Tencent Going Global?

It seems that only recently, after a long period of low-wage production for foreign companies, the time has come: Chinese companies are becoming committed to go overseas. Companies such as Lenovo, Haier, and TCL have taken the lead in setting up brand identities overseas and others have followed. But are there any Chinese Internet brands that are well known in countries other than China?

Do people in Europe, the U.S. and other Asian countries than China know brands such as Baidu and QQ, are they familiar with virtual worlds such as Novoking and Hipihi, or games such as Zhu Xian and Perfect World? It is very unlikely that they are….

Boundaries – It seems that Chinese Web companies are late in international expansion when compared to other industries. How come? There is no straight answer to this question, but besides the more obvious cultural and language boundaries some of the reasons could be related to:

• There is no need (yet) for going overseas since the Chinese market is still big enough and growing rapidly.
• Competing with international Internet brands involves creativity, innovation and coming up with a truly unique service because the Western market is already mature.
• The previous reason is closely related to the fact that the Internet services market is less sensitive for competing on price compared to other markets.

Surprisingly, despite these seemingly unfavorable conditions, there are several international initiatives from some of the bigger Web brands in China.

My Masters Thesis – As a Dutch New Media Ma student from the University of Amsterdam I am going to find out which companies are planning on setting up brand identities overseas or are already operating internationally. Some of the questions that I am addressing when visiting the most prominent Chinese Internet companies in China are: ‘What are your ambitions?’, ‘What does your international strategy look like?’ and, ‘How do you cope with cultural differences?’

One of the first interviews I had set up for my research was at Tencent, China’s largest and most used Internet service portal. In the Shenzhen High-Tech Industrial Park I had appointments with Tencent’s Richard Chang (Technology Strategist U.S.Office), Tristan Han (Sr. Product Manager International Product Center), and Thijs Terlouw (a Dutch developer working at Tencent’s innovation center). In this post I will summarize the most important findings I did.

Tencent Overseas – Tencent, being one of the biggest Internet brands in China and market leading with its QQ Instant Messaging (IM) services has been internationally active since 2002 when it launched QQ in several Asian countries. More recently in 2007 it was the first time Tencent launched a casual games website in the U.S. that is operated by Tencent alone instead of cooperated with local partners. The URL to Tencent’s casual gaming service in the U.S. – QQ Games – is: http://www.qqgames.com/

Based on the interview and tour I found the following concerning Tencent’s international future:

• Tencent will use a specific strategy for entering more mature markets. Since the U.S. and European IM market is already mature, Tencent’s strategy is primarily focussed on cooperation with local companies and/or focussed on gaming.
• Western gaming business models are based on off-the-shelf sales or subscription; Asia is ahead and makes use of more developed business models where items are sold within a game or application. Read more about it here and here
• Research has indicated that cultural factors like ‘cuteness’ and ‘Asianness’ do not seem to be a problem for users in the U.S. or Europe. According to Richard “games are more universal” compared to most other applications.
• Tencent will unlikely go international soon with its mobile services, that are very popular in China, because the Chinese technology differs too much compared to other countries; “it is a unique technology”.
• Even though the bandwidth and network infrastructure in India is not great, Tencent is keeping a close eye on the their gaming market and does not rule out trying gaming services for the Indian market in the future.

These are only a few outcomes of the extensive interview and tour I had at Tencent. An interview that ended with Tristan showing me a roadmap of the future of all Tencent’s international innitiatives, unfortunately this was classified information!

After meeting Richard, Thijs, and Tristan who were all really helpful and enthusiastic, I can’t wait to visit more Chinese companies for my research!

Read more general information about my trip, research, and findings so far on my class blog: MoM or my own blog (that is not accessible in China): Pieter-Paul’s Masters Thesis