Tencent, Fostering Connecting Ecosystem to Serve Enterprises and Consumers

Tencent was founded in Shenzhen, China, in 1998, and listed on the Main Board of the Stock Exchange of Hong Kong since June 2004. As I mentioned before, Shenzhen is an amazing city. Within 40 years history, numerous competitive companies were founded in Shenzhen, the most famous companies are Tencent, Huawei, Ping An, and China Merchants Bank

Currently, Tencent and Alibaba is the Top 2 conglomerates by market capitalization. Alibaba aims to provide operating system for commerce and make business easy for everyone. As for Tencent, from connecting people, services and devices, connect enterprises and future technologies, and foster win-win ecosystems for everyone. 

The Business Foundation of Tencent

Connecting people is the core of what Tencent do, and Tencent has built largest communications and social platforms in China. Until 30 September 2019, the MAU of Weixin &Wechat is 1.15 billion, so almost all the Chinese people using Weixin &Wechat app on their phone, for example, friends chat, searching information, video sharing, etc. 

From 2019 Q3 Corporate Overview

Although most functions of Wechat and QQ social platform are free to users, the two platforms provide huge amounts user traffic to Tencent VAS services, such as online game, video, music, mobile payment, etc. Most of the VAS services become the Top 1 in their market easily.

From 2019 Q3 Corporate Overview

Just like Ping An, the driving force of the business is customers growing from the 5 million Internet user from 5 ecosystems. Tencent has a even larger user base, and continue to migrate more users to VAS service.

From 2018 Annual Report

Tencent Business Services

Tencent offers business services for consumers and enterprises. At the beginning, Tencent create QQ as the internet chat platform. With the development of Internet in China, QQ attracts many young people and the user base grows quickly as the largest social platform in the PC era. When Apple launched iPhone, the Mobile Internet begining. Tencent developed Wechat app in the first time, and become the largest social platform ever since. 

As Tencent has huge success in the consumer Internet, it accumulated comprehensive technology which can enable traditional enterprises to success in the Internet era, such as Cloud, AI, online advertising, etc. 

In the 2018 annual report, we can see Tencent offers three different business: VAS, Online advertising, Others.

VAS is : Fee-based VAS registered subscriptions, including digital content, privilege subscription, online game.

Online advertising: including QQ.com, Video, social advertising.

Others: including Fintech, Cloud and Smart Industry solution.

From 2018 Annual Report

Digital content and privilege subscription provide social entertainment for Chinese people.

On the principle of “connecting everything”, Tencent continues to explore a range of diverse, integrated social entertainment offerings that look towards the future. Building upon high-quality content and driven by technological innovations, Tencent continue to explore the next generation of social and content integration. Tencent fee-based VAS subscriptions were up by 19.1% year-on-year to 160.3 million until Dec 2018, mainly attributable to growth in video and music subscriptions.

From 2019 Q3 Corporate Overview

Online game business is the cash cow of Tencent.

For 2018, Tencent smart phone games business achieved RMB77.8 billion revenues (including smart phone games revenues attributable to our social networks business, and PC client games business achieved approximately RMB50.6 billion revenues. The totoal revenue from online game is up to 128 billion. As the totoal revenue of 2018 is 312 billion, so online game takes almost one third of Tencent total revenue, which is the cash cow of Tencent. 

From 2019 Q3 Corporate Overview

As Tencent already takes the leading market share in China, it still expand global footprint by invest in develop new games.

Online advertising: fast growing by rich scenarios and big data

As China’s leading big data advertising platform, Tencent provides integrated digital advertising solutions based on deep business insight, marketing technologies, and professional services across the full range of Tencent’s applications. Tencent Advertising Solution offers a range of digital tools including user insight, creative management, placement strategy, digital assets management, and more. These tools are supported by Tencent’s expertise in cloud computing, AI, LBS, mobile payment, Mini Programs, membership cards, promotional coupons, and other innovations, offering comprehensive solutions for branding, sales conversion and many more online-to-offline integrated advertising solutions.

From 2019 Q3 Corporate Overview

From 2018 annual report: online advertising business achieved RMB58.1 billion revenues, up 44% year-on-year, for 2018, and RMB17.0 billion revenues, up 38% year-on-year, for the fourth quarter. Social and others advertising grew to RMB39.8 billion, up 55% year-on-year for the full year, and RMB11.8 billion, up 44% year-on-year for the fourth quarter, driven by Weixin Moments, Mini Programs, QQ KanDian and our mobile advertising network. 

Fintech, Cloud and Smart Industry Solution: The future of Tencent

Tencent’s FinTech services leverage WeChat Pay and QQ Wallet to connect people with financial products and solutions, build an open ecosystem for the financial sector, collaborate with our partners to provide innovative financial services such as mobile payment, wealth management, loans and securities trading to users around the globe.

Tencent Cloud provides industry-leading cloud products and services to organizations and enterprises across the world. Leveraging its robust worldwide data center infrastructure, Tencent integrates cloud computing, big data analytics, AI, Internet of Things, security and other advanced technologies for deployments in various industry-specific scenarios, with the vision to help build smart industries. It provides holistic smart enterprise solutions for industries including financial services, education, healthcare, retail, industry, transport, energy and radio & television.

Tencent is dedicated to being a “digital assistant”. Through cutting-edge Internet infrastructure and technologies, including Cloud, AI, Big Data Analytics, Security, Payment, Mini Programs, LBS and others, Tencent can help various industries upgrade to digital, and build smart business solutions. Tencent help customers identify new business models and profit growth drivers, and build a new, intelligent ecosystem that efficiently connects customers and enterprises. This process has been applied across many industries, including finance, retail, municipal sevices, tourism, healthcare, transportation and education.

From 2019 Q3 Corporate Overview

As for 2018 annual report, the revenue from Fintech, Cloud and Smart industry solution grew by 80% year on year.  In the future, for FinTech, Tencent will drive innovation in our payment product development and add new payment use cases, and will also expand FinTech solutions and product portfolio to cater to the wealth management and financial needs of users. For cloud, Tencent will integrate our advanced cloud computing capability, data analytics, AI and security solutions, to develop customised solutions for various industries such as retail, financial, transportation, healthcare and education. Tencent will assist enterprises in upgrading and innovating for the digital age.

Tencent Business Model

As we can see from above, Tencent offers comprehensive and competitive business services based on Wechat and QQ user base. Each service provide streaming of cash flow, which can be summerized as follows:

From 2019 Q3 Corporate Overview

Looking ahead, Tencent will invest in core infrastructure and frontier technologies to embrace the trend of the Industrial Internet, while continuing to drive the evolution of the Consumer Internet.


Relative Posts:
  1. Analysis of Tencent 2020 Annual Report: Reshapes Digital Lifestyle Through Ecosystem
  2. Analysis of Tencent 2019 Annual Financial Statements


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