Chinese tech giant Tencent has a two-word pitch to bring Western brands to its platform

This is a portion of an article based on an interview with Tencent's Steven Chang. To read the full article, sign up for access to BI Intelligence.

bii tencent revenue segments q2 2017

Tencent is staking its claim as the main gateway into China for Western brands. The tech giant recently opened up its advertising tools to marketers in the US — building a bridge between the world’s largest and second-largest advertising markets, and giving brands new abilities to reach Chinese audiences across its marquee messaging apps, WeChat and QQ.

To make its case to global brands and marketers, Tencent attended Advertising Week New York, the ad-industry summit held every fall, for the first time this year. BI Intelligence sat down with Steven Chang, Corporate Vice President at Tencent Online Media Group (OMG), to discuss his company's strategy for attracting brands to its platforms.

According to Steven, Tencent’s strategy can be summarized in two words:

1. "Connector" — of people and businesses in China

A self-described platform with “social as its DNA,” Tencent owns China’s top instant messaging and social networks — WeChat (or Weixin, as it’s known locally) and QQ, which have 968 million and 850 million monthly users, respectively. WeChat alone had 877 million daily users in June 2017, and 10 million Official Accounts, which are akin to Facebook business Pages, at the end of 2016.

Each of these apps, but especially WeChat, functions as a nexus of internet activity in China, connecting people with one another, as well as with online and offline services. These apps' user numbers dwarf the next biggest social platform in the country, Sina Weibo, which counted 367 million monthly users at the end of Q2 2017.

Tencent is also behind China’s second-biggest online payments platform, Tenpay, and is the biggest shareholder in the country’s second-largest online retailer, JD.com.

bii user growth on tencent social networks wechat qq qzone

2. "Content" — an ecosystem to draw and retain users

Tencent’s other competitive advantage is the breadth of content and intellectual property (IP) featured across its apps. It's the largest online gaming company in the world by revenue. Tencent News leads the industry in China in terms of daily users. Tencent Video ranks first in China in terms of mobile video views. And Tencent Literature, its platform for online reading, counted roughly 2.5 million daily paying readers at the end of 2016.

The company also held 77% of the Chinese music streaming market at the start of 2017 through its three streaming services QQ Music, Kuwo, and Kugou. In the broadcasting space, Tencent NBA reached 370 million unique users in the 2016-2017 season, with over 100 million tuning in for live games. At the end of the season, Tencent's NBA Finals broadcast attracted more than 175 million people — a world record for live streaming viewership online.

Tencent's portfolio of content allows it to experiment with IP and create custom and bespoke brand campaigns. The company can take a successful piece of content from any of its categories and spin it off, like taking a popular game and translating into a movie or TV show, for instance. This opens the door for brand integrations, product placements, and other forms of native advertising within Tencent's content ecosystem.

Reach in China and Beyond

Altogether, Tencent apps reach 98% of Chinese netizens and account for 55% of mobile time spent online. WeChat accounts for 30% of total mobile time spent online in China — the most of any single Chinese tech platform by a long shot — but it would be remiss to not mention the popularity of other Tencent-owned apps. The karaoke app WeSing (Quanmin K Ge) had 460 million registered users in August 2017, 76% of which were monthly users, and the mobile gaming sensation Honor of Kings boasted 200 million players — 55 million played the game daily, and 45% of all players were female.

Tencent can also lead brands toward some 135 million Chinese users outside of China. The company recently began the first phase of its international rollout of Moments ads, which are similar to Facebook News Feed ads, giving global brands the power to target outbound Chinese tourists and expatriates. China has been the world's largest outbound tourism market since 2012: Last year, its international tourism expenditure increased by $11 billion to reach $261 billion, and the number of outbound travelers increased by 6% to 135 million, per the United Nations World Tourism Organization.

bii digital advertising revenue of tech giants

Because its nucleus is in social networking, Tencent arguably offers the strongest combination of “connection” and “content” among any of the big Chinese tech companies. This is unlike Baidu, whose core product is a search engine, or Alibaba, whose specialty is online retail. Yet, when it comes to advertising revenue, Tencent still trails its local rivals and, further in the distance, global advertising juggernauts Facebook and Google. However, with approximately $188 billion expected to pour into digital advertising globally this year, focusing on attracting international brand spending can help Tencent make up the gap.

This is a portion of an article based on an interview with Tencent's Steven Chang. To read the full article, sign up for access to BI Intelligence.

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