BUZZ NEWS

QQ: Chinese ICQ Outdoes Facebook

Posted on April 2, 2008
Shu Wu

When talking about Internet, people used to focus on the US as the leading Internet market. Recently though, many western Internet marketers have been shifting their eyes towards a Chinese Internet company “Tencent”, whose brand “QQ” is well known by almost all the Chinese internet users (as well as many others).

What attracts these marketers most is Tencent’s buisness model and massive profitability. According to the 07’ earnings report announced a few days ago, Tencent made 523 million USD in revenues in 2007, this is close to 4x Facebook, at 150 million USD. Tencent’s operating profit was already at 224 million USD when Facebook was still losing money last year (and very likely again this year!).

QQ is usually seen as a social networking site, and as presented above, was naturally compared with Facebook which has been enjoying the media spotlight for over a year now. However, after studying it, you will find that it is far more than a social networking site. Starting from a “copy to China” IM software of ICQ about nine years ago (QQ was called OICQ in its very early stages), QQ has now successfully expanded its services to many online and offline sectors, and has become a leading provider of Internet and mobile telecommunications and other value-added services in China. Its various online platforms, including IM, web portal, Online Game, blog and wireless portal, are all taking the top places in respective sectors in China.

Tencent’s success is built on its astonishing user base (300.2 million active IM users out of 741.7 million in total), and there is no doubt that this base will keep expanding as QQ becomes an everyday tool for Chinese netizens. Whether you like it or not, many companies have added QQ as one of their main contact methods for clients.

Tencent is not the only Internet Company enjoying increased popularity and a massive user base, what makes it special is the way in which it converts user’s “eyeballs” into cash. When most of Internet companies are still counting on advertising as the solely profitable service they offer, Tencent is making 87% of its revenues from its users directly through Internet and mobile services.

Finally, Tencent is mainly criticized for its lack of technology innovation and its experience with virtual goods, virtual currency The development of its brand identity could be a good reference for other companies, especially foreign companies expecting to enter into the Asian market. After all, when web technology is becoming as common as the products we find in a supermarket, system innovation is very important.

By the way, here’s an interesting slideshare about QQ: