China 2015: BRAND PROFILE | 1. Tencent
COMPANY Tencent Holdings, Ltd.
BRAND VALUE US$ 66.1 Billion
YEAR-ON-YEAR CHANGE 95%
YEAR FORMED 1998
Tencent is China’s most valuable brand and leading Internet portal. With a 95 percent year-on-year brand value increase, Tencent, in the BrandZTM China Top 100 2015, become the first technology brand to hold the number one rank.
The brand increased in value 442 percent over the five years since it appeared in the first BrandZTM China ranking, in 2011. This growth rate suggests the brand has been enormously successful at accomplishing its mission, which essentially is to help people find enjoyment and satisfaction in the parts of their lives they spend online.
It built the business incrementally, adding products and services over time to become a ubiquitous ecosystem spanning social media and ecommerce, enabling users to move seamlessly among Tencent offerings to keep them engaged and away from competitors.
On the Tencent portal people can text, talk and video (QQ Instant Messenger), chat (WeChat), play (QQ Games), find news and information (QQ.com), buy and sell (PaiPai) and make online payments (Tenpay). Tencent often provides these activities, and more, better than the competition.
The clearest exception is ecommerce, where Alibaba dominates. To strengthen its ecommerce and O2O, online- to-offline, positions, Tencent aggressively completed several strategic acquisitions and collaborations in 2014.
STRENGTHENING THE BUSINESS
It entered a joint venture with Baidu, China’s leading search engine, and Wanda, a conglomerate with extensive holdings including films, movie theaters and shopping malls.
The three brands will collaborate on advertising and in other areas. Tenpay and WeChat payment apps, will be used to purchase goods and services available from Wanda, strengthening the O2O positions of both companies, and Tencent will broaden its offering with access to Wanda content.
Tencent earlier purchased a stake in the ecommerce website JD.com, an Alibaba rival, and merged
its own ecommerce businesses, including the consumer-to- consumer Paipai, with JD.com.
It also bought over a one-third share of the Sogou search engine of Sohu.com, to strengthen its position against Baidu. It merged its own search business into Sogou. Tencent purchased a stake South Korea’s CJ Games, and stakes in Sina Weibo, similar to Twitter, and AutoNavi, a mapping company.
All these acquisitions help Tencent fulfill a destiny it has shaped since its formative years, when Tencent anticipated the growth of social and mobile media. Tencent’s first product, the instant messenger site QQ, launched around 15 years ago, reported 829.3 million monthly active users at the end of June 2014.
GAMES DRIVE REVENUE
WeChat, Tencent’s social networking app for communicating and sharing, may best illustrate the brand’s prescience and business acumen. The app is similar to WhatsApp and enables users to connect over-the-top, free of charge on the Internet rather than over a telecom provider network, for a fee.
Launched in 2011, WeChat, or Weixin as it’s known in China, had 438.2 million active at the end of June 2014, a 57 percent increase year-on-year. In a recent campaign to promote its Smart car brand, Mercedes-Benz sold 338 cars in three minutes on WeChat. It received an additional 1,751 down payments and generated 6,677 sales leads.
In contrast to many Internet giants, however, Tencent doesn’t make most of its money by building an audience and then charging advertisers to reach it. Advertising generated only 12 percent of Tencent’s total revenue in the third quarter of 2014.
Instead, Tencent builds audiences with products like WeChat, and then sells the audiences a lot of stuff – games and virtual goods, for example – for relatively small individual transaction fees. Online games contributed 58 percent of revenue in the third quarter of 2014.
Tencent ranked five in the BrandZTM Top 100 Most Valuable Global Brands 2014 technology category, following Google, Apple, IBM and Microsoft. Net income increased 60 percent to $2.0 billion on a 37 percent revenue increase to $6.2 billion, in the first half of 2014. For the full year 2013, net income improved 25 percent to $2.5 billion on a 41 percent revenue rise to $9.8 billion. Tencent became publicly traded
in 2004, on the Hong Kong Stock Exchange.