Looking back at Tencent over the years

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The greatest competitive advantage of any leading company in the technology industry must be its ability to innovate. Once this ability is lost, failure is inevitable. Tencent is no exception.

How did a company born in the wild, without a father and without the nourishment of Peking University and Tsinghua University, achieve a market value of 100 billion US dollars in 15 years, comparable to the size of the four major banks, and ranked among the top four Internet companies in the world?

Can this be achieved simply by copying? Let’s turn the clock back 15 years and take a look at Tencent’s path to innovation.

1. How did QQ defeat ICQ?

In 1996, ICQ was born and became popular all over the world. By 1998, this software had monopolized the instant messaging market in China. In this year, ICQ married into a wealthy family and became an asset of AOL, the largest Internet group in the United States. With wealth and popularity, its position is unshakable.

In 1999, QQ was launched with only two employees, namely the founders Ma Huateng and Zhang Zhidong. They lived in a private house in Shenzhen and devoted themselves to research and development for half a year.

At that time, QQ was still very crude, but the Chinese interface made QQ quickly attract the attention of the market. If it were just that, QQ would not have achieved the success it later achieved, because at that time, a number of similar communication software had already been born in the market: PICQ, TICQ, GICQ, Sina Paging, Yahoo Instant Messenger...

QQ quickly stood out from the crowd of similar software with the following series of innovative technologies:

First, all ICQ information is stored on the user's end. Once the user changes the computer to log in, the friends added previously will disappear. However, QQ's user information is stored in the cloud server, and users can log in and chat on any terminal.

Secondly, ICQ can only chat when friends are online. QQ pioneered the offline message sending function and the invisible login function. You can choose the chat partner at will and have your own personalized avatar.

Third, ICQ makes profits from instant messaging software customized for enterprises, while QQ insists on seeking commercial opportunities through free services for consumers.

It can be said that the reason why QQ is successful is that it is the first company in China's Internet history with Internet thinking. The fundamental difference between it and ICQ lies in the difference between Internet concepts and software concepts.

The Internet concept defeats the software concept. Isn’t this the most popular idea nowadays? But 15 years ago, Pony Ma had already realized this.

The market is always smart, and it only rewards innovative products that provide the best user experience. By 2000, QQ had dominated the market and become the king of the instant messaging market.

2. How did QQ groups defeat chat rooms?

In the era of QQ's rise, surfing the Internet = chat room + Sina News + email. The most famous chat rooms are Sina, NetEase, Bihaiyinsha, etc. At the peak, there were tens of thousands of people online in a room of NetEase chat room. The story of "First Close Contact", which was popular on the Internet, took place in a chat room. Many people dreamed of encountering "Qingwu Feiyang" on the Internet.

All is past.

The decline of chat rooms lies in the fact that the user relationship is between strangers and is too unstable. QQ's innovative QQ group allows users to view chat records and define friend names by themselves, transforming QQ from the early relationship between strangers to a real user relationship.

At this time, the market value of the American AOL Network Group reached 163 billion US dollars. At its peak, its AIM instant messaging software integrated the functions of ICQ, launched the chat room function, and had 20 million users.

However, the functions of AIM software and AOL chat room are separate, which makes AOL chat room only a chat tool for strangers, and the use of these two software services is still charged: to log in to AOL chat room, you have to pay a monthly fee of $19.95. Now it seems really stupid and incredible, but in that era, when software was king, it was so natural.

The American social networking site Myspace was launched in 2003, and Facebook was not launched until 2004, 1-2 years later than the launch of QQ Group in 2002. It can be said that the world's first commercially successful social network was not FACEBOOK, but Tencent's QQ Group.

The new version of QQ released in August 2002 added the QQ group function, friend phone binding, camera binding, mobile phone address book storage in cloud servers, and added friend phone type, brand, model and other information to mobile phone data. These features quickly transformed QQ into a real social network platform, and the QQ number became people's online ID card.

After 2003, QQ launched functions such as QQ Show image, group photo album, and QQ Space, which continuously deepened and satisfied the potential social needs of users, making its popularity remain strong.

3. How did QQTM defeat MSN?

MSN launched its instant messaging service in 1999. Relying on Microsoft's strong capital and the WINDOWS operating system platform, by 2001 it had defeated AOL and become the world's largest instant messaging platform.

By 2003, MSN had 300 million users and was number one in almost all major markets except one: China.

This year, the ambitious MSN began to enter the Chinese market on a large scale and started the battle with QQ. With the free binding strategy, the brand image of tall, rich and handsome, the powerful hotmail mailbox and MSN news website services, it quickly occupied a place in the business communication market.

Tencent was in a precarious situation at that time: QQ Show had just been launched and had not yet achieved profitability. There was a shortage of talent, and in order to survive, it kept selling itself to raise funds: 40% of its shares were sold to overseas investors in exchange for US$2 million in wages, while no domestic investors were willing to buy.

In 2003, Tencent launched the enterprise version of QQTM to compete head-on with MSN. Since then, through a series of technological innovations and perfect and detailed user experience, it has gradually won back the hearts of high-end users:

UDP file transfer is faster, file breakpoint resume, file drag and drop window, shared folders, screenshots, friend grouping, chat history backup and quick query, SMS communication, video conferencing, network hard disk, soft keyboard password protection, personal business card...

This series of technological innovations were all launched by QQ first, and MSN either followed up or did not. Suddenly one day, everyone discovered that the white-collar workers' work communication tool had quietly switched back to QQ, and MSN had quietly become a supporting role that no one paid attention to.

4.How did QQ Games defeat Lianzhong?

In 2003, Ourgame was the world's largest casual gaming platform. Its founder, Bao Yueqiao, was the developer of UCDOS and one of the earliest technical experts in China's software industry.

At the peak of its glory, Lianzhong had 200 million registered users, 15 million monthly active users, a maximum of 600,000 concurrent online users, and servers in China, the United States, Japan, and South Korea. Such a scale seemed unshakable.

In 2003, QQ Games launched its first version, which included three games: card upgrade, four-country military chess, and chess. Bao Yueqiao played it for a while and felt that it was just so-so, so he decided to focus on the new project "Lianzhong New World" and stop updating the original system.

In 2004, Ourgame married into a wealthy family and became a subsidiary of NHN, the largest online game group in South Korea. A large number of Korean online game resources could be transplanted over, and Tencent could not match them in terms of products, funds, and talents. Moreover, at this time, it was not only Tencent that entered the casual game market, but also NetEase, Shanda, Kingsoft and other big companies that developed their own games.

But in this year, QQ Games gradually came from behind and surpassed the strong ones. The logic of surpassing is:

A. Lianzhong shifted its focus to the large-scale game market. Casual chess and card games were no longer updated, and some bugs persisted for a long time, leading to the loss of old users.

B. Tencent updates and iterates quickly, winning with more exquisite interfaces and more user-friendly operating details.

Let me give you an example, starting with the interface.

In the 2005 version of Landlord, QQ allows users to customize their character images, the sidebar displays players’ historical battle records, and the background is clear.

There is a fee for defining the character image on Lianzhong, otherwise it will be blank, with an ugly background, a bunch of advertisements, and irrelevant system messages in the sidebar. There is no aesthetic appeal at all.

Let’s look at the humanized operation.

The automatic seat-finding function of Lianzhong is charged, otherwise you have to look for it yourself. Sometimes we finally found a seat but couldn't sit down, and a prompt popped up saying that other members didn't want to play with us (there were many reasons, some complained about the low level, some complained about the slow network speed...), which was really speechless.

QQ can automatically join and customize the search for like-minded netizens, and all of this is free.

It is these micro-innovations that defeat Ourgame in details.

5. How did Tencent beat Shanda in online games?

In 2001, Shanda introduced the Korean online game Legend, which became popular across the country and officially established the business model of online games.

In 2002, NetEase's independently developed Westward Journey II was a success. In 2003, Fantasy Westward Journey became popular again. Since then, NetEase has become the leader in the field of independently developed online games.

In 2003, Tencent also began to enter the game market, but until 2007, Tencent's large-scale games had not made any achievements.

What is the reason? Not only did Tencent do nothing, but Shanda, the founder of the online game model, also introduced a large number of Korean blockbusters in the following years, almost all of which failed.

This has to make people reflect.

I think the key reason is that Shanda's success was first brought about by the innovation of its business model, but there was no improvement in its products. It adopted a large number of copycats. With the progress of domestic R&D and the intensification of competition, any company that lacks product innovation capabilities will inevitably be eliminated by the market. This is the case with Shanda, The9, and Tencent in the early days of the large-scale online game market, even though it has a popular social networking platform.

In 2006, shooting games began to rise in the Korean online game market, and "Raid OL" occupied a major market share. According to online reviews, this game "has real gun data, human physics comparable to CS, and the map design is very exquisite and excellent, and each map of "Raid OL" has strong playability." This game was also quickly introduced to the domestic market, but unfortunately it did not last long.

In the shooting game market, the old game CS still dominates. Its excellent operating experience and perfect balance cannot be shaken by any random game.

In 2007, Tencent bought the game CF Cross Fire from a small, second-rate Korean company at a very low price.

Its developer, Smile Gate, is just a small company with 33 people. It has only produced one game, CF, so far. Its R&D capabilities are really limited. It has been lukewarm in South Korea since its launch and even ceased operations and withdrew from the market in 2012.

In fact, Tencent has made its first fortune through QQ Show and chess and card games this year. It not only bought back CF, but also bought a large number of online games such as League of Legends and Dungeon & Fighter.

But this time, Tencent has realized that traffic does not guarantee everything, and a failed product will be doomed no matter where it is.

Tencent rebuilt and refined the large number of kimchi games it bought. CF was launched on the market after a year of in-depth development.

Please note that after CF was launched in March 2008, 22 versions were released in two years until February 2010, with an average of one new version released every month. The diverse modes, characters, and guns, the constantly optimized operating experience, and the most reasonable and balanced system under the prop charging model ultimately won it the recognition of the majority of players.

Since then, a large number of Korean online games independently developed or introduced by Tencent have achieved success. It is through the replication of this kind of R&D micro-innovation that in 2010, Tencent defeated Shanda and took the top spot in the online game market.

Since then, the Chinese online game market has undergone tremendous changes: those companies that only knew how to introduce foreign blockbusters and had no innovation capabilities have declined one after another, QQ Dance replaced Audition, QQ Speed ​​defeated KartRider, and the giants are at war.

On the other hand, those online game companies with innovative capabilities and independent R&D, such as NetEase, Changyou, and Giant, are getting more and more prosperous. In 2009, Tencent launched QQ Westward Journey, which was beaten badly by NetEase.

This fully illustrates the fact that the success of Tencent's online games is the success of product innovation, while those relatively mediocre works, even if they also have the traffic diversion of the QQ platform, will still be ruthlessly ridiculed by market laws.

This rule is actually repeated on Tencent:

QQ Browser, QQ Video, SOSO Search, Paipai Online Shopping, QQ Antivirus, Tenpay, SOSO Maps, because they only imitate and lack innovation, they can only play supporting roles in the market;

QQ Mail was not very popular in the early days until it recruited the technical genius Zhang Xiaolong, and then it achieved rapid success.

Tencent is not invincible, but once it finds the magic box of innovation, it will be reborn and crowned with the golden robe.

6. WeChat’s innovation and future

In 2010, mobile Internet came roaring in, and Tencent was the first among all Internet giants to turn around.

The elephant's turn was so light and quick.

From January 2011 to the end of the year, WeChat updated 11 versions in one year, an average of one version per month. Version 1.0 only had a chat function, version 1.1 added the ability to read mobile phone contacts, version 1.2 connected to Tencent Weibo, version 1.3 added multi-person conversations, and version 2.0 added a voice intercom function. It was not until this time that Tencent completed its imitation and catching up with its competitors and began its road to innovation.

Version 2.5 was the first to introduce the function of viewing nearby people. It was the launch of this function that achieved technological innovation and explosive growth in users over its main rival, MiTalk.

Version 3.0 was the first to add the drift bottle and shake functions, and version 3.5 added an English interface and fully entered the overseas market. At this time, Japan's LINE also rose in the international market and began to occupy Southeast Asia earlier. The American social giant FACEBOOK was still dreaming, and WHAT'SAPP was still continuing the software thinking of ICQ back then, charging users service fees. Time is running out and the opportunity cannot be missed.

Version 4.0 was the first to launch the photo album and Moments features, version 4.2 added a video chat plug-in, version 4.3 added a voice search function, and version 4.5 added multi-person real-time chat, voice reminders, and navigation based on the location sent by the other party. WeChat's social platform functions are becoming more and more complete, and it is gradually developing into a mobile smart assistant. It must be pointed out that in video chat and smart voice search, WeChat was one step ahead of LINE, and the product experience began to lead. (LINE's success is more due to its celebrity marketing strategy and the construction of a commercial ecosystem, and it has no advantage in product innovation experience.)

Version 5.0 adds an emoticon store and a game center. The scan function has been completely upgraded and can scan street views, barcodes, QR codes, word translations, and covers. The WeChat payment system has been opened up, and the framework of a mobile business empire has been basically established.

From a global perspective, LINE's commercialization has undoubtedly been successful earlier and its internationalization pace is also faster, but Tencent has always been best at catching up: as long as the direction is right and the focus is on innovation, miracles will always happen.

In April 2013, the number of overseas users exceeded 40 million, and in August it exceeded 100 million, snowballing at an average monthly rate of more than 15 million. At this rate, it will exceed 200 million by the end of the year, reach 400 million next year, and the number of global users will reach 1 billion.

If all goes well, Tencent will truly become an innovative leader in the global Internet. Next, let us witness the miracle.

7. Tencent’s approach to innovation

In my opinion, Tencent's innovation is mainly reflected in the following aspects:

First, Tencent is one of the earliest companies in the world with an Internet mindset. It is this mindset that sets it apart from ICQ and AOL, and makes it the only instant messaging company in the world to achieve large-scale commercial success.

Second, Tencent is the world's earliest successful real social networking platform. Through the innovative seamless connection of QQ and QQ groups in 2002, it shifted from stranger social networking to real social relationships, destroyed the traditional chat room business model, and made the first pot of gold on QQ Show. This transformation was two years ahead of Facebook.

Third, it is one of the earliest Internet companies to implement rapid iteration and micro-innovation. It is this micro-innovation ability that has enabled it to defeat many Internet giants such as MSN, Lianzhong, and Shanda, and gain strong profitability. Platform diversion has only magnified this commercial success, otherwise it would be impossible to explain the many failed byproducts of Tencent, such as SOSO search.

Fourth, Tencent is one of the most innovative companies among all the big companies, which is reflected in the success of WeChat and its rapid transformation in the mobile Internet era. Even from a global perspective, Tencent's transformation was earlier than Facebook in the United States and only slower than Google.

As of the first quarter of 2013, Tencent had 25,000 employees, more than half of whom were R&D personnel, and had applied for a total of 7,000 patents, second only to Google and Yahoo among global Internet companies.

This is Tencent’s innovative heritage.