Tencent Holdings Limited

Executive Summary

        From a five-founder start-up to a Hong Kong listed company of over 20,000 staff, Tencent had overcome numerous internal and external challenges, including financing technological improvement and creating value for Chinese Netizens, as well as forming strategic partnerships with industry players in supply value chain. Tencent’s revenue grew steadily to over 4Billions RMB in the year 2010, ranking top three internet company in the world by market value. While China had most internet users of any country in the world, e-commerce growth significantly and showing an over 50% increase annually for recent 10 years. Tencent started to find next growth generator in e-commerce market. ‘Paipai’ auction website, launched in 2005 by Tencent, as a symbol of Tencent next strategy, was not growing well as expected. Only obtained less than 10% of e-commerce market share in 2010 while five years later after the first entrance. Though Tencent had almost 1 billion account users, few of them use Paipai as their first choice to purchase stuffs from internet.

        Lack of brand recognition, lack of management resources, making no difference with other first-mover in e-commerce market, failure integration with other Tencent online community products. These issues pushed Tencent to make changes. Otherwise, Tencent will not make the achievement in e-commerce market as they usually success on other internet business. Business model need to be changed; strategy need to be reset; big data analysis of target customers shall be used in the right place; social e-commerce which takes Tencent’s own advantage must be built; improve users experience through payment method, QR code scanning; even conduct business acquisition, all these doable plan sounds critical and shows that Tencent facing difficulties and having a long way to make achievement in e-commerce market.

Introduction.

Tencent Holdings Limited., founded in 1998, is a Chinese investment holding company whose subsidiaries provide social network, mass media, entertainment, Internet and mobile phone value-added services, and operate online advertising services in China. Tencent was an internet start-up with five passion founding members who believed in the transforming power of the internet. After many changing of shareholding profile, Tencent conducted an IPO in Hong Kong in June 2004 and it was added as a Hang Seng Index Constituent Stock in 2008, resulting in a new distribution of shares with MIH group and Tencent founding members both holding 37.5% of the company.

Tencent's many services include social network, web portals, e-commerce, and multiplayer online games. Its offerings include the well-known (in China) instant messenger Tencent QQ and one of the largest web portals in China, QQ.com. It is the fourth-largest internet company in the world just after Google, Amazon, and EBay. In 2012, Tencent's revenue outstripped Facebook's by over $2 billion.

At first three years, Tencent remained unprofitable. The company originally derived income solely from advertising and premium users of QQ, who paid monthly fees to receive added virtual goods. But by 2005, charging for use of QQ mobile, its cellular value-added service, and licensing its iconic penguin character, which can be found on snack food and clothing, had also become income generators. While Tencent's services have included online gaming since 2004, around 2007-2008 it rapidly increased its offerings by licensing games.