBA basketball championships, can charge viewers Rmb22 a monthfor a basic subscription and Rmb60 for premium viewing.
