QQ Case Study "The Chinese leading Online Community"


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QQ Case Study "The Chinese leading Online Community"

  1. 1. Inside QQ The Chinese leading online community SKEMA Business School December 2009 - Suzhou Case Study provided by the Maochistes team
  2. 2. QQ Being a very successful internet service company in one of the most controlled media environment on earth? Tencent’s QQ did it, and how! After becoming the most used instant messaging application in the world, QQ is becoming the biggest information platform in China with a simple concept: Keep it easy, keep it powerful, and keep it fun. However QQ is often presented in foreign countries as the biggest Internet company no one has never heard of, let’s see the success story of a local web based company.
  3. 3. SU Inside QQ The Chinese leading online community
  4. 4. OMMARY 6 CHINA INTERNET MARKET OVERVIEW 7 CHINA INTERNET MARKET 11 QQ FACTS & FIGURES 9 IM KEY PLAYERS 12 WHAT ABOUT QQ ? Hiistory & Governance Figures 14 QQ STRATEGIES Positionning Segmentation & Targeting 4 P’ s strategy 19 QQ SWOT & PESTEL ANALYSIS 20 PESTEL ANALYSIS 21 SWOT ANALYSIS 22 QQ FUTUR(S) DEVELOPMENT 23 WHY QQ IS SO SUCESSFULL ? 24 WHAT FUTUR FOR QQ ? On the domestic market International growth
  6. 6. THE CHINA INTERNET MARKET The Chinese Internet Market has become at the end of 2008 the world largest market in term of users (almost 300 millions). It’s a very fast growing sector of China (20~30% YoY) with a low rate of penetration. China Internet Market model is still in early age and has a very strong growth potential. Internet, the fastest growing “S” curve of adoption and far from saturation. sector in China ! This low rate indicates that there is a huge The Chinese Internet market is a very fast Potential growth. growing sector in China and all around the world. This strong growth in recent years is due to a Regarding the increase in Internet accessible robust GDP growth, low price computers, computers, home has become the preferred affordable internet connection fees, government place for most users to access the Internet, with support to Internet usage and low-cost more than 2/3 of all Internet users accessing entertainment. Moreover, the rural population Internet from home. Access from an Internet café growth has exceeded the overall population lost share to the home, but still grew. growth, even low income groups continue to However, with the low price of Internet access adopt the Internet. from an Internet café, about 51.6 Rmb per month, younger population are drawn to Internet At of the end of 2008, Chinese Internet users has cafes. While Internet access at home is more outpaced US ones and its now the biggest online expensive for those who pay for it, about 74.9 community, it represents 17.3% worldwide Rmb per month ($10.83). According to JP market shares vs 15 % for US. Morgan, Internet access from home will continue to grow at a fast rate as population continues to This market has known a very strong increase buy more computers and get more Internet these last 4 years, only 100 million users in 2005 access from home. and 298 million users at the end last year. It’s also 42% growth YOY in 2008. Chinese Internet users are spending more and more time online, a survey showed that they Despite this fast growth, China's Internet spent on average 19 hours per week, it’s almost penetration rate reached 19.1% and this rate is doubled compared to the 8.7 hours per week in slightly lower than the global average (21.1%) June 2001. If we take a look on what they are penetration rate and still largely below developed doing, we see that 94 % of them use Instant markets one such as US, Japan and Korea over Messaging service, 85 % online music and video, 70%). China is still at the beginning of the 73% search engine, 70% games and news and 7
  7. 7. (figure 1.1) Country Mobile Phones Internet Users (MM) Mobile Phone to (MM) Internet Users Ratio China 574 221 2,60 US 256 216 1,19 Japan 107 86 1,24 South Korea 43 34 1,26 UK 71 37 1,92 (figure 1.2) 2009 CHINA INDUSTRIES GROWTH 30 % 25 % Internet 20 % Healthcare 15 % Consumer staples Retail 10 % Telecom 5 % Power demand 0 % only 57% use email services. The market is One of the China’s internet market characteristic focused on young people and entertainment, is that there is few business models and still in almost 70% of the netizens are 30 years or early stage, so there is a huge potential. younger. We also have to consider that part of China A large media online Industry Media and Internet are censured. In fact China has the world’s largest population with extreme Concerning the characteristic of this market, the gaps between haves and have-nots, East and Chinese Internet industry is a large online media West. Within this context, the key objective of the industry at the moment: Chinese Government is the stability whatever the cost. The consequence of this on Internet is that • Online commerce for real goods is not websites are required to get an ICP license (Internet Content Provider) and to filter some here yet, there is a real problem of politically-sensitive and illegal keywords. monetization. • Online commerce for virtual goods, on the other hand, is well proven • C2C e-commerce sites for real goods are essentially free • B2C sites are in a very tough business in general because margin is usually very low after taking into account of warehousing and delivery logistics. 8
  8. 8. IM KEY PLAYERS Internet Chinese Market is furiously competitive with several hundred competitors, but focused on the Instant Messaging market there are only few main worldwide actors. In fact more than 80% of China’s IM market is sharing by Tencent with QQ and Microsoft with Windows Live Messenger (MSN). A ferociously market Chinese local players won the top spot in all the The chinese web market is very competitive with main Internet sectors. For example QQ Instant hundreds of actors due to f the large influx of Messaging and Baidu search engine enjoy a venture capital and the low entry barriers. strong lead in their sectors in terms of market Moreover it is also ferociously competitive share. because of the relative low level of disposable However the three biggest Chinese Internet income. portals (Sina, Sohu and NetEase) didn’t pay attention to IM and didn’t touch this market. (figure 1.3) WHERE ARE THE GLOBAL PLAYERS Sector Local Player Global Player Portal #1 QQ #4 Yahoo Search #1 Baidu #2 Google E-commerce #1 Taobao #3 Ebay China IM #1 QQ #3 MSN Online Game #1 NetEase WoW (figure 1.4) REVENUE 2008 OF KEY MARKET PLAYERS (mln USD) - source plus8star.com 1047 1100 825 468 522 429 452 439 550 370 275 97 0 Mobile Web IM Portal + Online Online Search Online BtoB e- content Portal Game Games Games engine games commerce
  9. 9. Instant messaging (IM) product permits real - t million active users and Windows Live Messenger ime text-based communication between two or with 322 million active users. more participants over the internet or some form of internal network/intranet. IM products can If we focus on the IM Chinese Market, 97 % of typically be categorized into two types: Enterprise the market is shared as below: Instant Messaging (EIM) and Consumer Instant Messaging (CIM). • QQ (68%) • Microsoft Windows Live Messenger (24%) The two main worldwide leaders on Consumer • Yahoo Messenger (8%) Instant Messaging products are QQ with 377 • Google talk (7%) (figure 1.4) - source FRANCE CHINA 70 % 60 % USA 40 % 52,5 % 45 % 30 % 35 % 30 % 20 % 17,5 % 15 % 10 % 0 % 0 % 0 % MSN AIM ICQ Yahoo Jabber Gtalk QQ (figure 1.5) - QQ vs MSN vs Yahoo Product Product Core users Main function Feature Strengthness positionning QQ Individual Age: 70% under 30 1. IM Text 1. Groups: Include 1. Perfect function entertainment years old- 2. Conference text group chat, photo 2. Aim at platform Education : 44% 3. Multi voice chat albums, BBS entertainment mode under high school, 4. Video chat 2. QQ Online games: 3. Quantity of user, 53% high school 5. Send file have quantity of users, CCU average 30 and college 6. Offline message the N°1 casual games million portal in China Windows Business affair Age: Mostly above 1. IM Text 1. MSN space 1. Clean and Clear Live and part of 22 years old 2. Conference text conformity interface, simple to Messenger entertainment Education: 72% 3. Video chat 2. Hotmail Conformity use undergraduate 4. Voice chat 3. Share document file: 2. Stable, strong 5. Send file send file to server backend 6. Offline message 3. Interconnection with Yahoo Yahoo Email and IM Age: Mostly under 5 1. IM Text 1. Audible, photo 1. Interconnection with Messenger interactive years old 2. Conference text sharing, interactive mini MSN entertainment 3. Video chat games 2. Stable , strong platform 4. Voice chat backend 5. Share file 6. Group message 7. Offline message 10
  11. 11. WHAT ABOUT QQ ? QQ, the china’s greatest Internet success ! In less ten years the e-firm born in 1998 in Shenzhen has becoming the world largest online community with 485 million active IM user accounts and the most lucrative social network with 1,047 million USD revenue. In China Internet is QQ into an array of services ranging (figure 2.1) from QQ is the main service brand of Tencent, the Internet portal (first in China, source: Alexa.com), world largest Instant Messaging (IM) service blogs (first in China), avatars, virtual items, virtual provider in China, and a leading provider for pets, online games (first casual game platform) to Internet and mobile value-added services. WAP portal (first in China). Founded in November 1998 and located in Shenzhen the firm manages by Ma Huatengi The firm is now operating in three main lines of (CEO) count 6 194 employees (in 2008) and is business : register at the Hong Kong stock exchange since ‣Internet value-added service (IVAS) 2004. ‣Mobile and telecommunications value- added service (WVAS) Launched in 1999 the original name of QQ was ‣Advertising service OICQ (for Open ICQ which means “Oh, I seek The first two represent about 90% of Tencent’s you!”). The service were Largely inspired by ICQ, revenues in 2008. an originally and famous US IM tool. However, due to the possible trademark infringement with The company, which using a penguin as its brand ICQ, and also the fact that neither the program mascot, has become the most powerful online nor the protocol is considered "open", Tencent media in China, more, a Lifestyle. For millions of changed its name to QQ. Nowadays Due to the Chinese, “Internet is QQ”, “IM is QQ”. QQ meets popularity of its service the company is therefore their needs on entertainment, communication, generally called QQ. business, learning, etc. Even the police uses QQ In less ten years QQ evolved from the initial IM to communicate with residents. soso.com Jan. 2009 IPO at HK Stock Exchange paipai.com QQ Pet xiaoyou.qq QQ Game/RTX Q Zone Jun. 2005 QQ Game/RTX Mar. 2005 Internet VAS Jun. 2004 Dec. 2003 Mobile QQ Sep. 2003 OICQ Jun. 2001 Company founded in Shenzhen Aug. 2000 Feb.1999 Nov.1998 Source : Tencent Holding Ltd.
  12. 12. The world largest online The IVAS revenue category contributed to 70.5 community percent or $719.1 million, a 95.5 increase over QQ is China’s largest online community with over 2007. WVAS contributed $204.7 million whereas 1,057 million registered IM user account and 485 online advertising contributed “only for” $120.9 million active IM user accounts (Q3 2009) and is million. (cf figure 2.3) said to be covering 95% of Chinese Internet In comparison MySpace brought in around $800 users and 78% of China’s IM market in terms of million, coming in at less than the hoped-for $1 frequency of use (2008). (cf figure 2.2) billion goal. Facebook brought in $250 to $300 These spectacular results can be materialize by million. comparing Qzone, the QQ social network (cf part ), with the most world famous social Other core metrics networks. With more than 200 million monthly 75.5 million peak simultaneous online IM user active users (January 2009), Qzone, is the world accounts 5.7 million peak simultaneous online user accounts on largest network neck and neck with Facebook QQ Game portal (for mini casual games only) which is somewhere right around the same 47.9 million paying subscriptions of Internet value- number, and growing at 5 million users a week, added services but it spread all around the world. MySpace, it 17.7 million paying subscriptions of mobile value- has around 140 million users, with over half in the added services U.S. The world Most lucrative social network The firm generated 1,047 million USD in total revenue, an increase of 87.2% over 2007 and 412 million USD in net profit in 2008. Close to 90% directly from users. (figure 2.2) ACTIVE IM USER ACCOUNTS (mln) 500 400 300 200 100 0 3Q 2005 3Q 2006 3Q 2007 3Q 2008 3Q 2009 Source : Tencent Holding Ltd. (figure 2.3) REVENUE BREAKDOWN (mln USD) 1500 1200 900 IVAS WVAS 600 Online Ad Others 2001 300 2003 2005 0 2007 Source : Tencent Holding Ltd. 13
  13. 13. A WELL GROUNDED STRATEGIES ! QQ is becoming the biggest information platform in China with a simple concept: Keep it easy, keep it powerful, and keep it fun. The firm offers a large range of adapted online services to target a huge part of the China Internet users. With a strategy base on the valued ad services QQ had found the way of the success and the notoriety. An innovative & simply to use (figure 2.4) QQ users’ distribution global online platforms We must recall that positioning is the way a company wants to be seen by consumers. At its 11,5 % beginning, Tencent would establish IMQQ as a 9,7 % 35,4 % major Instant Messenger on the head of Chinese people. But, face to the IMQQ success and the 8,6 % growing Internet market QQ had diversified it’s range of services and involved its positioning. 11,2 % According to the firm investor factor sheet, QQ is nowadays providing a “comprehensive range of 23,7 % Internet […] services” in order to “ fulfill the user’s needs for communication, information and e- 19-24 25-30 31-35 Commerce on the Internet”. 36-40 Above 40 Under 18 So by developing their products, they are looking Source : Research Inc for simplicity, that’s why QQ is easy to use. As they said they want to fulfill user’s needs so they Main target, the 19 to 30 years old must have products that respond to every Like we said before, if QQ aims to target at its Chinese Internet users segment, that is why QQ beginning a specific range of Internet consumers, has a large product range compared to a Google the IM users, we might think, with an external or Microsoft for instance. approach, that today all the Chinese Internet users are the current target of the penguin firm. Besides, if the design looks like the competitor’s products, they have sometimes more tools. For Let us comment the criteria which define QQ’s instance in the IM, the keyboards shortcuts are targets. more efficient than in windows live messenger. We can infer that QQ want also to be seen as an First the user has obviously a computer and the innovative technological firm. Internet in order to use QQ, so the target belongs to the middle class at least. Then the Internet is In fact, QQ develop, around its core IM plateform, commonly used by people who have seen the services based on the successful services of beginning of the era of this new technology, that western competitors but with a specific approach is to say generally speaking people between 15 to the Chinese needs and culture and within an and 40 years old. But as QQ decided to target original (vs western firm) business model. This is this segment through a specialized marketing trough this way that QQ try to implement its strategy, we can divide this segment in many positioning. parts : 14
  14. 14. • The young, students, who are in China or So, if we have to sum up, QQ users (cf figure 2.4) abroad : They use the basically and generally are people aged from 15 to 40 years old free services as the instant messenger (specifically the 19-30 years old which represent services, entertainment. 59%of the QQ users), Chinese most often, living, studying or working in China or abroad as expats • The worker, the active person, who use the or students. But the customers are also premium version and services such as foreigners – who use the version in English TENPAY and the IM services too. IMQQ-, with the same criteria as Chinese people, There is another growing segment we must take and companies (also foreign companies) who into account. The companies using the Online Ad tries to extend their reputation through this way of services of QQ to extend their reputation communication. throughout China such as KFC. (figure 2.5) TENCENT content portfolio IM & Community! IM Games! IM •!Mini Games! •!IM, Email, Avatars! •!Advanced casual games! QQ! •!SMS! •!MMOG! •!VoIP! •!Network PC game Advertising platform! search! Contents! IM E-commerce! IM TM! •!News & information! •!C2C! •!Music, movie, radio! •!B2C! •!MMS, IVR, CRBT! RTX! QQ.com! More than services, a Online, which is its core business channel, the community brand offers a large range of 18 services to Through the years, QQ had developed an answer the Internet consumers needs in important range of services to answer to an information, entertainment… and built a large and evolving Internet consumer needs and a fast strong community of QQ user’s. (cf figures 2.5 & growing market. The firm is now operating in 2.6) three main lines of business : As follow some of the mains QQ services : •Internet value-added service (IVAS) •Mobile and telecommunications value-added IMQQ : The Instant Messaging services is the service (WVAS) historical and core service of QQ. With 377 mln •Advertising service active accounts the first born of the penguin firm is the leading IM service in china. 15
  15. 15. QQ.com : is the largest online in China featuring strategy of this service is also to become an news, interactive communities, entertainment interactive platform featuring community based products and widely-used basic services. This results and commenting search results website is dedicated to becoming a trend-setting commenting options. and main-stream internet platform with a great interactivity. PAIPAI.com : is QQ’s online trading platform which features a lot of products in several major SOSO.com : is Tencent’s search engine website channels (women, men, online games, digital launched in 2006. It has became Tencents main products, services …). This service helps QQ to search engine and is essential to Tencent’s online build a fashionable and trendy brand culture. In a life strategy. This service provides more than 16 short laps of time (launched in 2006), this service QQ service map search services including websites, images, has become the netizens’ most favored e- music, blog, news and video search. The QQ service map commerce website. 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All rights reserved. www.plus8star.com 62 62 | 284 | 284 Innovation Arbitrage Mobile & Internet Innovation Arbitrage Mobile & Internet © Copyrights 2009. 2009. All rights reserved. www.plus8star.com © Copyrights All rights reserved. www.plus8star.com 62 | 284 Mobile & Internet Innovation Arbitrage © Copyrights 2009. All rights reserved. www.plus8star.com 62 | 284 62 | 2 Innovation Arbitrage 62 | 28 QQGames Arbitrage Innovation : The interactive entertainment since user can share and comment the music platform of QQ is the largest online game and discover the hottest music trends. community in China. Lots of game are available, from mini games to rich 3D Games like Xunxian. QQMusic : Is the largest music platform in China and the leader in providing copyrighted digital music in China’s intenet field. This service both provide online and offline music service. The community also plays a large role in this platform 16
  16. 16. QQ Model vs Western Business Model, being of a company. Let’s get have an overview “Internet Valued Ad Services” vs of the QQ business model vs the western e- “Advertising” company business model. In most advanced Internet markets, the only way When e-firm build their model they should answer to gather revenues on the Internet seemed to be 3 mains questions : by using online advertising, in the form of •How to attract users and build a community? banners, customization, paid search or paid (Virality) listings (houses, cars, personals, etc.). •How to keep them interested? (Engagement) Facebook, MySpace and Twitter might be the •What do users value? How to monetize it? poster boys of the new wave of Internet services (Monetization) but many experts have questioned their business The last one but not least determine the well models, mainly base on advertising. (figure 2.7) QQ Business Model Personalization, value-added! Interactivity! Fee-based revenue! Traffic-based revenue! IVAS! WVAS! (Internet value-base service)! (Internet value-base service)! Advertising! Fee-based IM! Fee-based IM! IM Client-end! Premium QQ, QQ Xing Mobile QQ Online identities! Content-based SMS QQ.com! QQ Show, Qzone, QQ Pet QQ Games! 2.5 G! Search! Casual, MMORPG MMS, WAP… Others! Mobile Voice VAS! SNS! Dating, e-card, e-magazine… IVR+CRBT QQ, virtual goods focus The QQ business model is sum up on figure 2. QQ isn’t quite analogous to the traditional social For instance the avatar service “QQ Show” is a network, either, as it’s a conglomerate of good example of how the company is making consumer-facing web services. The point is that money. In it, “QQ users can choose virtual its revenue model is built into how people use clothing, jewelry, backgrounds and cosmetics to their site. Means that the company monetize customize the avatar they use in services, such users directly, via digital goods or games, like as QQ IM, QQ Chat Room, Tencent Community avatars, dating services, online memberships, and QQLove. music and community sites. The company is seemingly focused on making The whole amount was paid using QB, Tencent‟s money from everything but display advertising. virtual money. With QB, QQ users can buy virtual 17
  17. 17. items to personalize their avatar or homepage, QQ doesn’t only use the instant messenger to pay for online anti-virus software, download films, advertise but also its wide net of services (QQ play online games, etc. portal, SoSo, Paipai, Game & Music portals). New products and services are often presented QB became so popular that it can be used to pay as related content on the different websites and the services or products offered by other encourage people to click. providers, for example game points of World Of Since QQ controls a large virtual communication Warcraft. The official rate between QB and RMB channel, it doesn’t advertise much in the “real defined by QQ is 1:1. world”. However, QQ also partners with other 1 QB = 1 RMB = 0.146 USD companies to create cobranded products. Some 7 QB = 7 RMB = 1 USD of them are for instance Chery’s QQ car, QQ In 2008, Internet VAS generated 719 million USD, noodles, QQ candy … as such 8% of the QQ’s active accounts and 68.7% of Tencent’s revenue. Due to the Let’s take the example of the QQ car : QQ has increasing user loyalty and stickiness over 3 mln decided to choose products that are not very USD of donations from QQ users was collected expensive and that users can actually buy. via the QQ platform. Chery’s QQ is a very cheap car (between 30.000 and 45.000 RMB), so cheap that a lot of chinese We are not able to explain the success of this people surname it “ernaiche” which means “the kind of business model at all, perhaps Chinese car that a married man buys to his mistress”. users like virtual goods more than people in other places? But the takeaway from QQ numbers today is that the company is moving faster to make what appear to be more reliable revenue streams. MySpace is exploring music, mobile and To see pictures of the cobranded products and other services for their money-making potential. advertising channels of QQ please visit our Facebook is focused on experimenting with ads dedicated website on http://imqq.fr/images that appear in feeds of user activity. Those could one day prove to be more profitable as well. Virtual goods revenue is one of many ways that social networks could prove the value of their traffic — but at this point, its the most profitable business model and QQ had well understood it. From Web to Noodles First of all, QQ chose an easily recognizable logo, its mascot: a little penguin. By doing so, QQ created a strong brand awareness and used the “cute” factor of the penguin to give a friendly touch to the communication. QQ provides monetization spaces which allow third companies to advertise on the QQ network. This advertising solution indirectly adverts for QQ since the client companies often use this as a selling argument “As seen on QQ” QQ mainly uses its wide network to launch new products: Having for instance millions of people using the instant messenger allows QQ to reach them in a matter of seconds to launch a new service with popup screens. 18
  19. 19. QQ PESTEL & SWOT ANALYSIS The Chinese market is influenced by several factors which have an impact on the demand, this factors include Political, Economic, Social, Technological, Legal. QQ operates in one of the fastest growing country in the world which also have a powerful and restrictive government. PESTEL Analysis Political aspects Technological aspects •Censorship in China which restricts the •At the end of 2008, the number of chinese competitors internet user outpaced US ones. But there is still a long way to go until saturation, barely ¼ of the •China yet doesn’t apply the OMC rules on population is online. copyright infringement and individual properties. •The price of computers able to run web based •China doesn’t really support the internet : All services has become very low (netbooks from cybercafés have been closed in china. Acer, HP or Dell) Economic aspects •Internet capable cellphones are very common •Chinese online industry sales is expected to and inexpensive in China grow 20%-30% each year from 2009 on •The number of people able to pay for services Legal aspects •The chinese law on copyright isn’t very strict. (including online services) is increasing Social aspects •More and more chinese young people feel the need to use the internet (mobile phone 3G internet connection are becoming more and more popular in china) •For chinese people QQ means “internet” •Chinese people love games •For chinese internet users their #1 goal is entertainment while in the US it’s information. 20
  20. 20. SWOT Analysis QQ is the leading company in china in the instant messaging, online portal, gaming (…) industry. This huge success is a virtuous circle for this service, however some negative aspects and threats are still present. Strenghts Weaknesses •Advanced payment system which allow 1-click •Almost no international presence payments •Structure based on fun/gaming, which isn’t •The currency QB (QQ’s virtual money) generates adapted to western vision of internet. a large amount of money and is even used to pay other services or products from other providers, Threats •Western competitors which innovate a lot and even if unauthorized. could leave QQ lagging behind •Main websites of China are from Tencent (QQ,Baidu,Taobao …) •The interest of the younger generation of chinese people to use western services •Tencent is seen by the government as the best •Not focusin enough on businessmen opens a internet company, the Shanghai Expo 2010 website is powered by the QQ’s founders. large niche to a chinese online professional network (linkedin-like) •Having a huge IM userbase makes it easy for QQ to launch new products •Very limited global competitors threat due to internet censorship Opportunities •L i m i t e d a l t e r n a t i v e s f o r a f f o r d a b l e entertainement, since the media industry is tightly controlled. •Local competitors (Sina, Sohu and Netease) didn’t enter the IM market when QQ grew •Other competitors gave up on IM since they could not get any revenue from their service •Western companies like Microsoft and Yahoo focuse on global strategy and don’t adapt their goods to the local chinese market. •Future ability to use chinese characters in domain names, which will make it impossible for international companies to compete. •It will be soon allowed to register new domain names with chinese characters, so chinese websites will have a competitive advantage because they’ll have domain names chinese people can memorize easily. 21
  22. 22. A SUCESS STORY BUT FOR HOW LONG ? QQ is a successful business story and has become a real cultural phenomenon in China. In spite of its undoublty competitive advantage on the Chinese Market, is this enough to get global ? Why is QQ so successful entertainment and it’s one of the most valuable in China ? and monetizable internet sector. That’s why QQ The 1980s and 1990s generations grew up has developed diversified products adapted to user needs. together with QQ, the style of entertainment in Moreover foreign companies SNS have a hard QQ has significant influence on them. It’s much more than a successful business story, it’s a time in China, they have a lot of difficulties to cultural phenomenon. In Chinese people’s minds, succeed. In fact, China is probably the most competitive market in the world now for foreign “QQ” is synonymous with the Internet and online SNS because of its culture. Foreign companies chat. Teenagers chatting online use the “Q” to imply “cute,” as in “You’re so Q!” QQ has are trying to re-use their global strategy to developed a lifestyle and a new kind of language, conquer China which obviously is wrong. which is called Words from Mars , it is mainly We also have to know that in China, Media and used in QQ chatting and QQ’s Qzone. Internet are censored. The key objective of the QQ has largely defined the way that young Chinese Government is the stability whatever the Chinese people communicate with one another cost. The consequence of this on Internet is that online, creating by its convenience and its sheer websites are required to get an ICP license ubiquity a preference for IM over email. In fact (Internet Content Provider) and to filter some they don’t ask one another for email addresses, politically-sensitive and illegal keywords. Some of they ask for QQ numbers. It has created a the main competitors of QQ are forbidden in powerful channel for the viral spread of news and China as Facebook or MySpace. Within this information, entertainment, and even of brand political context, QQ enjoy a very strong messages. competitive advantage comparing with foreign companies. One of the key of success in the Chinese internet market that QQ has well understood is the But there is a risk in the future for QQ. The entertainment. In fact, more than 80 % of political environment will probably change with Chinese Internet users spend their online time on the entrance of China in the OMC. 23
  23. 23. The consequences will be that the government as the same way that today in America the term could not censor media and internet anymore “google it” or to be “youtubed” is employed. and the market will be more competitive with the Which means QQ can have a great reputation in entrance of new competitor as Facebook. foreign countries. To avoid this risk TENCENT will consolidate his So QQ is now working with partners in Asia, Italy position focused on R&D and long term and the USA to provide services beside the development and maximize its monetization. common instant messenger. In Asia Tencent has There is more to come, despite its incredible partnered with Ibibo in India by bringing services Internet influence, it derives only a minor share of such as game, mail chat. Then with VinaGame in its revenues from online advertising. Recognizing Vietnam to bring the QQ Casual gaming portal as this untapped potential, Tencent is beefing up its well as the QQ Messenger as an addition to the advertising team and working on building a already Vietnamese gaming communities. In the higher trust in their capacity as an advertising USA, because of the importance of tools like platform. This requires notably improving the Google, Facebook, YouTube or else, QQ understanding of it with advertisers, as those are partnered with AOL to bring only QQ Games in gradually shifting advertising dollars to Internet this since 2007. Finally, in Italy, QQ has launched and embrace online communities. a Italian language version, QQItaly. Given this political environment and the Perspective & critical analysis characteristics of the Chinese internet market, We must not occur that they have a lot of work to the success of QQ in China is not in danger now do to catch up the major competitors. Indeed, and rest with its big competitive advantage vs despite the translation of QQ, Chinese stays the foreign companies. But QQ succeed only in official language of the interface which makes the China and has difficulties to conquer the global understanding of the messenger more difficult for market. foreign users. For instance, all the added What is the strategy of QQ to enter and succeed services, which also make the value and the abroad? strength of QQ, are only in Chinese characters and language. International development !? Although QQ is well-known in China, it has not What are the next step to be able to compete yet the same reputation worldwide. Besides with other instant messenger services or else? It South Africa, QQ is mainly not used abroad, but means being known internationally. Google for it is changing little by little since the creation of instance bought YouTube, so QQ could buy IMQQ in 2008. The goal is first to enable some new services, or shop for foreign brands foreigners to chat with the Chinese people and licenses in US, Europe and Japan within the through this tools of communication, then to be next few years. able to compete in a significant way with other instant messenger services such as MSN. QQ could also buy competitors in developed countries which means smaller competitors and “ Q Q I n t e r n a t i o n a l w i l l d e v e l o p t h ro u g h implement his technology as they did in India. applications dedicated to promote the development of an international community in “MIH India Global Internet, which owns social networking site ibibo.com, will sell up to 50% China” M. Violo , QQ Product Manager stake in five years to China’s Tencent Holding Ltd First let us take a look at South Africa. QQ has Inc., an instant messaging service provider owned 36.1% by Naspers.” been used by people during 3 years, a local music band even titled one of their song«QQ me» 24
  24. 24. “This partnership allows us to benefit from Tencent’s expertise in providing Internet and mobile value-added services, as well as online advertising services,” said Ashish Kashyap, chief executive officer at ibibo Web.” “The deal is our initial attempt to explore opportunities in an emerging market,” said Catherine Chan, a spokesperson for Tencent Moreover, as Tencent is currently ruling the roots in Asia, they could benefit from the others who may want to join the market by process already tested in other industries. ❖ So they have not really adapt the product, in fact they only do the translation of the main interface. The added value services remains in Chinese. ❖ They have to enter in a market by adapting the most relevant service, gain reputation and then extend their range of services. ❖ They should develop in the Developing Countries Market 25
  25. 25. NOW WHAT ? QQ is a well established internet company in China providing a wide range of services and entertainment solutions. Moreover its close link to the government allows Tencent to have a clear competitive advantage since the most important international competitors are banned in China. The logical next step for this company would be to conquer the global internet market. Doing so isn't expected to be simple, however with the number of emerging markets (India, Brasil,Russia, Africa ...) and QQ's adapted business model this could be a clever step of the company.
  26. 26. SOURCES www.tencent.com http://www.imqq.com www.wikipedia.com http://www.mercurybrief.com www.web2asia.com www.plus8star.com www.techcrunch.com www.mashable.com
  27. 27. THIS CASE STUDY WAS PROVIDED BY THE MAOCHISTES TEAM http://imqq.fr/ The Financial Men The AD Men The Geek The e-Men Charlie Jaafar Bennani Robin Garabedian Morgan Denis Laurent Igolen Johary Ramariason
  28. 28. QQ