Do you have pet penguins


First Business Week cover

 

A self-revolution that improves Penguin's image may keep Tencent away from its hundreds of millions of young users. Enough money, long enough experience of success, sufficiently high market expectations and a group of executives old and new who have their own words, but no one can make a strong decision ... Tencent has all the elements to make a big mistake.

Without a doubt, it is still the most powerful money machine in China's internet industry. Tencent's financial report for the first quarter of 2008 published on May 14th showed that the company's revenue reached 1.43 billion yuan, an increase of 85% over the same period last year; net profit was 534.4 million yuan, an increase of 84% over the previous year.
 
Good news is coming. Credit Suisse is raising Tencent's share price target, and Goldman Sachs and Citibank have suggested investors increase their holdings of Tencent shares. Hong Kong's Hang Seng Index Services Co., Ltd. will add Tencent to the Hang Seng Index on June 10th - an Internet stock was treated with blue chips.
 
However, if investors really follow their advice, it can result in a loss. At the very least, "see what you see is good" is an investment policy that management believes in. May 15-30 only, Tencent Board Chairman and CEO Ma Huateng, President Liu Chiping and Chief Technology Official and Executive Director Zhang Zhidong and other Tencent executives successively reduced their holdings of 2.1 million shares and raised more than 140 million Hong Kong dollars.
 
Whenever a similar sell-off happens, these executives always have a reason to explain - then most of those reasons have little to prove: that is their cunning in judging stock movements. For the past 52 weeks, the company's stock had a high of HK $ 78.30 and a minimum price of HK $ 28.50. Tencent's stock is up 111% since the March low.
 
Tencent is at its own peak. For the past 10 years, the company has relied on a globally rare, if not unique, model to generate astounding profits - the so-called value-added service model. In the west, it is difficult for you to entice young people to recharge by calling and letting them adopt a pet penguin or pig as their main source of income. At least you can't get on the billions of yuan a year like Tencent.
 
To understand how difficult sand accumulation can be, read the Morgan Stanley investment bank report. The report says that only 6 out of 100 QQ users pay and each user spends just 6 cents a day.
 
The cultural divide has led to the uniqueness of the Chinese market, including the lack of social activities and the immaturity of outdoor sports. Hundreds of millions of one-child children would rather stay in the computer room and show their new avatars to internet users thousands of miles away than go down to a basketball court and play a real basketball game with their neighbors.
 
This status quo combined with Tencent's excellent execution skills has earned the reputation of "Penguin Empire". This success is so rapid that in less than 10 years the market has entered a mature phase of slow growth. And Tencent now has to think about what future profits will depend on.
 
You have two options, one of which is to further address other young people's needs, such as news, gossip, entertainment, making friends and taking out loans, which resulted in sales of 4 billion into 8 billion. But it looks like they have bigger ambitions - they want their website to be the choice of most people (including high-end business people) to increase their advertising revenue - which means At Greater Risk.
 
With the change of the Tencent logo as a brand in late 2005, Tencent has not been clear about this request for more than two years. They announced that their goal was to increase advertising revenue, but did not dare to explicitly propose a competition for opponents. They repeatedly celebrated the growth of traffic and advertising, but never introduced the level of input cost and competition. The latter, we know that online advertising is obviously not an empty market without competition. At least Sina is a benchmark for - both in terms of content editing and advertising revenue.
 
To some extent, Tencent has always viewed the "stickiness" of hundreds of millions of QQ users as the almighty driving force - 2005 The QQ game nearly defeated former head of the online casual game Lianzhong Company almost overnight. When the QQ chat tool was linked to the QQ game client, QQ users lost the link to Lianzhong Online The Need to Play Games. For another, Tencent is not the earliest blog service provider in China, but once the QQ-linked Qzone launches it will run out of control like a QQ show and quickly become the most popular and widely used blogging product among young users in the world China.
 
However, Tencent's previous successful companies are all based on the needs of young users. Everyone knows how dangerous animals like penguins can be.
       
Either way, Tencent is at its own peak. In late May, Tencent announced that it would invest 550 million yuan in the Chengdu High-Tech Zone to build a research and development center and an information processing and customer service center, and then spent 335 million yuan to build the Shanghai Luohejing Development Zone Tencent plans to invest in a film of the same name with a specific game product as a background in order to pass the "Game + Movie" - to buy 17.76 million square meters of real estate, even the film industry. Mode, copying legends like "Final Fantasy", "Tomb Raider" and "Resident Evil".

An increasingly clear fact, however, is that Tencent gradually began to work with them when JP Morgan Chase, Goldman Sachs and Citigroup finally realized the tremendous energy generated by the "100 million young people". Go away. When Tencent tried to tear down the "Playground for Young People" label, people began to realize that Tencent and Tencent QQ have increasingly become two independent brands.

So Tencent has to answer this question: Can't wait to hug the mainstream crowd, and how far will it deviate from its core competitiveness? Do not forget that the main population of Chinese internet users are precisely those young users who are more and more distant. Mop.com, 51.com, ChinaRen, and other companies are watching these users.