Chinese Web giant Tencent faces obstacles in its goal to expand in global IM market

Chinese Web giant Tencent faces obstacles in its goal to expand in global IM market

By Jia Lynn Yang, Saturday, July 6, 7:52 AM

BEIJING — With Web giants such as Facebook and Twitter blocked by the government here, an entire ecosystem of home-grown companies has flourished with names that are unfamiliar to many outside China. Tencent, one of the country’s biggest tech firms, is hoping to change that with a product that is already one of the fastest-growing mobile services in the world. The company’s instant messaging product, WeChat, has amassed more than 300 million users — nearly equivalent to the U.S. population — in less than three years. Tencent says there are more than 70 million users across southeast Asia, India and Mexico, with 30 million of those added in just the past three months. WeChat has also expanded into Saudi Arabia recently, and there are plans to open an office in the United States. But WeChat’s Chinese origins could cause problems for the company worldwide, just as Chinese telecommunications companies Huawei and ZTE have faced obstacles in the United States.Top Web services enjoy extraordinary access to the kind of user data that is coveted by national security officials. China has long been seen as especially aggressive with cyber-snooping, and recent revelations about American Internet surveillance efforts have heightened global concerns about online privacy.

WeChat has already run into some resistance. India’s intelligence bureau has reportedly proposed a ban on WeChat’s services. Analysts predict a potential backlash in the United States, too.

“It’s one thing when WeChat dominates in China, but when WeChat becomes popular outside China, suddenly China has this access that only the U.S. had before,” said Christopher Soghoian, senior policy analyst on speech, privacy and technology for the American Civil Liberties Union.

Jeremy Goldkorn, director of Danwei.com and a Chinese media expert, said the political issue of where servers that store user data are physically located is going to become more common. “It seems to me many governments are going to want as much control as possible,” he said.

A spokeswoman for Tencent said that “we have taken user data protection seriously in our product development and daily operations, and like other international peers, we comply with relevant laws in the countries where we have operations.”

In mainland China, WeChat is ubiquitous, used by everyone from teenagers and their parents to Tibetan activists.

It has been called the Facebook of China, but that comparison fails to convey all the things that WeChat can do. At its most basic, WeChat functions like a free text-messaging service on your phone. Beyond just texts, users can send short videos or voice messages back and forth, like a walkie-talkie. Each person can also set up a profile like the ones on Facebook.

Companies can also set up WeChat profiles to connect to customers. Have a question about a computer that needs to be fixed? Send the manufacturer your exact location via your smartphone, and an employee will tell you the nearest place to get your device repaired.

Tencent is already a $7 billion company, with revenue up more than 50 percent last year. Pony Ma, Tencent’s chief executive, has said he wants his company to go global.

“Successful or not, this is a once-in-a-lifetime opportunity for Tencent,” Ma told CBN, a Chinese financial news network.

WeChat, whose rivals include the United States-based Whats­App and Japanese Line messaging services, has been able to charge into new countries by using advertising that features local celebrities, including Bollywood actors and soccer players.

By doing this, Tencent is showing a level of savviness about how online services must often cater to local tastes and cultural norms. If Ma succeeds, it would be a breakthrough for Chinese tech firms.

“The Chinese market is both a curse and a blessing,” said Lee Kai-Fu, a longtime tech entrepreneur in China. “It’s a blessing because it’s big, but it’s a curse because the marginal cost of doing something more outside China­ isn’t that attractive.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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