Inside Tencent

Inside Tencent
+8* | Plus Eight Star Ltd
Mobile & Internet Innovation Arbitrage
China, Japan & South Korea
www.plus8star.com
Learning from the world’s leading online community

Congratulations!
You are about to look into Tencent, China‘s most
astonishing Internet success
This report explores the details of its services, strategy,
business models and actual usage.
It also highlights the key catalysts and best practices that
led to its success and overwhelming presence in the
Internet life of an entire generation.
© Copyrights 2009. All rights reserved. www.plus8star.comMobile & Internet
Innovation Arbitrage

About this report

Mobile & Internet
Innovation Arbitrage 4 | 284
© Copyrights 2009. All rights reserved. www.plus8star.com
Why we publish a report about Tencent
Asia is advanced?
We have been researching advanced Asian markets for nearly 10 years.
During that time, we found that while Western social networks were struggling
with advertising-based models, several Asian services were doing very well with
B2C models, notably personalization, avatars and games.
Why Tencent
In 2007, Tencent was on its way to record over 500 million USD in revenue and
over 200 million USD in profit. We thought it was a good time to get the word out
and published the first edition of this research.
In 2008, Tencent was getting more and more attention and passed 1 billion USD
in revenue, with over 400 million in net profit.
According to its first quarter 2009, Tencent might record over 1.5 billion USD in
revenue this year with and a net profit over 600 million USD. This is more than
the acquisition price of MySpace by News Corporation.
We will not explain why ―people buy things that don‟t exist‖.
We will assume you understand digital goods exist as much as MP3 songs and
accept the fact that dozens of millions find something of value in buying or
offering digital objects to enhance their online life.

Mobile & Internet
How you can benefit from this report
Whether you are a social network, a gaming company, a telecom carrier, a
media group, an investor, or simply interested in knowing more here are
some of the reasons why Tencent makes sense to look at:
First, Tencent is the world’s largest online community (over 377 mln monthly
active IM accounts vs. Microsoft Windows Live‘s estimated 320 mln) and casual
gaming portal. Only China Mobile can claim such a large user base.
• How can you gather so many users?
• How to keep them interested?
Second, its revenues were 1,047 mln USD in 2008, much higher than Facebook
and MySpace, most of it coming from non-advertising services. More, the
company is incredibly profitable with 412 mln USD in net profit!
• What are Tencent‘s key services?
• How can they make users pay for Internet services in a low-income market?
• What are the successful business models at work to achieve such results?
• What kind of economy & ecosystem are being created around the service?
Last, Tencent is still growing fast and there is much to learn from it.
• What are Tencent‘s recent strategic moves?
• What are their ambitions for overseas markets?

Mobile & Internet
Leveraging best practices
Now the next step is to dive into this report and spread its knowledge to
your key people – a client of our previous Inside Cyworld report translated it
entirely into Chinese for his Chinese management team!
We encourage you to look beyond numbers and focus on what are the
proven concepts and great ideas that Tencent implemented in QQ. Tencent
itself was inspired by ideas from outside such as ICQ (US IM), Cyworld
(Korean SNS) or Hangame (Korean casual game portal) and more.
Last, we wish you to successfully adapt the best of Tencent‘s concepts and
business models to become – who knows – the Tencent of your own
market!
The editors
Benjamin Joffe | Founder & CEO | +8*
Yiqun Bo | Consulting & Research Manager | +8*

Mobile & Internet
They purchased the 2008 edition
Selection of companies who purchased the previous version
Microsoft | Tencent is MSN‘s main competitor and the first company to
monetize IM and build an ecosystem with such scale.
Nokia | ―Connecting people‖ is what Tencent is also about – connecting
most of China‘s Internet users – but it also monetizes connections! As
Nokia is evolving towards becoming a web company, benchmarking a
successful web and mobile service counterpart makes lots of sense.
Harvard Business School | The centenary institution stays at the top
by researching successful economic models. Tencent is an outstanding
example of how to get paid in the information goods market.
DeNA | Operator of ―Mobile Game Town‖, Japan‘s largest and richest
mobile social network made about 250 mln USD in 2008). Learning best
practices to improve their service.
Mail.ru | Russia‘s leading email provider and top portal site. Possibly on
its way to become Russia‘s Tencent?
Vinagame | Vietnam‘s leading online gaming company. Virtual goods is
the king of revenue models in the region and adding communication to
gaming can be a killer recipe.

Mobile & Internet
Methodology
A company as large and complex as Tencent is unlikely to be covered in its
entirety. To make the best use of your time, we provided views from
different angles to help grasp the key elements the QQ universe.
This research, which was conducted and enriched over more than 2 years,
includes input from:
Research in online and print media.
Use and analysis of QQ‘s various services.
Interviews and discussions with Tencent executives.
Interviews of experts involved in China‘s Internet and mobile scene.
Interviews of users.
We hope you will enjoy your reading and encourage you to apply QQ‘s
numerous proven ideas to your own context. China is now an innovation
powerhouse for IM, gaming and social networking and it is time for the rest
of us to learn from it!

Mobile & Internet
About the Authors
Benjamin JOFFE, CEO, +8*
Benjamin founded the digital strategy company +8* (www.plus8star.com) while being part of
Japan‘s mobile revolution, Korea‘s Internet boom and China‘s mobile crash & Web 2.0
revival during the past 9 years.
He is a regular keynote at industry events (Ad:Tech, GSP East, Asia Venture Capital Forum,
eComm, etc.), quoted by the media on Asian web and telecom sectors (The Economist,
CNN) and was named among China‘s Top 100 Mobile Industry Influencers in 2007 & 2008.
Benjamin co-founded and runs monthly the Beijing chapter of Mobile Monday, making it the
leading mobile industry forum in China with over 3,000 members and part of a global
network. He is also a founding partner of Cmune, a startup building the next-generation
social games platform.
Benjamin speaks fluent English, French and Japanese with working knowledge of Korean,
Chinese and Spanish.
Yiqun BO, Consulting & Research Manager, +8*
Yiqun has been working in China‘s ICT industry for the past 10 years. Before joining +8*, he
was notably involved in research on B2B e-commerce, as well as Beijing Eleventh Five-Year
(2006-1010) Plan on informatization.
He has been the lead consultant in numerous projects ranging from the evaluation of MVNO
opportunities in China, mobile innovation and ecosystem assessment, research on Web 2.0
and virtual worlds and has provided his expertise to clients such as Mitsui Global Strategic
Studies Institute, Microsoft, Adidas, MIH and the EU-China Information Society Project.
Yiqun speaks fluent Mandarin, English and French.

Mobile & Internet
Acknowledgements
We would like to thank for their contribution and support at Tencent
Ms. Charlotte CHAN, General Manager, Investors Relations, Tencent.
Tencent executives who regularly contribute their views to the local media at
various conferences and seminars.
Unnamed executives and friends who gracefully enlightened us during informal
discussions.
The numerous expert interviewees who added perspective to media
reporting and corporate talk. They are listed on the following page.
Our clients and partners who helped us tailor this research to their needs
and bring more perspective to it.
Last, thanks to the millions of users of QQ – you made it what it is!

Mobile & Internet
Experts interviewed in this research
Leo WANG
Founder
Mobile 2.0 Forum
Jim LEE
General Manager
EA Mobile
Gang WANG
Vice President
Sina
Xing WANG
Founder
Xiaonei, Hainei, Fanfou
Brian RU
Senior Analyst
Matrix Partners
Zili REN
Founder
Appleap
Project Manager
China Mobile
Olivier GLAUSER
Managing Director
Steamboat Ventures
Gang LU
Founder
Mobinode
Yong LV
Investment Director
SK Telecom, China
Leon HUANG
Product Manager
Jiapu.com
Former Project Manager
Tencent
Catherine CHAN
IR General Manager
Tencent
Kaiser KUO
Digital Strategy Director
Ogilvy China
Tangos CHAN
Editor
China Web 2.0 Review
Alex LIANG
CEO
Pica.com
Dr. Song LI
CEO
Digu, Zhenai
Buddy YE
CEO
Wangyou Media
Wayne SHIONG
Partner
WI Harper
2008
2009
Dirk HE
Senior Manager
Huawei

Mobile & Internet
Disclaimer
Opinions
Opinionated views are expressed in several chapters, those should be seen as
our opinion or the interviewee‟s opinion according to the case.
Claims
Due to the nature of this product, all our sales are final.
We recommend that you study the information, table of content and sample
pages provided on our website to determine whether this report fits your needs.
We are interested in your feedback!
Tell us your opinion and what you would like to see in the next version.
info@plus8star.com

Table of Content

Mobile & Internet
Table of Content | Overview
About this report 3
Table of content 14
1. Introduction 17
2. Market Overview 24
3. QQ Facts and Figures 95
4. Key Services 123
5. Strength & Weakness 236
6. Users Interviews 241
7. Experts Insights 249
Appendix 277
Notes
1. Chapters are accessible via the hyperlink
2 This icon takes you back to this page
Exchange rate
1 RMB (= 1 QB*) = 0.146 USD; 1 USD = 6.8 RMB
* QB is Tencent‘s virtual currency

Mobile & Internet
Table of Content | Details
About this report 3
Table of Content 14
1. Introduction 17
1. Tencent and China‘s Internet 18
2. Tencent‘s bright future 19
3. Tencent vs. Foreign SNS 20
4. Profitable SNS in Asia 21
5. Turning SNS into successful businesses 22
6. What to learn from Tencent 23
2. Market Overview 24
1. General figures 25
2. Why do global giants fail in China? 35
3. Dispelling Misconceptions: Internet & Media
Censorship 41
4. Key players 45
5. Market Trends 61
6. Internet heroes and social trends 71
3. QQ Facts and Figures 95
1. General figures 96
2. Key milestones and results 107
3. Legal stories 116
4. Key services 123
1. QQ service map 124
2. QB: Tencent's virtual currency 126
3. Economic value of QQ digital assets 132
4. Payment systems 137
5. Instant messaging 141
6. QQ Show 145
7. Qzone 157
8. QQ Games 168
9. QQ Pet 172
10. Premium Memberships 188
11. Mobile services 191
12. Additional services 203
13. Online Advertising 215
14. Access solutions 223
15. Future Developments 230

Mobile & Internet
Table of Content | Details
5. Strengths & Weaknesses 236
1. Tencent‘s strengths 237
2. Tencent‘s weaknesses 238
3. Opportunities for Tencent 239
4. What are the risks for Tencent? 240
6. Users Interviews 241
1. Methodology 242
2. Profiles 243
3. Interviews 244
4. Image of QQ 248
7. Insights from Experts 249
1. Experts interviewed in this research 250
2. Experts interviewed in 2009 251
1. Views on QQ's local competitors 253
2. Views on QQ's international competitors 255
3. The digital goods business model 256
4. Tencent's innovations 257
5. What is the limit for growth 258
6. What could go wrong? 259
7. What is the potential of mobile for QQ? 260
8. Overall Consensus 261
3. Experts interviewed in 2008 262
11. Exclusive interview with Tencent 263
12. Characteristics of China's Internet industry 267
13. What made QQ so successful? 269
14. What is your professional opinion of QQ? 270
15. What would be QQ‘s weaknesses? 271
16. Who could compete with QQ and how? 272
17. Can Tencent internationalize? 273
18. QQ‘s influence on Chinese society? 274
19. Favorite Chinese Internet services? 275
20. What‘s next in the Chinese Internet? 276
8. Appendix 277

1. Introduction

Mobile & Internet
Tencent and China’s Internet
In China, Internet is QQ
QQ is China‘s largest online community with over 377 mln active IM accounts.
Many users connect to Internet solely for using QQ.
QQ evolved from the initial IM into an array of services ranging from Internet
portal (#1 in China, source: Alexa.com), blogs (#1), avatars, virtual items, virtual
pets, online games (#1 casual game platform) to WAP portal (#1).
And users pay for it
Tencent generated 1,047 mln USD in revenue and 412 mln in net profit in 2008.
Close to 90% directly from users.
All this in an environment with low GDP/capita (the average revenue of an
Internet user in China is 400 USD), low trust and moderate network speed.
And it is not only about business, but social influence as well
The most powerful online media in China.
Lifestyle – for mlns of Chinese, ―Internet is QQ‖. QQ meets their needs on
entertainment, communication, business, learning, etc.
Over 3 mln USD of donations from QQ users was collected via the QQ platform.
Even the police uses QQ to communicate with residents.

Mobile & Internet
Tencent’s bright future
And there is more to come
Despite its incredible Internet influence, Tencent derives only a minor share of its
revenues from online advertising.
Recognizing this untapped potential, Tencent is beefing up its advertising team
and working on building a higher trust in their capacity as an advertising platform.
This requires notably to improve the understanding of it with advertisers, as
those are gradually shifting advertising dollars to Internet and embrace online
communities.
Mobile is expected to grow faster than before as operators have a more open
content policy, lowered data fees and started to roll-out 3G networks.

Mobile & Internet
Tencent vs. Foreign SNS
Facebook, MySpace and Twitter might be the poster boys of the new wave
of Internet services but many experts have questioned their business
models and the viability of social networking as a whole.
Though Tencent might be the most visible of all, three social networks in
Japan are not only profitable but also market-listed for hefty sums.
Mixi, Gree and DeNA‘s ―Mobile Game Town‖ services record 30% to 60% profit.
Both Gree and DeNA are mobile services.
0%
10%
20%
30%
40%
50%
60%
70%
0 200 400 600 800 1,000 1,200
0%
10%
20%
30%
40%
50%
60%
70%
0% 20% 40% 60% 80% 100%
Revenue vs. Profits
Revenue from users
Share or revenue from users vs. Profits
Revenue (mln USD)
OperatingProfitMargin
OperatingProfitMargin

Mobile & Internet
Profitable SNS in Asia
The following table summarizes the differences between leading social
networks. Among key differences:
The most profitable ones monetize users directly, via digital goods or games.
The average revenue per user of those services is about 10 times Facebook‘s.
Facebook Tencent Mixi DeNA Gree
Sales 2008 350 (est.) 1,047 127 258 146
Operating profit 0 (est.) 475 40 103 88
Profit margin 0% (est.) 45% 31% 40% 60%
Registered users 200 377 17.4 14.5 12.6
Revenue from users 10% (est.) 88.5% 7.5% 75% 75%
Market cap (bln USD) 3 to 15 (est.) 25.1 1.0 1.5 1.9
Notes: 1. Numbers for Facebook are estimates. 2. Sales from Mixi and DeNA are from April 08 to March 09.
3. Sales for Gree are from July 08 to June 09. 4. Only the ―Mobile Game Town‖ service are considered for sales for DeNA.
5. DeNA‘s profit margin is taken as the one of the whole company. 6. Active users for Tencent are counted as ―registered users‖.
7. Market capitalization is taken as of August 5, 2009.

Mobile & Internet
Turning SNS into successful businesses
Why are Western services stuck with the advertising business model?
In most advanced Internet markets, the only way to gather revenues on the
Internet seemed to be by using online advertising, in the form of banners, paid
search or paid listings (houses, cars, personals, etc.).
After studying dozens of leading players in advanced markets, we came to
the conclusion that the real reasons for this situation were the following:
Online payment mechanisms are too few and inefficient to provide hassle-free
1-click macro or micro-payment.
Young generations do not think twice about enhancing their personal image or
entertainment experience online, similar to what older generations do… offline.
Measurement tools are lagging behind new usage patterns and technologies.
Online communities need sociologists and psychologists, not only engineers.
• As technology is becoming more and more a commodity, the real issue lies
today in the assessment of trust, social links and privacy.
Our words are poor to describe the differences between key elements.
• What are the differences between a ―good friend‖, a ―business friend‖, a
―best friend‖?. Who would you lend your car keys to? Who can see the
pictures from your latest cross-dressing party or fishing trip?

Mobile & Internet
What to learn from Tencent
Online communities, social networks, online games and virtual worlds are
converging and face very similar challenges in their development
How to attract users and build a community? (Virality)
How to keep them interested? (Engagement)
What do users value? How to monetize it? (Monetization)
As we worked closely with numerous innovative companies, we found that
Many Western services do not work well in markets where the online advertising
market is too small, or online payment systems are not developed.
As a result, while the first wave of Internet services in China needed strong
execution skills, the second wave required numerous adaptations to the local
environment and improvements leveraging local characteristics and led to
innovation in service concepts and business models.
Chinese models offer today proven business models and services ideas
that can help develop Internet services worldwide.
Just as the US powered the first Internet wave, Asia is now proving an innovation
powerhouse in business models and service concepts.
This report demonstrates how QQ not only triggered a social phenomenon but
also proved numerous business models that can be adapted globally.

2. Market Overview

2. Market Overview
General figures

Mobile & Internet
0
100
200
300
400
500
600
700
million
Fixed Mobile Internet（CNNIC） Broadband
Key market figures
Subscribers in 2008
Fixed line: 341 mln
Mobile: 641 mln (world‘s #1)
In 2002, mobile overtook fixed lines
Since 2005, fixed lines started
decreasing due to competition from
mobile
Internet users in 2008
298 mln users
World‘s #1 since early 2008
Broadband subscribers: 84 mln
Internet penetration: 23%
High growth potential
Online advertising still early stage
Market size: 2.5 billion USD in 2008
Value per internet user: 8.4 USD
0
10
20
30
40
50
60
%
Internet | 23%
Sources: MIIT, CNNIC, +8*
User growth
Penetration rate
641
341
298
84
Fixed line | 26%
Mobile | 49%

Mobile & Internet
Online advertising, games and e-commerce
Online Payment & E-commerce (online shopping including B2C and C2C)
Emergence of payment systems like Tenpay (from Tencent/QQ), AliPay (from Alibaba.com)
and billing by mobile operators make online payment easier.
As a result, the volume of online payments is projected to rapidly increase.
Online advertising
Online advertising includes both brand advertising and paid search.
Online game
70% of Internet users in China are under 30 years old, fueling the online gaming market.
Year-on-year growth over 50% with a sound B2C revenue model B2C model resilient to
crisis, offering low-cost communication and entertainment.
0.3
0.6
0.9
1.6
2.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2004 2005 2006 2007 2008
blnUSD
Online ad
0.5
0.7
1.1
2.0
3.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2004 2005 2006 2007 2008
blnUSD
Online game
0.7
2.2
3.7
8.2
18.8
0.0
5.0
10.0
15.0
20.0
2004 2005 2006 2007 2008
blnUSD
E-commerce
Source: iResearch

Mobile & Internet
Internet users demographics
Younger demographic
67% are under 30 years old.
36% are under 20.
In the US, 70% are above 30 y.o.
<20
36%
20~29
31%
30~39
18%
40~49
10%
50~59
4%
>60
1%
China‘s internet user breakdown by age
<middle
school
5%
middle
school
28%
high school
40%
college
14%
bachelor
12%
master or
above
1%
China‘s internet user breakdown
by education level
Relatively low education levels
27% of Chinese Internet users have a college
degree or above, lower than 36% in 2007;
Little potential in this point, as China has only ~5%
of total population as college graduates
Source: CNNIC, Jan 2009

Mobile & Internet
Three telecom operators in China
The Chinese government reorganized
telecom operators in 2008 (operators
are still over 70% owned by the govt).
It formed three ‗integrated operators‘
with licenses for mobile, fixed and
internet services.
China Mobile
• Absolute leader in mobile with
74% market share.
• Very weak in fixed market.
• 3G license: TD-SCDMA.
China Unicom
• The most balanced operator in
terms of business breakdown.
• 3G license: W-CDMA.
China Telecom
• Dominant in fixed line market.
• The weakest one in mobile.
• 3G license: CDMA2000.
Broadband (2008)
84 mln subs
Fixed lines (2008)
341 mln subs
Mobile (2008)
641 mln subs
Source: MIIT, 2009

Mobile & Internet
Top 10 sites and global players
# Name Category
1 Baidu Search
2 QQ IM + Portal
3 Sina Portal
4 Google.cn Search
5 Taobao E-commerce
6 Netease Portal + games
7 Google.com Search
8 Yahoo! Portal
9 Sohu Portal
10 Soso Search
Source: Alexa Traffic Ranking by country, March 2009
Among the top 10 Internet sites
5 are general portals and IM services
4 are search engines
1 is an e-commerce platform
Tencent covers IM (QQ), portal
(qq.com), and search (soso.com)
The difference between Google.cn and
Google.com is the location of their server
Local vs. Foreign
Only two foreign players in the Top 10
(Google and Yahoo)
Yahoo.com.cn acquired 40% of Alibaba
and gave to Alibaba control over their
Chinese operations (August 2005)
Alibaba founder Jack Ma
and Yahoo former COO Daniel Rosensweig
give a joint press conference to announce the deal in Beijing.

Mobile & Internet
Top 10 sites and global players
Local players won the top spot in all
the main Internet sectors.
Baidu (search engine) and QQ (IM)
enjoy a strong lead in their sectors in
terms of market share.
No foreign company operates directly
in the online game sector (mostly due
to Chinese regulation).
eBay China lost its #1 position in C2C
auctions to Taobao since 2005, then
lost again its #2 position to Paipai
(Tencent), and is unlikely to bounce
back in the near future.
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 is in Top 3
in terms of PCU
Where are the global players?
Sources: +8*

Mobile & Internet
Chinese Internet Giants
Company Tencent Baidu Shanda Alibaba
Foundation 1998 2000 1999 1999
Service IM, online
community
Search Online game E-commerce
(B2B subsidiary)
Revenue in
2008
1,047 mln USD 468 mln USD 522 mln USD 439 mln USD
Market
position
377 mln active
accounts
>70% IM market
share
>70% search
market share
#1 in online gaming and
#1 in MMORPG,
17% market share.
38 mln B2B users
>50% B2B market
share
Business
model
Digital goods, mobile
services, advertising
Advertising Virtual goods VIP account /
certification fee
Market cap
(2009.08)
26 bln USD 12.3 bln USD 3.4 bln USD 11.8 bln USD
Sources: Company Reports, +8*
Tencent‘s market cap is equivalent to Baidu + Shanda + Alibaba combined.
It is almost twice the valuation of Facebook based on the Microsoft deal (15 bln USD).

Mobile & Internet
SNS in China: from copycats to local innovations
The Market is
dominated by local
players.
Nickname-based SNS
started much earlier
than MySpace or
Facebook‘s copycats in
China.
Monetization is not only
from ads but also from
B2C models (game,
digital goods, etc.).
Source: Web2Asia, March 2009

Mobile & Internet
Major social networks in China
User pages of Xiaonei, Kaixin001, 51.com and Facebook.
Xiaonei.com
Kaixin001com
51.com
Facebook.com

2. Market Overview
Why do global giants fail in China?

Mobile & Internet
Foreign company Local company
People Team leader often coming from HK, Taiwan; Employees are
educated white-collar staying in high-class buildings in Shanghai
Field of vision is limited to high-class buildings in Shanghai, and
Fortune 500 Companies
Know Gmail, but not 163. They use MSN Messenger, but not
QQ, considered to be ‗less professional‘
Look down on netizens from Internet cafés, fans of Super Girl,
because of their education.
Would prefer to close their website rather than run one with no
taste or differentiation
They cover not only white-collar,
but ‗small potatoes‘
Target regular people and SMEs,
do not care about having good taste
Comment: Without attention to the masses, it is difficult to be a Top 3 website
Attitude Earning a salary 8 or 10 times higher than local competitors,
they worry about negative news. They prefer ‗no achievement‘
than to take a risk which could bring a mistake.
Cautious, conservative, polite, educated, but little fighting spirit.
Prefer to be hated than to be
forgotten
Always ready to make mistakes
Comment: Local players don‘t care about sounding good or making mistakes. The worst for them is to be
forgotten. Jack Ma, CEO of Alibaba, and Zhou Hongyi, CEO of 3721 are representative of this philosophy.
Efficiency Long term strategy, spend a lot of money on market research
May have to wait one month for HQ‘s answer on the purchase
of a laptop if it is out of budget.
React fast
Numerous small steps, and correct
quickly when making a mistake.
Comment: As the Chinese saying goes, „Eagerness for quick success and instant benefit should not be
encouraged‟. But in the ICT sector, efficiency and speed are of the essence.

Mobile & Internet
Result or
Means?
Have complicated Key Performance Indicators (KPI) to
match, and a lot of rules to follow.
Combination of long-term and short-term objectives with
close attention paid to brand image and ethics.
Results-oriented.
Decide on clear objectives, ‗this year
for traffic, next year for subscription‘.
Any ‗not clearly illegal‘ way to achieve
the objective might be used: ‗hooligan
software‘ (self-installed in browsers),
promotion in adult websites, etc.
Comment: For local players ‗objective is all‘ and don‘t care about anything else. That creates efficiency.
Localize Can care too much about users‘ requirements. In addition,
follow Western customs and tastes.
Only follow the local taste and needs.
Comment: Considering the security of customer‘s private information, the chatting history of ICQ can only
be saved on one PC, limiting the use of this function. However, Chinese users often surf in Internet Cafés
and don‘t mind saving online.
Note: There are over 100,000 Internet Cafes in China in 2006 (about 1 per 10,000 inhabitants, but
concentrated in large cities). Internet Cafes are popular with students, migrant workers and generally low-
income customers.
Design Clean, neat, gentler, elegant, appreciated by maybe 20% of
Internet users
Crowded with content, pictures and
ads, including floating flash Ads. Many
could hardly be described as beautiful.
Comment: hao123.com is the best example. Founded by a Cantonese who only completed junior high
school, it is just a website navigator targeting people with little Internet and PC experience. Hundreds of
links are collected in the home page. It spent a grand total of US$0 on promotion, but kept ahead of Yahoo
China in terms of PV and unique visitors.

Mobile & Internet
Communi
cation
means
They spend 90% of communication time on writing email or
MSN Messenger. They are happy of their English skills.
Sometimes, instead of making a 5 minutes phone call, they write,
reply, transfer 10 emails.
When ten people make a meeting, even with only one foreigner,
they all speak English.
They call and see their customers,
dine them, even go to Karaoke with
them.
Comment: If you do business in China and earn money from Chinese people, it‘s better to communicate in
the Chinese language and to understand the Chinese way.
Ad
strategy
Target high-level customers
Spend large amounts of money, hire 4A PR firm, get excellent
Ad design. Put Ad in subways, commercial centers, bus stations.
Meanwhile, they design an Ad suiting white-collar‘s taste, then
pay much for banners on Top 3 Internet portals in China, and buy
key words of Google.
Their thinking is to pay 1000 RMB, and get 10 high-level
customers
They win the reputation battle, but not traffic
Target: no-target, whoever
They don‘t pay so much on
advertising. They don‘t use the same
distribution which costs too much for
them.
Their thinking is to pay 100 RMB,
and get any 1000 users. Among
these 1000, there could be 100 high-
level customers.
Instead of reputation, they first
target traffic
Comment: Education and culture level in China is not same as in high-ranking OECD economies. The
market segmentation is also very different.

Mobile & Internet
‗Free‘ is something very attractive. The best example of it is not
myself with Alibaba but Pony Ma and his QQ. Since 1999, QQ
has provided free IM service, and has never stopped to improve.
When QQ‘s penguin will announce it starts to charge users, we
will understand how much we cannot abandon it.
Everyone around you – from policeman to prostitute – uses QQ.
Until now, QQ has maintained its free strategy for each new
service and monetizes premium content and services. When you
see that a .GIF picture of just some KB can be sold for half a
dollar, you have to admit that Pony is really a fox!
Jack Ma
Founder of Alibaba
Alibaba operates China‘s #1 B2B and #1 C2C e-commerce websites
Alibaba also runs Yahoo! China
Eventually, ‗Free‘ is the most expensive thing in the world!
Comments from Industry Insiders

Mobile & Internet
Compared to Google, Baidu has no advantage in
capital, brand or technology, even for Chinese language.
Despite these disadvantages, Baidu matches better
local people‘s needs.
ZHOU Hongyi
Angel Investor
Former CEO of Yahoo! China
The performance of Google, Amazon, Microsoft in
China depends totally on their localization work.

2. Market Overview
Dispelling Misconceptions: Internet & Media Censorship

Mobile & Internet
Media and Internet censorship in China
China has the world‘s largest population in a territory
similar in size to the United States. Unlike its Western
counterpart, China has extreme gaps between haves
and have-nots, East and West, cities and countryside
Within this context, the key objectives of the Chinese
Government is stability and ―avoiding chaos‖ whatever
the cost. The consequence on the Internet is that
websites are required to get a license (Internet
Content Provider or ―ICP‖ license) and to filter some
politically-sensitive and illegal keywords
Sensitive issues: Falung Gong, Tibet Independence,
Tian‘anmen, Taiwan democracy
Illegal content: Adult, Drug and Gambling
Those issues are treated more or less like Nazi groups or
pedophilia in Western countries
Intimidation power?
The Shenzhen Public Security Bureau created two anime-
style "Internet Police" characters named "Jingjing" and
"Chacha― (―Jingcha‖ means ―police‖ in Chinese); each
cybercop has a blog and a chat window where Chinese
citizens can talk to them.
The main function of Jingjing and Chacha is to intimidate
all Netizens to be conscious of “safe and healthy use of
the Internet, self-regulate their online behavior and help
support a healthy Internet.“
That being said, Western media are much more aware
than local netizens of the existence of those mascots.
ICP license of
Google China
Jingjing
Chacha

Mobile & Internet
Media and Internet censorship in China
The Chinese
government is furtive
about its censorship
Censorship is only a
political issue
The government
checks everything
It is too hard to follow
regulations and know
what is legal to do.
Chinese people
suffer from the
censorship.
Misconception
The government is quite matter-of-fact about regulation and some topics.
• e.g. Jingjing and Chacha
• Rewarding ―self-regulators‖
• Public signs posted in Internet Café: ―Don‟t go to pornographic and illegal
website.‖
In China, censorship is not only a political arm, but also a competition tool
between companies (especially in the Internet and mobile fields).
Intimidation and "self-regulation" are more ―efficient‖ than official checking.
• To get an ICP license, companies must sign a document agreeing not to circulate
content on certain subjects. Usually, the definition is unclear and no official ‗black
name list‘ exists so Internet companies ―reverse engineer‖ tolerance.
• Companies have to consider in depth what the government wants. Consequence:
The filtering is done mostly ‗voluntarily‘ by websites moderators. For safety, many
companies check and likely delete content beyond what is possibly needed.
It‘s true that government‘s expression is not clear. But people who know Chinese
culture understand more or less what are the limits. According to a founding
executive of Sohu.com (#2 Internet portal) “it's not harder than dealing with
Sarbanes-Oxley”.
Free speech
• Compared to traditional media, Internet enjoys a freedom of several orders of
magnitude difference, and has already largely impacted the Chinese society.
Reality

Mobile & Internet
I don't want to call it censorship, each country has its
own bias. There are taboos you can't talk about in the
US, and everyone knows it.
Charles Chao
CEO of Sina
#1 Internet and news portal
We don't want to annoy the government so anything that is
illegal in China, it's not going to be on our search engine.
After all, we are a business and our shareholders want to
make money.
This goes with making the customer happy, not with doing
this or that political thing.
Jack Ma
Founder of Alibaba
Alibaba operates China‘s #1 B2B website and #1 C2C website.
Alibaba also runs Yahoo! China

2. Market Overview
Key players

Mobile & Internet
The struggle of mobile and Internet companies
Internet is a low-trust and crowded place
While China‘s Internet has seen an overflow of content, portals and Web 2.0
companies, it remains a low-trust environment due to poor measurement.
Alexa ranking? This has been the key measure to raise venture capital in the
Internet space, making page views a critical metric, above actual service quality
(we say China follows the ―Alexa School of Investment‖).
In addition, many companies have used self-installing ―hooligan software‖ to beat
competitors, gain subscribers and boost their ranking.
As a result, advertisers have been very cautious and unwilling to switch from
traditional media to online media. Today, about 8% of China‘s advertising
spending goes to Internet. The prevalent ad sales format is an antiquated CPD
―cost-per-day‖, rather than CPM (per thousand) or CPA (per action).
Mobile content providers are under tremendous pressure
Due to operators‘ policies working in a self-serving mode, mobile CPs have
been declining steadily since 2005, undergoing major changes of strategy.
Mobile operators are more or less using content providers as free research
centers: once a CP achieves some success with a service, operators will
replicate it and launch their own version.
The trend today for CPs is to find new distribution channels and business models
independent from operators, working with manufacturers and media companies.

Mobile & Internet
Web
Portal
Mobile
content
IM Portal +
Games
Online
games
Mobile and Internet market leaders
Source: Company reports
mln USD
Search
engine
Online
games
Only B2B
e-commerce part
Revenue 2008
of key market players
Source: Companies
+8* | www.plus8star.com

Mobile & Internet
Performance of leading Internet and mobile companies
Not all business models are born equal
All companies are recovering since October 2008. The most badly hit has been the mobile player
KongZhong, which has suffered from government and mobile operators‘ policies.
―Brand advertising‖ (especially pay-per-day or pay-per-week banners) shows limited growth, in spite
of the reorganization of Sina‘s media power based on its news portal.
Baidu‘s keyword search model shows a better trend than Sina.
Shanda has not been overly impacted by the crisis thanks to its B2C-based virtual goods model.
Tencent enjoys amazingly good karma since its introduction on the Hong Kong Stock Exchange.
2004 2005 2006 2007 2008 2009
KongZhong
Mobile content
Baidu
Search Ad
Tencent
Sina
Brand Ad
Shanda
Game
Source: Yahoo! Finance
Comparison over 2004-2009

Mobile & Internet
Sina
Positioning
#1 Internet portal in terms of ad value
#2 MVAS provider
A reference for news
and entertainment products.
Peak PV > 800mln/day
Full time employees: 2,080
Comments
#1 online brand ad player
Will largely expand its media reach and
customer base by acquiring Focus
Media‘s digital out-of-home advertising
networks (see details in next page)
Total revenue in 2008:
370 mln USD
Sina + FMCN may create No.2 ad company in China
Revenue growth rate 50%
Operating margin 20.2%
Source: Company 2008 annual report

Mobile & Internet
In December 2008, Sina announced its intention to acquire Focus Media‘s
assets of digital out-of-home advertising networks, including LCD display
network, poster frame network and certain in-store network.
Sina + FMCN may create #2 ad company in China
Sina
Charles Chao
CEO of Sina
Jason Nanchun Jiang
Chairman & CEO
370 mln USD
in 2008
370 mln USD
in 2008o Movie theatres
o Billboards
o Online Ad
o LCD Display Network
o Commercial building
o In-store
o Poster Frame network
o Elevator
32% 68%
o To acquire FMCN‘s outdoor digital
media – 68% of total rev. 2008
o Online Ad – 60% of total rev. 2008
o MVAS, Others
o The combination of #1 online brand ad player and #1 outdoor ad player gave birth
to the #2 ad company after CCTV, and #1 private ad company in China.
o Will largely expand Sina‘s ad customer base thanks to Focus Media‘s 3,000+
advertising clients, nearly 3x that of Sina.

Mobile & Internet
Sohu
Positioning
China‘s #5 largest portal
#2 online brand ad player after Sina
Owns China's top vertical sites including
ChinaRen (alumni community), Focus.cn
(real estate), 17173.com (online game
portal) and Sogou (search).
Partner of Beijing Olympics 2008
Comments
Sohu has shifted focus on advertising and
gaming as its core businesses.
High growth rate in 2008 thanks to the
success of its gaming business.
#2 Internet portal and major online search player
Rev growth rate 127%
429 mln USD

Mobile & Internet
Changyou: Sohu’s second IPO on Nasdaq
Changyou (CYOU), ex-gaming division of
Sohu, IPO on April 2nd 2009 in Nasdaq.
First IPO on Nasdaq since November 2008.
The shares went up 26 percent in strongest
debut in a year.
Sohu‘s game revenue in 2008: 202 mln
USD, 47% of total revenue
YoY growth: 380%
Net margin: 54%
Tian Long Ba Bu – flagship product of
Changyou
Translation: "Heavenly Dragon: The Eighth
Episode.‖
Launched in May 2007.
Contributed 94% of Sohu‘s game revenue
in 2008.
PCU: over 800,000 in March 2009.
Changyou‘s game (Tian Long Ba Bu) video on
the wall of Nasdaq

Mobile & Internet
Tencent (QQ)
Positioning
#1 brand for teenagers
78.5% IM market share in terms
of frequency of use
377 mln IM active accounts
49.7 mln IM PCU
4.7 mln game PCU
Comments
Online platform integrating
a large number of internet and mobile VAS
Monetizes mainly via virtual goods and
casual games
Money collection of micro-payments
Tenpay, proprietary online payment
platform
Expanding from Internet to mobile, from
entertainment to media
Leader in IM, #1 Internet portal in terms of PV
1,047 mln USD
Rev growth rate 87%

Mobile & Internet
Baidu
Positioning
#1 in traffic in China
#1 Internet search engine
Over 70% usage market share for search
#1 for online ad revenue
Comments
Absolute dominant in Internet search
market, Google is #2 but far away.
Expanding from search to diversified
services such as blog, BBS, IM, e-
commerce, online music, online TV, etc.
Difficult to keep the same growth rate in
2009 due to single business model (100%
from online ad)
#1 Internet search in China
468 mln USD
Rev growth rate 83%

Mobile & Internet
Alibaba.com
Positioning
#1 B2B e-commerce player
Over 60% B2B EC market share in terms
of paying accounts
432,031 paying accounts
Full time employees: N/A
Comments
Alibaba.com is the B2B part of the e-
commerce empire built by Alibaba Group.
Alibaba benefits from the synergy with
other companies held by Alibaba Group
including Taobao (#1 C2C in China + Ad
exchange), Alipay (#1 online 3rd party
payment), and Aliwangwang (#1 IM for
trading)
Alibaba.com is positioned as ‗one-stop
shop‘ to clear various bottlenecks for
China‘s over 40 mln SMEs, the growth
engine for the country‘s economic boom.
Leader in B2B e-commerce
439 mln USD
Rev growth rate 39%

Mobile & Internet
NetEase
Positioning
#2 game developer and operator.
#1 email service provider with 280 mln
accounts or over 70% market share.
Average daily PV: 640 mln
Comments
One of the first Internet companies in
China and among the first to list its stock.
Started from Internet portal, then entered
into gaming market.
Leader of in-house development of
games.
Diversifying services such as e-commerce
search by leveraging traffic from portal.
Second most cash-rich Internet company
in China with 823 mln USD (Morgan
Stanley).
Online Ad,
13%
MVAS, 2%
Online
gaming, 81%
Others, 4%
#2 in online gaming, #3 Internet portal
452 mln USD
Rev growth rate 39%

Mobile & Internet
Shanda
Positioning
#1 game developer and operator
80 mln active accounts including 5.89 mln
active paying accounts for MMORPG.
Average revenue per paying user
(ARPPU) for MMORPGs stabilized to 7.2
USD per month.
A diversified game portfolio with 20+
games under operation and 15-20 new
games in the pipeline.
#1 online literature portal with over 20 mln
subscribers and 300 mln PV per day.
Comments
Started with games licensed from South
Korea and moved gradually to in-house
development.
#1 in online gaming
522 mln USD
Rev growth rate 42%

Mobile & Internet
Shanda
#1 in online gaming
Shanda vs. Tencent
Widening Gap in Casual Game Accounts
Source: Company data, Morgan Stanley Research
Shanda is #1 online games operator in
terms of revenue (mln USD)
Source: Company 2008 Annual Reports
Content providing and service platform were split.
Shanda Game (SDG, game content development), Shanda Online (SDO, third-
party service platform open to all content providers)
Dominant in MMORPG but losing market share for casual games.
Launched online literature business in 2008 with 15 mln USD revenue.
Invested 13 mln USD to build licensing platform for those user-generated works.

Mobile & Internet
KongZhong
Positioning
Top mobile MMORPG #1 player in java
games
Top WAP portal
Full time employees: 804
Comments
Transforming Kong.net from a pure
mobile portal to community-based portal,
then try to monetize not only from ads but
digital goods as well.
Received 6.8 mln USD investment from
Nokia Growth Partners in 2009 to
reinforce the partnership with Nokia which
could be an important sales channel for
its mobile gaming business.
Lost 0.2 mln USD in 2008 due to the
decrease of traditional MVAS revenue.
Leader in mobile VAS and mobile gaming
96.7 mln USD
Rev growth rate (-9%)
Operating margin (-25.5%)

Mobile & Internet
KongZhong
Leader in mobile VAS and mobile gaming
Kong.net
Mobile portal
cn.NBA.com
NBA official mobile portal
Mobile game portal
o Info portal + mobile community;
o Peak PV: 150 mln per day
thanks to Olympic Games;
o Started getting mobile ad rev.
o Launch: Sep 2007
o Operated by Kongzhong with
content provided by NBA
including NBA live video;
o 0.6 mln daily unique visitors
o Mobile gaming is booming in China.
o Tian Jie Online, a mobile
MMORPG developed in-house is
one of the most popular mobile
online games in China.

2. Market Overview
Market trends

Mobile & Internet
Online population reached 298 mln
at the end of 2008 and is still
growing fast (42% YoY in 2008).
As of the end of 2008, Chinese
internet users outpaced US ones.
China is still at the beginning of the
―S‖ curve of adoption and far from
saturation, as barely 1/4 of its
population is online, vs. 60~70% in
US, Japan, and Korea.
Overall Chinese online industry
sales should grow 20-30% YoY in
2009, exceeding other sectors.
Internet sector outgrows most others
Source: Morgan Stanley Research
Internet Sector:
Fastest-Growing Sector in China
2009IndustryGrowth
(estimates)

Mobile & Internet
in 2008, Internet and media companies
produced an average operating margin of
30-40%, higher than others.
The Chinese Internet and media sector
includes some of China‘s most profitable
companies. For instance, NetEase has net
profit margins in the high 50% since 2005.
Companies should be able to sustain or
expand their margins, as they are often
asset-light but human capital heavy, and
their key cost driver is human capital cost.
Human capital costs in China are <20% that
of the US.
Over 6 mln students graduated from college
in China in 2008. Over 1/3 of them did not
have a job on graduation day. IT as a major
ranked #1 by its number of graduates.
Internet & media players enjoy the highest margins
Averageoperatingmargin(2008estimates)
China Internet/Media:
Enjoying the Highest Margins

Mobile & Internet
Online gaming, secure and prosperous under crisis
Changyou‘s IPO is just the beginning
Reflecting on the country‘s level of development with the average income remains around
400 USD per Internet user, most of them find that online gaming is a very attractive value
proposition for entertainment, especially under the current economic conditions.
Why is there no strong online gaming market in the West yet?
Legacy of packaged software.
Focus on low-hanging fruits (advertising).
It took time to understand the human motivations behind the success of digital goods (we
still hear ―why would anybody pay for something that does not exist?‖).
What are the next steps for Chinese hugely profitable gaming champions?
Buy licenses? Fledgling foreign companies?
Chinese companies might shop for foreign brands and licenses in US, Europe and Japan
within the next few years. It would be similar to what Lenovo did with IBM laptops, with the
difference that there are much less difficulties with distribution.
E.g. Shanda has become #1 shareholder of Actoz (game developer in Korea) by
acquiring its 29% shares with 91.7 mln USD in 2004. In fact, Legend II, game which
helped Shanda get the dominant position, was licensed by Actoz.
Online games (e.g., those from Shanda and NetEase) offer cheap and yet
―sticky‖ entertainment options, which explains why Korea‘s online game
companies saw accelerated growth in the last Asian financial crisis.
Richard Ji
Analyst, Morgan Stanley

Mobile & Internet
Social games: SNS + Online games converging
The combination of game and SNS is emerging in China too
A new business model for SNS sites
• SNS sites have a large users base, huge traffic and stickiness of service.
• However, their business model relies heavily on online advertising, which is
unable to sustain them in most markets. In China, most of the ad money
goes to larger properties such as portals and search engines and the rest is
split among an ever-increasing inventory.
Games increase social features and stickiness of service
• In China, the online game market is larger than the online ad market.
• Client-based MMORPG shows great success but cover rather young people
(students, migrant workers, etc.) playing in Internet café. White-collars with
strong consuming power have less time and lower interest on MMORPG.
Happy Farm – a leading social game in China
o Compete in growing vegetables!
o Web-game on Xiaonei.com (#1 real name SNS in China)
o Started charging user on Dec 16, 2008.
o Over 9.5 mln installations and over 1.7 mln active accounts in
May 2009.
o Also on Facebook!
o Revenue of 600,000 RMB/month (88,000 USD/month)

Mobile & Internet
Social commerce: convergence of SNS and shopping
People put more weight on
recommendations as they
are increasingly
disenchanted with
advertising.
New service concepts and
business models are
emerging from this
situation.
Alimama | regular
internet users can
promote Taobao
(China‘s ―eBay‖) sellers
in their own websites
and get a commission.
Taobao SNS | Online
shopping-based SNS.
NicoNico Video |
Users of this Japanese
service can add affiliate
links to shopping sites.
―Favorites‖, ―Votes‖ – two key points of Taojianghu
representing online shopping guide features
Two applications with strong gaming features to
accelerate popularity and stickiness
o Beta launch: Mar 31, 2009
o SNS with regular features for all of Taobao‘s buyers and sellers
(about 100 mln in total)
o Upgraded from community service inside Taobao.com
o Two strong shopping guide features:
• Favorites: ―my favorites‖ and friends‘ favorites.
• Votes: online survey system.
• Gaming applications
Taojianghu: SNS within Taobao.com

Mobile & Internet
Year 2008 (%) US China
Ad market (bln USD) 293.3 29.5
Ad market YoY growth 3% 15.9%
Online ad market (bln USD) 25.8 2.5
Online ad market YoY growth 21.7% 60.4%
Online ad / Total ad share 8.8% 8.4%
Online media’s high potential
Compared to US, China‘s media
consumption is still modest.
Both China‘s total and online ad market are
1/10th of the US.
However, growth in China is much higher.
Chinese online media players enjoy world-
class profitability.
Unlike ‗old media‘ players, ‗new media‘
leaders often dominate their markets in
China.
Source: iResearch, 2009
~40%
~80%
Baidu+Sina
+Sohu
Company Operating
Margin
Company Operating
Margin
Chinese companies US companies
NetEase 62.1% eBay 24.3%
Alibaba 39.7% Google 30.4%
Tencent 45.4% Yahoo! 0.2%
Sohu 38.2% Amazon 4.4%
Shanda 40.4% IACI -4.3%
Baidu 32.8% EA -13.3%
Sina 20.2% VeriSign 7.4%
Average 39.8% 7.0%
Source: Company 2008 Annual Reports
Advertising
in commercial buildings
IM
Online ad
TV ad

Mobile & Internet
E-commerce on its way to explosive growth
In 2008, China‘s online shopping market size was 18.8 bln USD (+128% YoY)
C2C represents 92% of the total market.
There were over 70 mln online shoppers in 2008, about 26% of Internet users.
In China, C2C is much more important than B2C due to:
More choices & cheaper price.
Wider coverage for delivery.
Combination of Search + Community + Commerce creates a better shopping experience and
increases stickiness.
3 main C2C players in terms of GMV (gross merchandise value):
– Taobao (Alibaba Group), 82.2%
– Paipai (Tencent), 9.9%
– Eachnet (JV of Ebay with Tom Online), 7.9%
The growth of third-party e-payment (online, telephone, mobile) is a catalyst for e-
commerce
Third-party e-payment has grown from 1 bln USD in 2004 to 40 bln USD in 2008.
The market will maintain its growth rate in 2009
China is expected to have 40% more Internet users by the end of the year.
More users go shopping online due to the economic situation.
Source: iResearch

Mobile & Internet
B2C will be a long-term driver
B2C is expected to grow faster than C2C due to:
Maturity of e-commerce market
• Better logistics.
• Online payment is accepted by more users, especially third-party payment solution with
Alipay and Tenpay expanding their business to all the e-commerce players.
• Increased trust from users with improved reputation of B2C websites.
More vertical B2C websites
More offline retailers extending online
B2C
C2C
auction
Vertical B2C
B2C based on
C2C platform
C2C fixed
price
E-commerce market
started from B2C
Larger products
choice.
Long process due
to auction.
Integration of IM
service
Faster deals.
Maturity of platform
More professional service.
Maturity of e-commerce
market environment.
Combination of B2C and C2C.
Dangdang
Joyo (Amazon
China)
Taobao
Ebay China
Paipai
Taobao
Ebay China
Paipai
360buy, PPG, Redbaby
Taobao, Tom-Ebay, Paipai,
Dangdang, Joyo…

Mobile & Internet
Chinese Internet companies going overseas
Chinese internet companies going abroad
Just like Lenovo, TCL and Haier were a while ago - entering the next phase in China‘s
development by establishing co-operations with international partners, licensing their
services,
and some of them are even in the phase of initiating overseas operations.
Partnerships, licensing, co-production
The entertainment industry – especially game companies – has caught up with advanced
markets such as Japan, South Korea, the US and Europe:
• Tencent | Gaming business in cooperation with AOL in the US.
• Perfect World & Changyou | Launching online games in Vietnam, Hong Kong, Macau,
Taiwan, Singapore and Malaysia.
Self operated or wholly owned overseas initiatives
Alibaba | Its services and business model are international by nature
• B2B business serving Chinese suppliers doing export.
• Online payment business helping overseas sellers reaching Chinese consumers.
Baidu | Opened a Japan office and launched a local version leveraging its regional
advantage.

2. Market Overview
Internet heroes and social trends

Mobile & Internet
Digital natives have their stars and trends
In China, there are limited alternatives for affordable entertainment
The media/music/cinema industries are still in their infancy and tightly controlled.
Internet is thus filling a gap.
Consequences
Social networks, digital creations, interactive TV are all booming in China.
Online advertising is also taking off.
Digital music sells more than ―offline‖ music, most of it via mobile phones
The following cases provide a glimpse of the current Chinese Internet pop culture. All
are whether ―user-generated‖ or ―interactive‖ content.
Mice Love Rice | Internet-originated national hit song
Backdorm Boys | Lip-synch artists
Furong Jiejie | Self-proclaimed Internet beauty
SuperGirls | China‘s ―American Idol‖ leverages mobiles
“Heart” China | Viral phenomenon on MSN to support China pre-Olympics
Online Olympics | The most ―web 2.0‖ event in history
MSN Rainbow | Viral support for the Sichuan earthquake victims by adding a rainbow
Little Fatty | Success from user-modified Content / China‘s ―Star Wars Kid‖
The public relates strongly to net stars, who can generate direct and indirect revenue
while costing a fraction of mainstream celebrities.

Mobile & Internet
“Mice Love Rice‖

Mobile & Internet
“Mice Love Rice”
In October 2004 the song ''Mice Love Rice'' is released on the Internet
The author, Yang Chengang, was a 26-year-old music teacher by day and
lounge singer by night in central China's Hubei province.
The song became an instant hit online and its popularity quickly spread to
traditional media
Over 100 mln Internet downloads (mostly free).
At peak, it sold 6 mln ringback tones (RBT) in one month (sales equivalent to
700,000 CDs).
#1 in ringtones, ring songs and ringback tones over mobile phones and Internet
and made it to iTunes Top 10 World list in 2005.
The rights holder and SP Hurray Freeland generated $21.5 mln in
licensing fees (170 mln RMB, mostly coming from RBT).
Sources: Hurray, 2006.9; Chongqing Evening News, 2006.10

Mobile & Internet
I don't see it as a threat, but as a complement to
our business.
Harry Hui, President of Southeast Asia
Universal Music
The Internet is becoming a very good promotional
platform that did not exist before for finding new
talent.
In 2005, 4 out of the top 10 hit songs in China
came from the Internet.
According to China Mobile’s Chairman Wang Jianzhou, the digital music
market is now larger than the traditional music industry in China.

Mobile & Internet
Backdorm Boys

Mobile & Internet
Backdorm Boys
Two university students from Guangzhou reach fame through lip-synch
Technical requirements: webcam in campus dorm room
Among the most watched viral videos in China
No direct benefit from video but…
Extremely high recognition among netizens
Advertising contracts (Motorola), brand ambassadors (Pepsi)…
• http://edu.sina.com.cn/y/2006-06-15/163352672.html
Their blog is one of the most visited in China
Artist contract (Feb 06, Taihe Rye Music)
Movie: Shi Quan Jiu Mei (―Almost Perfect‖) (Aug 08)
Shi Quan Jiu Mei

Mobile & Internet
Young Chinese want to chose their own stars
and marketers want to be part of this
environment.
Michael Darragh, Digital Influence Strategist
Ogilvy PR, Shanghai
Web surfers believe the Internet brings them
closer to people who are interested in the same
things. It echoes the popularity of reality TV.

Mobile & Internet
Sister Hibiscus

Mobile & Internet
Furong Jiejie (Sister Hibiscus)
Furong Jiejie became a controversial Internet celebrity in 2005.
Attention came after she posted comments and pictures of herself striking
self-important poses on a famous online forum (Tsinghua University BBS).
…Many call her a narcissist, but she prefers the term "self-confidence.―
Some quotes from Furong Jiejie.
―I'm pure and noble (this is how my classmates describe me, it isn't my fault)‖
―My life is now so annoying. All the time I am the focus on the street. Why do the
eyes of the men fall hot upon me? I have no place to hide.‖
Furong Jiejie participates in various commercial activities, exhibitions, press
conferences, brand endorser, etc.

Mobile & Internet
SuperGirls

Mobile & Internet
SuperGirls (“Chinese Idol”)
Main sponsor: dairy firm Mengniu (founded in 1999)
Produced by local TV channel (Hunan Satellite TV)
Social phenomenon!
150,000 candidates nationwide
10 short-listed
47 episodes
The whole country almost stopped to watch the finale

Mobile & Internet
The business of “SuperGirls”
The ―SuperGirls effect‖ boosted the sales of the main sponsor an estimated
250~350 mln USD for a total cost of 12.5 mln USD split between
sponsorship (1.8 mln USD) and promotion (10.7 mln USD).
SMS voting was part of the show‘s DNA
8 mln SMS votes for the finale!
Total over 20 mln SMS votes at 0.1 RMB (0.015 USD)
• Registration: 1 RMB.
• Information: 6 RMB /month + 15 info SMS per month at 1 RMB / SMS.
• Total: 21 RMB / month / user!
Total SMS revenues over 30 mln RMB (4 mln USD)
Ad revenues for TV channel & producer ~40 mln RMB (over 5 mln USD).
All finalists became famous brand endorsers and/or singers.

Mobile & Internet
“Heart” China initiative on MSN
In light of the turmoil surrounding the torch relay overseas, a mass MSN
―Heart China‖ signature campaign broke out online.
The campaign was initiated by netizens to show both their support of the
Beijing Olympics and support for China.
People's Daily: 7 mln MSN
users joined the ―Heart
China‖ initiative.

Mobile & Internet
Online Olympics
The Beijing Olympic Opening Ceremony on 2008.08.08 was a moment China had
been working toward for seven years.
Before the ceremony had even begun, netizens were already discussing and
exchanging information about the event. Then, during the ceremony, netizens were
uploading screenshots and reporting on the ceremony‘s progress on BBS forums.
Quote: ―I am so excited about the drummers,
the view is so grand that I cannot type.‖
Time: 19:56
PV: 2,601,435
Replies: 2,649
Source: Sina BBS

Mobile & Internet
Sam Flemming
CEO, CIC Data
Leading Internet Word of Mouth (IWOM)
Research and consulting firm in China
• The 2008 Beijing Olympics Games were one of the
best possible case studies for marketers on how
online channels are utilized by netizens to participate
around special events.
• More than just reading about the Olympics online,
netizens made the 2008 Beijing Olympics the most
“Web 2.0” in the Games’ history by becoming not
only spectators, but also commentators through a
variety of channels which serve host to the massively
active Chinese Internet Community.
Olympic-related page views reached 24.7 billion

Mobile & Internet
MSN rainbow signature
On May 12, 2008, a massive earthquake hit
Wenchuan, Sichuan Province, killing at least an
estimated 68,000.
Following this, Toyota and MSN jointly launched a
―rainbow‖ signature initiative on MSN.
For each ―rainbow‖ signature added to a screen
name, MSN and Toyota each donated 0.1 RMB to
support the relief efforts
Results of the campaign (ended on June 2)
6,216,469 MSN users participated.
1,243,293.80 RMB (182,000 USD) were raised for
the earthquake victims.

Mobile & Internet
Internet and Sichuan earthquake relief
Online third-party payment platform has been an important donation
channel for internet users, within 10 days, 19.4 mln RMB (2.84 mln USD)
from Alipay (Alibaba Group) platform, 21.9 mln (3.2 mln USD) from Tenpay
(Tencent).
Taobao.com homepage
promoting the donation
The symbol of online donation launched by QQ,
32,754,656 QQ users participated in the campaign.

Mobile & Internet
Mourning online in black & white
May 19~21, 2008 were declared
Mourning Days for the earthquake.
Online media mourned by removing
commercial ads from the sites and
changing the colors to black & white.
• QQ.com homepage.
• #16 on Alexa.com worldwide
• #2 in China
• Ad replaced by mourning words.

Mobile & Internet
People seeking 2.0
In May 2008, right after the
earthquake, Tencent‘s search
engine SOSO added a ―human
search‖ functionality, called
―xunren‖ to find missing persons
in the Sichuan earthquake.
Within 10 days, over 100,000
persons had published
information and 11,415 survivors
had been identified.

Mobile & Internet
Little Fatty | Success from user-modified content
Xiao Pang or ―little fatty‖ has become an
unexpected celebrity, as one day someone
snapped his photo during a school traffic safety
activity. The rest is history.
―Little Fatty's soulful, eye-catching gaze quickly
conquered the hearts of net friends, setting off a
crazy flood of Photoshopping and making Little
Fatty unwittingly into a star known around the
world.‖
―The most common form of new media
production in China is “e‟gao”, a combination of
the words “evil” and “to make fun of” that now
signifies a multimedia expression that pokes fun
at an original work‖ | China Daily, 2007

Mobile & Internet
Xiao Pang | ―Little Fatty‖

Mobile & Internet
Xiao Pang’s commercial success
2008.08 | Video ad produced by Ku6 (a leading
video site in China) and Intel for Centrino product
2007.06 | A marketing campaign launched by Pepsi 2008.03 | Video ad for Google China
http://v.ku6.com/show/1SBsmZCd3vzarBo_.html
Invited by Apple Institute (online presence of Apple
Store inside Xiaonei.com, #1 SNS in China), taught
internet users how to use Apple Mac.
Xiao Pang is covered by global
media such as CNN, BBC, Times,
Yahoo! News, etc.

Mobile & Internet
Xiaopang.cn | Official website

3. QQ Facts and Figures

General figures

Mobile & Internet
QQ is the main service brand of Tencent, founded in November 1998 and located in
Shenzhen (South of China, near Hong Kong).
Tencent is the #1 Instant Messaging (IM) service provider in China, and a leading provider
for Internet and mobile value-added services.
Tencent‘s IM community counts over 377 mln active accounts and is said to be covering
95% of Chinese Internet users and 78.5% of China’s IM market.
Tencent‘s is operating 3 main lines of business:
The first two represent about 90% of Tencent‘s revenues in 2008.
Core services
Its IM tools include Tencent QQ, Tencent Messenger and RTX. Though these services are
free, they are the core of Tencent‘s business and are the foundation for VAS products.
Tencent is reinforcing its portal QQ.com to activate its huge IM user base and introduces all
kinds of WVAS and IVAS.
QQ uses a penguin as its brand mascot. The brand commands
very strong awareness thanks to its early entry and its ‗cute‘ factor.
Service Target
Internet value-added service Individual users
Mobile and telecommunications value-added service Individual users
Advertising service Corporate
What is QQ?

Mobile & Internet
Key services and figures
Internet Portal (QQ.com)
Alexa ranking
#16 global, #2 in China, after
Baidu.com (2009.04)
C2C platform: #2 in terms of
GMV after Taobao (Alibaba)
Search engine (Soso)
Alexa ranking
#75 global, #3 search
engine in China
Game Portal: 4.7 mln PCU,
117.4 mln USD in 2008
Music Portal: 5 mln daily
unique visitors
SNS nickname-
based (Qzone):
200 mln subs,
including 150
mln active
users
SNS w/ real ID (Xiaoyou)
20 mln subscribers
(launched in 2009.01)
IM (QQ)
•#1 in China
•892 mln reg.
accounts
•377 mln active
accounts
•49.7 mln PCU

Mobile & Internet
1 paying account for 10 active = 1 billion USD
14.7 mln paying mobile users
31.4 mln paying web users
892 mln registered IM accounts (2008).
298 mln Internet users in China.
Avg. 3 QQ accounts per Internet user.
377 mln are active
accounts.
Revenue
About 8% of QQ‘s active accounts bring revenue

Mobile & Internet
95.0%
32.9%
24.6%
16.6%
7.7% 4.9% 2.7% 1.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Tencent QQ AliWangwang MSN Fetion Skype Sina UC NetEase Popo Yahoo!
IM market in China in 2008
• QQ reaches 95% of Chinese Internet users.
• AliWangwang: IM of Taobao, vertical usage for e-commerce.
• MSN: Distant competitor to QQ, mostly used by urban white collars.
• Fetion: IM of China Mobile, growing fast thanks to free IM-to-SMS.
• Skype: JV with Tom Online, limited impact due to local regulations
and competition from a variety of voice chat services including
Tencent's. Quite popular with users of Alibaba.com doing B2B e-
commerce.
Source: iUserTracker, April 2009

Mobile & Internet
Tencent’s market position in key service categories
9 18 24.5 36.1 49.7
135
202 233
300
377370
493
580
742
892
0
200
400
600
800
1000
2004 2005 2006 2007 2008
IM PCU Active account Registered account
Service Date of entry Market position Competitors
Portal 2003.12 #1 Sina, Sohu, NetEase
Paipai (C2C) 2005.09 # 2 Taobao, Eachnet
Mobile content 2000.08 #1 Internet portals
Casual Game 2003.09 #1 Shanda, NetEase, The9
SNS 2005.03 #1 51.com, Xiaonei, Kaixin
Search 2006.03 #3 Baidu, Google
Online payment 2005.09 #2 Alipay
IM: Holding 377 mln active
accounts (2008), QQ has the
second largest user base in
the ICT field in China, second
only to China Mobile with
457 mln mobile subscribers
QQ is a formidable
competitor in many
key Internet fields
mln
Source: Tencent
Source: Tencent, +8*

Mobile & Internet
Competitors to Tencent by category
Tencent has managed to position itself in all key B2C services in China‘s
digital space.
Service Name Rank Main Competitors
IM QQ #1 in users
Market share: 78.5%
Reach: 95% of Chinese Internet
users, more than the sum of all rivals
Portal QQ.com #1 in traffic Sina, Sohu, NetEase
Paipai (C2C) Paipai.com # 2 in GMV Taobao, Eachnet
Mobile content m.qq.com #1 in revenue Internet portals
Mobile portal Wap.qq.com #1 in traffic Tianxia, 3G.cn
Casual Game QQ Game #1 in PCU Shanda, NetEase, The9
SNS
Qzone (nickname)
Xiaoyou (real ID)
#1 in users
Top 3 in users
51.com, Xiaonei, Baidu
Search Soso.com #3 in traffic Baidu, Google
Online payment Tenpay.com #2 in transaction 19% market share, after Alipay (51%)

Mobile & Internet
All Chinese leading game companies are very profitable.
The net profit of most of them is higher than 40%
In contrast, EA (Electronic Arts), one of the world‘s leading global video game
publishers, was losing money in 2008.
Comparison of leading game companies
Shanda NetEase
Game
Tencent
Game
The9 Giant Perfect
World
Chang
you
Net
Dragon
King
Soft
Revenue
mln USD
522.2 366.2 341.7 250.4 233.3 210.3 202 87.2 81
MMORPG
Share
85% Mostly N/A 100% 100% 100% 100% 100% 100%
Casual
games share
12.4% Little N/A 0% 0% 0% 0% 0% 0%
Net Profit 35% >52% >39% 20% 70% 45% 54% 40% >37%
Business
models
• Free to play
• Virtual
goods
• Mostly time-
based
• Free to play
at the
beginning
• Pay to play
• Virtual goods
• Free to
play
• Virtual
goods
• Free to
play
• Virtual
goods
• Free to
play
• Virtual
goods
• Licensing
• Free to
play
• Virtual
goods
• Free to
play
• Virtual
goods
• Licensing
• Free to
play
• Virtual
goods

Mobile & Internet
Revenue and profitability of game companies
Giant recorded 70% in net profit margin, with 90% of revenue from a single game.
Tencent game is #3 in terms of revenue, catching up fast (+90% y.o.y.).
0%
10%
20%
30%
40%
50%
60%
70%
80%
0 50 100 150 200 250
Note: The net margin/profit value used for Tencent game and NetEase is the one of the whole company.
Comparison of leading game companies
Net profit (mln USD)
OperationProfitMargin

Mobile & Internet
Comparison between local and global SNS
QQ not only leads China‘s SNS market, but also shows much better performance
than the Western leaders despite the challenge of operating in a developing country.
Service name QQ Qzone Xiaonei Kaixin001 51.com Facebook MySpace
Launch Date 1999 2005.03 2005.12 2008.03 2005.08 2004.02 2003.09
Users
(mln)
892 200 40
May 09
35
Jun 09
140 200 200
Active users
(mln)
377 150 22
Daily
10
Daily
40 150 125
Revenue
(mln USD)
1,047 N/A N/A Little N/A 350 750
Profit
(mln USD)
412 N/A Not
profitable
Not profitable Not
profitable
Expected
in 2010
N/A
Business
models
• IVAS (game,
virtual goods,
premium
membership)
• WVAS
• Ad
• IVAS (game,
virtual goods,
premium
membership)
• WVAS
• Ad
• Ad
• Virtual goods
• Rev. sharing with
developers with
its own virtual
currency and
payment system.
Ad • Ads
• Virtual
goods
• Premium
members
Over 85% Ad 95% Ad

Mobile & Internet
Why is QQ so successful in China?
Limited competition
Initial competition gave up on IM as they could not get revenue.
When QQ started to grow strongly, the three biggest Chinese Internet portals
(Sina, Sohu and NetEase) didn‘t pay attention to IM and didn‘t touch this market.
Western giants (Microsoft, Yahoo) were more focused on a global strategy.
High conversion cost and network effects of IM service
The connections on an IM service generally makes switching a painful exercise.
Network effect based on the huge user base of 377 mln makes it easy to
promote any service.
Learning from successful foreign services such as ICQ (US), Cyworld
(South Korea) and Korean online game companies
Matching the needs of Chinese users: Entertainment!
In China, the #1 priority for Internet users is entertainment
while in the US, it‘s information.
That is why Google leads in the US and Tencent rules China.
Richard Ji
Analyst, Morgan Stanley

Key milestones and results

Mobile & Internet
QQ’s history
Largely inspired by ICQ, Tencent launched OICQ in China in 1999.
OICQ means: ―Oh, I seek you!‖
Tencent launched many other services such as
Paipai: online shopping
Soso: search
Xiaoyou: SNS
Nov. 1998
Feb. 1999
Aug. 2000
Jun. 2001
Sep. 2003
Dec. 2003
Jun. 2004
Mar. 2005
Jun. 2005
Sep. 2005
Company founded in
Shenzhen
OICQ
Mobile QQ
Internet VAS
QQ Game/ RTX
QQ.Com
IPO at HK Stock Exchange
Q Zone
QQ Pet
Paipai.com
Oh, I seek you
soso.com Xiaoyou.qq
Mar. 2006
Jan. 2009

Mobile & Internet
Became the most profitable Internet
company using online games &
virtual items business model
Strong growth
thanks to mobile
value-added
services
QQ bloomed with China’s Internet Industry
Survived thanks
to online ads
within QQ IM
Start-up
Rapid development
Dominant position
1998 2000 2004 2006
Internet portal
WVAS
E-commerce
Online game
Online search
New media
InternetTransitionQQdevelopmentstage
2007
Web 2.0

Mobile & Internet
Business results
2001 2002 2003 2004 2005 2006 2007 2008
Others 0.3 0.5 0.6 1.2 1.3 1.0 0.9 2.1
Online Ad 1.0 2.4 4.2 7.1 14.5 34.1 67.5 120.9
WVAS 4.9 25.5 59.9 82.2 66.3 89.7 110.6 204.7
IVAS 0.1 5.1 29.5 56.3 100.9 234.0 344.1 719.1
0
200
400
600
800
1000
1200
Total 6.3 33.7 94 147 183 359 523.1 1047
2001 2002 2003 2004 2005 2006 2007 2008
IVAS % 2.0% 15.2% 31.3% 38.4% 55.2% 65.2% 65.8% 68.7%
WVAS % 77.6% 75.7% 63.5% 56.1% 36.3% 25.0% 21.1% 19.6%
Online Ad % 16.3% 7.2% 4.5% 4.8% 7.9% 9.5% 12.9% 11.5%
Others % 4.1% 1.5% 0.7% 0.8% 0.7% 0.3% 0.2% 0.2%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
Total revenues were 1,047 mln USD, an
increase of 87.2% over 2007.
IVAS grew steadily as far as 68.7% in 2006 but
due to new regulations for mobile content in
China, the share of WVAS dropped significantly
over the years.
Online advertising remains a minor share of
revenue at 11.5% in 2008.
Comparison between the 3 main services
HKSE code: 700
Total number of shares: 1,797 million
Main shareholders:
MIH (35.07%)
Ma Huateng, CEO (11.71%)
Zhang Zhidong (4.28%)
Market Cap: 26 billion USD (August 2009)
Stock Exchange Information Revenue Breakdown (mln USD)
Revenue Breakdown (%)
Source: Company Annual Reports
1,047 mln USD in revenue
412 mln USD in net profit

Mobile & Internet
Business models
Content-based SMSOnline identities
QQ Show, Qzone, QQ Pet..
QQ.com
2.5 G
MMS, WAP…
QQ Games
Casual, MMORPG
Search
Fee-based IM
Mobile QQ
Fee-based IM
Premium QQ, QQ Xing
IM Client-end
WVAS
(Wireless value-added service)
IVAS
(Internet value-added service)
Advertising
Mobile Voice VAS
IVR+CRBT
Others
Dating, e-card, e-magazine…
Personalization, value-added
Fee-based revenue
Interactivity
Traffic-based revenue
Free services to attract user to come and to keep them stay in the community
(QQ IM, QQ.com, WAP portal, QQ Group…)
SNS

Mobile & Internet
Users paying for personalization and games
0.0
20.0
40.0
60.0
80.0
100.0
120.0
07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4
110.3 mln USD
in 2007
341.7 mln USD
in 2008
QQ Game revenue
mln USD 2007 2008 Growth Rate
IVAS 344.1 719.1 95.5%
Games 110.3 341.7 189.8%
MVAS 110.6 205 73.2%
Online Ad 67.5 121 67.5%
Total 523.1 1047 87.2%
IVAS represent 68.7% of total revenue
ARPPU = Average Revenue Per Paying
User / month = 1.9 USD.
Games are a key component
50% of IVAS revenue, and one third of total
revenue of QQ in 2008.
190% YoY growth, much faster than other
revenue sources.
#3 game operator after Shanda and
NetEase in terms of gaming revenue.
Operates 65 casual games titles.
Top games: Dungeon and Fighter (DNF,
PCU 1.7 mln, 2009.03), QQ Dancer, Cross
Fire (PCU 1 mln, 2009.04), QQ Speed.
Revenue from QQ Registered Membership
grew thanks to
Increased user loyalty and stickiness based
on the differentiated VAS (music, digital
goods, online storage, etc.).
Convergence across platforms (IM, SNS,
game, e-commerce, email, etc.)..
Note: Calculation of growth rate based on the RMB figures.

Mobile & Internet
Growth of games and presence in Internet cafes
QQ showed high growth in China‘s online game market share in 2008.
QQ enjoys a dominant position in Internet cafés: Four QQ games are among Top 10
applications within the cafes served by Goyoo Networks (10,000 cafes, ~10% of China‘s
total).
# Company 2008 2007 YoY
1 Shanda 17% 19% -1.7%
2 NetEase 13% 15% -1.7%
3 Tencent 11% 6% +5.1%
4 The9 9% 10% -1.6%
5 Giant 8% 12% -4.1%
6 Perfect World 7% 5% +1.7%
7 Sohu/Changyou 7% 2% +4.4%
8 NetDragon 5% 5% n.a.
9 Kingsoft 5% 3% +2%
10 CDC 1% 2% -1%
Total 80% 79%
# Application Genre Publisher
1 Dungeon & Fighter RPG Tencent
2 QQ2008 IM Tencent
3 Cross Fire FPS Tencent
4 X5 Dance Tencent
5 QQ2009 IM Tencent
6 Audition Dance Battle Dance 9You
7 Speed Car Racing Tencent
8 Counter Strike Online FPS Tiancity
9 ASKTAO RPG GYYX
10 XYQ | RPG RPG NetEase
Source: Goyoo Networks, 2009
Online game market share Top 10 applications in Internet cafe

Mobile & Internet
Mobile services recovering
The mobile services market shrank during the
past two years
Operators tightened control over the mobile
VAS value chain and launched their own
services (music platform, IM service and
mobile blog services for China Mobile).
Pushed by the Government to clean up the
mobile sector, operators continue to punish
SPs that do not comply with regulations
(overcharging users, spamming, etc.).
Emerging opportunities
Mobile market competition improved thanks to
the new round of industry reorganization
pushed by the government in 2008.
• The market has now 3 mobile carriers
instead of 2 previously.
• Prices of voice and data are going down.
3G licenses were awarded in January 2009
and trigger important investments.
As the leading online community, Tencent is
already the #1 mobile VAS player in terms of
traffic.
Mobile VAS sector is recovering
Tencent is leading the recovery
Source: Tencent, Morgan Stanley Research

Mobile & Internet
Advertising still limited but strong potential
Advertising revenue in 2008 was 120.9 mln USD
(+67.5% vs. 2007), growing faster than the average of
industry (60.4%).
Driven by the media power across multiple platforms:
IM (#1), portal (#1), SNS (#1), casual game portal (#1),
WAP portal (#1), avatar (#1).
Reducing the gap with Sina and Sohu.
Negative growth in 4Q08 due to the economic
slowdown.
High potential for long term.
A user‘s QQ account provides access to all services and
usage can be tracked across services.
Advertising campaigns can be run across all properties
(Internet/mobile, IM/SNS/avatar/game/portal).
While we continue to see significant long-term potential in the Internet market, we
are conscious of the potential negative impact of a slowing economy and
intensifying competition in the market.
Our online advertising business will experience particular pressure as advertisers
reduce or delay their advertising budget, while our user-paid small ticket based
entertainment and membership services will be relatively more resilient. Huateng (Pony) MA
CEO, Tencent
270%
176%
146%
352%
250%
213%
0%
50%
100%
150%
200%
250%
300%
350%
400%
2006 2007 2008
Sohu/QQ
Sina/QQ
Sohu and Sina‘s online ad
rev. as % of Tencent's

Legal stories

Mobile & Internet
Domain name
Originally OICQ
Tencent launched its IM service in February 1999 under the name of QICQ,
inspired by ICQ (now property of AOL).
Loss of OICQ name
In August 1999, Tencent was sued by AOL because of the two domain names
registered by Tencent, oicq.com, and oicq.net.
According to AOL, the word ‗OICQ‘ includes ‗ICQ‘. That infringes the intellectual
property of AOL.
Finally, Tencent had to give up in March 2000 its domain names and the brand it
had operated successfully for one year.
From OICQ to QQ
Since then, Tencent changed its brand from OICQ to Tencent QQ.
In March 2002, they bought the domain name of QQ.com from an American
engineer.
I wasOICQ!

Mobile & Internet
QQ and Chery
In November 2005, Tencent sued the Chinese
domestic automobile manufacturer Chery for the
use of the "QQ" brand.
Chery released a new car called Chery QQ in July
2003. The model was very successful and reached
#5 in sales in China.
Chery might pay to Tencent for the right to use the
brand "QQ" for its automobiles.
Still in process
One year later, another fight took place between
Tencent and Chery.
The latest song of S.Wing (a Chinese band) ―QQ
Love‖ got extremely popular. Tencent and Chery
fought to buy the rights for this song.
Eventually, neither bought the song, but this case
generated a lot of (free) media coverage.

Mobile & Internet
QQ sues PICA
In October 2006, Tencent sued Beijing-based
mobile IM service provider PICA for software
copyright infringement.
According to Tencent, PICA allows its users to
log on to QQ's servers to use the mobile QQ
service through PICA's software without
paying service fees to mobile QQ.
Interconnection with QQ
Log in QQ
QQ buddy list
1. PICA paid 2 mln RMB
(290,000 USD) as
compensation.
2. No more interconnection
with QQ.
Result

Mobile & Internet
Embezzled QQ accounts
QQ is becoming an important target of hackers and criminals.
Beyond the curiosity of the young IT geeks and hackers, professional
criminal groups are more threatening for virtual money operators.
At the end of 2006, China a group stole millions of QQ numbers (up to 300,000 in
a single day) and earned ~1 mln RMB (0.15 mln USD) by reselling virtual
currencies and online game equipment belonging to these QQ accounts on
Taobao.com (China‘s eBay).
The value of a QQ account may include QQ number, Q coin, and virtual
items.
QQ number: 61030
Meaning of number:
Date of birth of Diego
Maradona
Bid from 1 RMB
Price sold: 6,416 RMB
(over 700 USD)

Mobile & Internet
Stealing dreams: theft of virtual currency
In May 2005, Tencent reported to the police
in Shenzhen that they received more and
more complaints from users for the stealing
of their QQ accounts including QQ number
and QB.
Thieves created 3 studios in different
locations, hacked commercial and
government websites, and put Trojans and
backdoors to steal QQ accounts.
Millions of QQ accounts were stolen, and
generated about 1 mln RMB (150,000 USD)
for the thieves.
11 persons were arrested and sentenced to
jail (from 6 months to 1 year) for their
violation of freedom of communication,
Studio 1
Studio 2
Studio 3
Websites
Put Trojans /
Backdoors, and steal
QQ accounts
Sell QB on
Taobao, #1 e-
commerce site
in China
In Nov 2005, a VOIP service provider
virtualized some fixed line numbers and
pretended to recharge QQ accounts by
dialing the fixed line IVR-based QB
(Tencent‘s virtual currency) recharging
system via their virtualized fixed numbers.
During 4 months, they recharged over
10,000 QQ accounts in this way which
represented over 2 mln RMB (300,000 USD)
fixed-line communication fee and 0.7 mln
RMB (100,000 mln USD) profit by selling the
QB via Taobao.com.
Two leaders were arrested, and sent to jail
for 10 years and 13 years due to stealing.
Virtual fixed-line
Dail 96160902,
recharge QQ
account
1st case of arrest for QQ account theft 1st case of a sentence for QB robbery
Sell QB on
Taobao, #1 e-
commerce site
in China

Mobile & Internet
Virtual currency extortion
In October 2008, four people beat up an Internet user playing game in Internet café forced him to
turn over 100 QB worth 100 RMB (US$14.7). The attackers also extorted virtual equipment for
online games and 200 RMB in cash from the victim.
The men were each fined and the main attacker sentenced to three years in prison due to
extortion.
No law in China clearly grants protection to virtual property. The court ruled that it should be
covered by criminal law in this case since the victim had spent time and money to acquire it.
1st case of extortion for virtual currency

From Instant Messaging to instant noodles
4. Key services

QQ service map
4. Key services

Mobile & Internet
QQ service map
Internet services
QQ Pet
Q Zone
QQ Online Storage
QQ Search
QQ Email
Internet Portal
QQ Show
QQ AlbumQQ Games
QQ Membership
QQ MusicQQ Live
QQ Love
QQ Dating
Wireless services
Super QQ QQ Notice
QQ Mobile WAP Mobile
E-commerce services
Tenpay
C2C service
In addition to mass market services, QQ activities cover online advertising
QQIM

QB: Tencent’s Virtual currency
4. Key services

Mobile & Internet
What is QB?
QQ‘s value-added services belong to two groups: Internet VAS and
mobile/telecom VAS.
In 2008, Internet VAS generated 719 million USD, 68.7% of Tencent‘s revenue.
The whole amount was paid using QB, Tencent‘s virtual money.
With QB, QQ users can buy virtual items to personalize their avatar or
homepage, pay for online anti-virus software, download films, play online
games, etc.
Though not authorized by Tencent, QB became so popular that it can be used to
pay the services or products offered by other providers, for example game points
of World Of Warcraft.
The official rate between QB and RMB defined by Tencent is 1:1.
In China, all major Internet companies have their own virtual currency
system: Tencent, Baidu, Sina, NetEase, Shanda, etc.
1 QB = 1 RMB = 0.146 USD
7 QB = 7 RMB = 1 USD

Mobile & Internet
Usages of QB
Pay for QQ services and products
Vote for Super Girl: Super Girl is one of the most popular singing contests and TV
shows in China, inspired by ―American Idol‖.
In 2006, QQ was selected as a voting solution and users could use QB to pay for voting.
Fans spent a large amount of QB.
A merchant on Taobao sold 10,000 RMB worth of QB (1,350 USD) in one day for the finale.
Buy online DVD, software license, etc
Pay various Internet services offered by other providers
Cross-marketing: soft drink vendors and digital goods companies regularly use QB
within their products‘ promotional campaigns.
QB is so widely used that gray areas emerged and even illegal usages appeared.
Sell and earn money: according to statistics of Taobao, #1 e-commerce site in
China, over 8,000 vendors opened an online store focused on Tencent products.
The transaction in QQ channel exceeds 550,000 RMB per day in average. Most revenues
are generated by QB exchange (at a lower rate than the official one).
There were 58,914 Selling Leads concerning QB on 12th July 2009.
A professional merchant of QB can earn 4,000 RMB per month (30% higher than the
average salary in Beijing).
Pay salaries in some fields: some Internet service providers pay their forum
administrators by QB. Then they change them back to RMB by other ways.

Mobile & Internet
Getting QB
Buy from Tencent’s online system: pay by bank card, Tenpay account, ADSL
account, etc.
Buy and pay with fixed line: dial a special number with a fixed-line.
Buy and pay with mobile: dial IVR number through mobile phone, use IVR service,
and offered QB. For example, a China Mobile user dials 125908818, then push ‗1‘,
listen jokes, he will be offered 1 QB per 1.5 minute listening.
Buy on e-commerce platform: in C2C sites like Paipai, or Taobao the rate is
generally more interesting than the official one offered by Tencent. It is not difficult to
find a rate of 0.7 or 0.6 RMB for 1 QB.
Buy offline in distributors of QB: e.g. Internet Café, newspaper stands.
Use other QQ services and earn QB: every time QQ launches a new service, users
are encouraged to use it and are offered QB as a reward.
Earn by using services of QQ‘s partners: many start-ups partner with Tencent, and
promote their service through offering QB.
Exchange to other virtual money (this practice is not legal).

Mobile & Internet
Monetary functions of QB
Function QB usage
Measure of value Many products and services have a price in QB, such as a
virtual cap, QQ pet, VIP monthly fee, QQ online storage, etc.
Value storage Online game points cards, mobile phone prepaid cards or
telephone cards are always valid for a certain period. However,
QB is valid as long as Tencent exists.
Currency Officially not available, but popular and efficient for black
market purchases.
Payment method So many things can be paid with QB! It is sometimes more
efficient than RMB payment using online bank transfer.
Convertible currency No conversion at that point.

Mobile & Internet
Benefits of QB
The government worries about the impact of an alternative currency on the RMB
Simplify small sum payment
Useful especially for people
who don‘t do online payment
Increasing user loyalty
Benefits
Social problems
• Virtual currency trade is illegal and causing crime (extortion,
hacking)
Confusion in financial sector
• Exceeding the territory of online service provider
• Online hard currency, huge trade in black-market including
important international trade
• Gambling tool
• Illegal exchange from QB to RMB
• Company credibility risk
Last regulation released in June 2009
• Virtual currency issued by one company cannot be used to
purchase products or services from another company.
• The regulation is primarily aimed at virtual currency issued by
large online game companies including Tencent and Shanda , in
order to avoid virtual currency influencing the national financial
system (report by Sohu quoting a Ministry of Culture marketing
department chief).
Issues

Economic value of QQ digital assets
4. Key services

Mobile & Internet
Style and value of QQ numbers
Five-digit numbers
These numbers started being issued in 11/98, beginning at 1, although Tencent
held back the #10,000 series to use internally.
10201 to 10999 are very valuable numbers-- it's very hard to get one of the 798
of them.
AAAAA style
A total of nine of these types of numbers: 11111, 22222, 33333 and so on.
Impossible to get these through ordinary means.
88888, the number kept by Tencent CEO, sold on Taobao for 260,000 RMB
(33,500 USD - enough to buy an imported luxury car or a large apartment).
AAAAB or BBBBA style
180 of these, such as 98888, 99998, also rare, and priced slightly lower than
AAAAA style
Inverted numbers
Such as 98889 and 89998, which read the same way backwards and forwards,
also out of price. But this depends on personal taste
Straight numbers
1234567 2345678 3456789. "Dragon" numbers [in mahjong]. The average
person couldn't get one of these either.
Source: Virtual China

Mobile & Internet
Style and value of QQ numbers
Conceptual style
Numbers that sound somewhat like sentences in Chinese, e.g.:
• 5201314 我爱你一生一世 "I love you for my whole life a
whole generation―.
• 88520 爸爸我爱你 "Dad I love you―.
• 52077 我爱你妻妻 "I love you, dear" etc. Young people
seem to like these!
Birthdays, cell phone numbers, license plate numbers
These are only useful to individuals.
Stars style: e.g. David Beckham
89975: for instance date of marriage 1999.07.05 + Chinese
happy number ‗8‘
Price sold in Paipai: 7,401 RMB (956 US$)
Composite style, e.g. AAAAA style + Conceptual style
319488888: 3194-88888 生意就是发发发发发 ―our business
must grow, grow, grow‖, price in Taobao: 1,500 RMB (220 USD)
Online numbers are subject to offer and demand like any ―unique‖ good

Mobile & Internet
Value of online history, gaming levels and ranks
Online history
Online time on QQ represents user‘s level and right which is
labeled by how many "suns" the user has (1 year = 1 sun).
QQ online game level
People spend a lot of time and money to achieve high levels,
which gives them market value in the virtual asset world.
What is the value stored in a typical QQ account?
Membership for 1 year: 120 RMB
QQ account, 100 QB: 100 RMB
QQ game account, 15 million coins: 100 RMB
Online storage: 10 RMB/month or 120 RMB/year
QQ Super Group: membership 1 RMB/day or 360 RMB/year
QQ Pets: in general, one pet of level 15 costs over 80 RMB.
Total value: 600 RMB (78 USD) for 1 year.
Online assets aside from QQ numbers are valuable as well.

Mobile & Internet
QQ number = new and improved phone number or email?
QQ number, which used to be a code for virtual identity, now appears to be
as prevalent as mobile numbers and e-mail addresses among Chinese
youngsters and professionals alike.

Payment systems
4. Key services

Mobile & Internet
Lowering the payment barrier
IVAS
QB
Mobile operators
Broadband operators
Fixed-line IVR
Prepaid card
E-commerce
Online payment
Tenpay
MVAS Mobile operators
Advertising Direct payment
Service Payment method
The variety of payment methods lowers the barrier to convert active users into paying
users. Each method has its specific reach and associated costs.

Mobile & Internet
Paying for mobile VAS
Logo of QQ‘s wireless service
Tariff: 2 RMB/ sending
Service name: ring tone
SP‘s name
User‘s mobile number
Confirmation code received by SMS
Logo of Monternet, China Mobile‘s VAS brand
For China Mobile users, mobile services are
always paid on China Mobile‘s ―Monternet‖ web
site through the user‘s mobile account.
This page indicates the last step before paying.

Mobile & Internet
Tenpay is Tencent’s online payment platform
Usage
Tenpay is Tencent‘s online payment platform.
Tenpay plays a role of escrow between buyers and vendors.
It is used not only in Paipai.com (C2C platform operated by Tencent), but other
e-commerce sites as well.
In addition to the basic functions of traditional payment tools, Tenpay
features advanced functions as:
Personal finance management
Transaction management
Competition
Tenpay‘s strongest competitor is Alibaba Group‘s payment system Alipay.com,
which is popular with the millions of users of Alibaba‘s Taobao e-commerce site.
So far, eBay and Paypal have a very weak presence in China.

Instant Messaging
4. Key Services

Mobile & Internet
Main products
QQ
TM
RTX
QQ is Tencent‘s IM software for common users.
Simplified Chinese, traditional Chinese and English versions (with
less functions) are available.
The core of this service is communication and entertainment.
Free to use.
TM stands for Tencent Messenger. Compared to QQ, TM looks
more professional, and provides more business applications such
as contacts management, business card, agenda, and so on. This is
to prevent users from migrating to MSN when they ―graduate‖.
Free to use.
RTX is Tencent‘s professional IM version dedicated to internal
communication for companies.
The software interface can connect to internal management tools
and information systems
Not free.
Tencent tries to cover several market segments. TM and RTX are not as popular as QQ.

Mobile & Internet
Typical QQ IM interface
QQ buddy list
Email
Online disk
Wireless service
Mini portal
Music
Game
Interaction
Panel admin
Making friends
E-magazine
Online video
Stock info
SMS
History
QQ Pet
QQ Music
IPTVTencent browser
Find friend
Main menu
Address list
Group list
Last contacts
Search
QB: Virtual $
Online shopping
Video chat
File transfer
SMS/MMS
Multi-person chat
Entertainment
Input area
friend‘s QQ Show
Chatting with friend
Weather
My QQ Show
Friend‘s QZone
Take a group photo with
friend‘s QQ Show
Ad
Animated smiley
Smiley
Font
Send pic
Screen shoot
Background
Voice chat

Mobile & Internet
QQ lingo
With QQ‘s popularity a new language emerged with two main purposes
Type faster using shortened words or phonetics relying on numbers combination.
Communicate emotions more accurately, with a more sophisticated type of
smiley than those usually encountered overseas.
Some examples
Faster typing
• 88 or 886: ―Goodbye‖
• 9494: ―That‘s the way it is‖, ―You see?‖ or ―There we are‖.
• 8916: An insult — if you see this on your screen, your friend is obviously not
in the happiest of all moods.
• 7456: ―I‘m angry‖ — remember, keep calm…
Communicate emotion
• orz: (represents a person on all four with his head on the floor) ―I‘m tired‖,
―I‘m fed up‖ or ―Oh my God!‖
• XD: a crafty smile (look sideways
• >>::_::<<: very sad, pouring with tears
“Q me”
Instead of ―message me‖ or
―let‘s chat‖, people now say ‗Q me‘.

QQ Show
4. Key services

Mobile & Internet
QQ Show avatars
Largely inspired by Korea‘s Cyworld, QQ Show is a personalized avatar service.
Users can buy various items (clothes, background image, decoration) with QQ‘s virtual
currency called ‗QB‘ to create their ‗QQ Show‘. [1 QB = 1 RMB / 0.14 USD]
This ‗QQ Show‘ is used within the IM client, QQ.com‘s online community & QQ game portal.
Most items can only be rented. Duration depends on the item itself.
Items can be offered as gifts to other users.
Users have various ways to obtain a QQ Show
Buy in QQ Show Mall.
Buy in C2C e-market.
Gift from friend.
Initial avatars Simple QQ Shows Richer QQ Shows

Mobile & Internet
QQ Show use case
1. I like chatting with Cathy. To
look cool in front of her, I
bought a QQ show.
2. I asked Cathy to take a
group photo. She agreed. Of
course, I paid for it and
offered her a copy as a gift.
Buddy‘s QQ Show
Chat window
My original QQ
Show
Take a group photo
with Cathy‘s QQ Show
3. Our photo
4. Then our chat window
becomes…

Mobile & Internet
Selection of standard items
Emotions (0.8 to 1.1 QB) Hairstyles (1.5 to 2.0 QB)
Scarves (1.2 to 1.3 QB)Hats (1.1 to 1.6 QB)

Mobile & Internet
Branded items
Branded clothes: ESPRIT, ebc (avg. 2 QB) Background scene (avg. 2.7 QB)
Film stars (3.4 QB)Branded clothes: Nike (1 to 2.3 QB)

Mobile & Internet
Personal chat icon from QQ Show
Users can change their QQ icon by selecting a part of their QQ Show.
The selection is
now the user‘s
icon in the chat.
This picture is
user‘s QQ Show.
User can select a
part of it to make
it an icon
Some portraits are offered by QQ.
Compared to these simple portraits, QQ Show enables users to have
more personalized choices.

Mobile & Internet
Where can avatars be seen?
Where can QQ Show avatars be seen?
The ubiquity of QQ Show‘s avatar makes it all the more
important to users.
It is visible across most QQ services.
QQ IM: chat window, buddy‘s panel, personal info, etc.
Qzone (SNS)
QQ Game
QQ chat rooms
QQ community services: online dating, online album…
The QQ show can also be made visible outside QQ‘s realm
By copying a HTML code, users can add their QQ Show to a
web page.
Usually, a QQ Show is valid for a certain period
Standard QQ Show: 6 months; Flash QQ Show: 2 months.
The idea behind the limited period is: in real life, nobody buys
one piece of clothing to last a whole life.
Thus, Tencent believes it is reasonable to charge users a virtual
image every six months in their virtual life.

Mobile & Internet
Monetizing QQ Show
Sell QQ Show to users
QQ Show is sold mainly in the online QQ Show Mall.
Prices vary depending on richness and fashion. A QQ Show package including
hairstyle, emotion, clothes, and background could cost 10 QB.
3D QQ Shows are usually more expensive than 2D ones.
Cross marketing
QQ Show can be used to promote a brand, for example a sportswear item with
Nike‘s logo, a BMW car, a Coco Cola drink, etc.
This way, the advertisement is integrated in the QQ Show. A sports fan would
choose a QQ Show with Nike goods. While selling QQ Show, Tencent generates
also ad revenue.
Blue fur style cloth
Price: 3 QB
VIP price: 2 QB

Mobile & Internet
QQ Show Mall: virtual items store
QQ Show is not free, and should be paid by QB
Starting
avatar
Buy Offer Paid by otherTry
Maybe
VIP price: 2.7 QB
Price: 3.9 QB
Item title: For You (Male)Item

Mobile & Internet
Buying a QQ Show
Select
avatars in
QQ Show
Mall
Try and
confirm
purchase
1 2
3 4

Mobile & Internet
Update the QQ Show through mobile
QQ IM and QQ Show are both
available via mobile
220 million registered users.
120 million active users.
Many users in China have no Internet
connection.
There are 641 mln mobile users in
China, much more than 298 mln
Internet users.
This service is included in one of the
mobile service packages of QQ – 12
RMB or 1.8 USD) /month.
When users login QQ via mobile, their
friends will see a mobile icon.
Update QQ Show by sending picture through
MMS to service number 170015100

Mobile & Internet
Online auctions for QQ Show
46 persons have bid 137,470 page views Vendor info
Paipai: Tencent‘s C2C platform Auctioned item‘s title
QQ show: Hermit
out of print item!
Auction info
Highest bid: 721 RMB
Starting bid: 1 RMB
Up bid: +10 RMB
Item: QQ show Tenpay: 3rd
party payment
platform offered
by Tencent

Qzone
4. Key services

Mobile & Internet
Qzone’s blog & Cyworld-like service
Qzone is a nickname-based blog servicewith strong inspiration from
Cyworld (Korea‘s leading SNS) with the integration of avatars, mini-rooms
and ―mini-homepage‖ style.
Main features:
Photo album.
Blog: customize with music streaming, background, lay-out, various decorations.
Music box (music player).
Message board (―wall‖).
Mini-home: personalized space decorated through furniture and decorative
items.
Reaction between blogger and visitors.
Blog page Mini-home

Mobile & Internet
Facebook + Cyworld = Qzone?
Tencent‘s SNS Qzone is a hybrid of Facebook and Cyworld with additional
―QQ‖ features.
Cyworld
style
Facebook
style

Mobile & Internet
“Profile” without any decoration
Menu
•Home page
•Blog
•Music box
•Message
•Album
•Mini-home
•Personal info
•Friends
Skin
(background)
Messages
Music
collection
Emotion
expressionBlog
AlbumLast visitors
Friends list
Personal info,
image, statistic

Mobile & Internet
Decorated profile
Categories Menu
SkinPlants will grow and bloom into flowers with sunshine (text upload),
water (picture upload), nutriments (comment upload).
Music player

Mobile & Internet
Two featured user pages
To encourage user‘s
creativity, Tencent
selects regularly
some personal
pages to feature
them on Qzone‘s
homepage.
In addition to
decoration, the page
design and lay-out
can also be
customized.

Mobile & Internet
IM + Community makes 1+1>2
Tencent realized that IM could enhance the stickiness and activity of the social
network, and launched IM within Qzone.
The convergence of IM and SNS accelerated the growth of both services.
Qzone icon
Updates in
Friends’ Qzone
Qzone icon in
friend‘s profile

Mobile & Internet
Monetizing with digital goods
Digital goods sales
While other blog service providers are seeking desperately new business models, Qzone has
already become one the most important money makers for QQ through the sale of digital
goods such as skins (background), personalized menus, banners, entry page, objects in
mini-home (furniture, household applicants, pet…).
All the items have a limited lifetime: 2 months, 6 months, etc.
―Rental‖ is the dominant business model.
Skin
7.8 QBi
Music
player
5.3 QBi
Menu
5.5 QBi
Decoration
7.8 QBi
Active entry
page, 7.8 QBi
Flower
Free
Hot items
Skin
Music player
Active entry
Small décor.
Big head
Flower

Mobile & Internet
Monetizing with music
Background music is an important feature and revenue source for Qzone.
Users can listen to music not only with a player on their own Qzone but also can
listen to their friend‘s Qzone music when they visit their page.
Neither player nor music is free.
Skin
7.8 QBi
Music
player
5.3 QBi
Menu
5.5 QBi
Decoration
7.8 QBi
Active entry
page, 7.8 QBi
Flower
Free
Hot items
Skin
Music player
Active entry
Small décor.
Big head
Flower

Mobile & Internet
Monetizing with advertising
BMW page in Qzone
http://bmw1.qzone.qq.com/
Promotion of BMW 1
3,151,155 unique visitors
13,935,713 PVs

Mobile & Internet
Performance of QQ Show and Qzone
Current figures
200 million Qzone subscribers including 150 million active accounts.
Key success factors
Huge user base of QQ IM.
Largely inspired by successful cases, notably Cyworld from South Korea.
Matching users‘ self-expression need.
Variety of business models: B2C (digital goods, music), B2B (ad).
Usage of QB as payment solution, the virtual currency issued by QQ.

QQ Games
4. Key services

Mobile & Internet
QQ Games is Tencent’s largest revenue source
Gaming is the #1 single revenue source of Tencent (1/3 of total in 2008)
#1 casual game portal in China.
Tencent is in the Top 3 MMORPG developers in China.
The offering includes mini-games, single player games, multi-player games.
Several of the larger games (MMORPG, FPS) are licensed from Korea
Business models:
• Pay per play.
• In-game virtual goods.
• Premium VIP membership for game services (―Blue Diamond‖).
• In-game advertising.
Gaming is a key usage driver
Play with friends
• Client-based games can be accessed from QQ IM while browser-based
games are accessed from Qzone.
Meet friends by playing game
• QQ has the largest game community with millions of concurrent users.
Chatting + Gaming combine social networking and entertainment aspects.

Mobile & Internet
QQ Games interface
QQ Game hall can be launched via IM
Play with friends & Meet new friends
Video Poker
Game
5.6 mln users
online now
Click here to
launch game
Game list
Game
list

Mobile & Internet
Examples of QQ games
Billiard hall Billiard with video chat
QQ Speed | car decorationQQ Speed | racing

QQ Pet
4. Key services

Mobile & Internet
Tencent’s virtual pet community
QQ Pet is an IM-based desktop virtual pet game launched in 2005, which displays a
small animated penguin on the desktop.
Users can chose to have the pet stay on the desktop and accompany its host.
When clicking on the pet, a larger window opens and offers various options.
To start, users can play a daily lottery to get a free egg, ask/be offered one by existing users,
buy an egg or a VIP Membership to get a free egg. One QQ account can have only 1 pet.
The host feeds the pet, cleans it, takes it to see a doctor. The pet expresses its emotions,
studies, takes medicine, works, makes friends, travels, marries. In short, does everything a
person does in a human society.
QQ Pet is the fifth largest revenue source for Tencent after gaming, premium accounts,
Qzone, and ―QQ Show‖ for the IM service.
Main features
Nurture and educate: study, feed, clean, take medicine, see doctor, get married…
Outdoor activities: Travel, make friends, visit friends, drive a car. Innovative functions allow a
QQ Pet to visit the desktops of its host‘s QQ friends, and to be fed and taken care of by them.
Entertainment: play with toy, send to buddy an animated emotions related to the pet.
Pet status: on desktop or hidden, customize pet‘s outfit, house, etc.
Pet levels: some activities require a minimum pet age, such as getting married, go to
university, work as a lawyer or an artist, etc

Mobile & Internet
QQ Pet Internet portal
•Beginner
•FAQ
•Charging
•Transaction
record
Events
News
Supermarket
Event Ad
BBS
Experience
exchange
E-magazineCartoon
Survey
Love index
ranking
Pet ranking
Log in
•Pet index
•Pet news
•Feed help
•Supermarket
•Event
•Player
•Service
•BBS
Promotions

Mobile & Internet
Virtual Currency System
Three main types of virtual currencies are available in QQ Pet.
QB (available for all QQ services ), YuanBao (YB, created for QQ Pet, available
for all Pet services), and a few others.
QB is mainly purchased with real money and sometimes offered as gift.
1 QB = 1 RMB (0.15 USD)
QB can be used for most of the services in-world.
QB is the revenue generator of QQ services.
Yuanbao (YB) is a currency created for QQ Pet.
Aside from being offered at the moment a pet is born, YB can only be earned by
using the service and playing in-world games.
YB can be used with most QQ Pet services.
YB is the main currency rewarding service usage.
Various other currencies are used in QQ Pet in addition to YB.
Those can be earned by playing games.
They can only be used with a limited range of services and games in-world.
QB
YB
Others

Mobile & Internet
Interconnection of virtual currencies
The following chart summarizes the usage patterns of the various virtual
currencies.
X
Usable with all QQ
services including
QQ Pet
QB YB Others
No conversion
Usable with most
QQ Pet services.
• Usable only with
some QQ Pet
services.
• Convertible into YB.
Pay by cash
• 300 YB are offered at the
Pet‘s ―birth‖.
• Earn with various services
and by playing Pet games.
• Earn by using
services and
playing Pet games.
How to get
How to use
Convert

Mobile & Internet
Buying pet goods
Virtual items can be bought in four locations
Shopping street: groceries, commodities, medicine, jewelry.
Toy city: funny, original items.
Decoration city: room, furniture, pictures .
Vehicle city: car, boat, to fly, animal to ride on.
Shopping
street
Toy city
Decoration
city
Vehicle city
Shopping street Food Commodity Medicine Bijou
Indian flapjack
Hunger index: +900
Price: 50 Yuanbao

Mobile & Internet
Pet supermarket
In addition to going to different shops in QQ Pet community, it is also
possible to buy in a supermarket packages of various goods.
Flapjack, bamboo shoot, popcorn,
candy, ice cream
Quantity, price, attribute value
200 Yuanbao offered
Packages: food supplies
Price: 10 QB/month
Hair shampoo, body shampoo,
towel, dentifrice, underwear
Quantity, price, attribute value
200 Yuanbao offered

Mobile & Internet
Use case: QQ life step by step, from 1 to 4 years old
Why pets are high maintenance
I was offered 300 YB.
With this money, I can
enjoy life for a while
One day, a new QQ
pet was born
I eat and play in the
shopping street
I played football in other‘s
place. My skills were not
bad.
I traveled sometimes to
others desktops. I
remember I have been
invited often to a girl‘s
place
The time flies. 300 YB
were spent quickly
enjoying life. I even forgot
what I bought.
I seems that I should feed
myself and do some work.
I don‘t think it is difficult.
The work is really hard. I
miss the joyful days.
That is life. Now I know the
hardships of workers. I will
arrange my life rationally, and
be an excellent QQ Pet.

Mobile & Internet
Level 5! It is popular to go
to World Carnival. Today I
am going there.
I‘m taking part in a
hurdles race
I also did target practice,
and shoot with great
acuracy.
Swimming competition
with mermaid.
I won a lot of awards in
the World Carnival. I am
so happy.
This guy is actually faster
than me!
I joined the baseball
match of World Canival.
Rock cutting competition
with uncle gecko.
Out of money…Though
World Carnival is an
amazing place, I‘d better
be careful with spending
So it is important to study
well and do a better job
for the next World
Carnival.

Mobile & Internet
With my efforts, I become
an excellent student in
elementary school
It is incredible that my
dream was realized in
Seeking Treasure Park.
I experienced to be
journalist. I got a lot of
prizes.
For example, a coupon
of 1,500 YB.
For example, I dream of
winning the lottery
I played a roulette game.
Hey… what a good pet!
Which host doesn‘t like
this kind of pet? Haha…
I even won a real MP3 for
my host.
In fact, sometimes I am
day-dreaming.

Mobile & Internet
I am 12 years old. My
dear, look, this is the
finger ring which I got in
the church. Marry me,
please.
You are not adult! We
cannot get married before
15 years old!
Everybody has its
romantic love story. I
secretly love a QQ girl.
I cannot help offering her
secretly a large gift.
I lost face in front of my
QQ girl. Actually I didn‘t
know the legal age of
marriage. I should study
harder and learn more…
I‘m underage!!
I qualified to get a high
position in a police office,
with a nice salary of 34
YB per hour!
I can also change to another
job as a lawyer in QQ Pet
community court, and get a
salary of 32 YB per hour

Mobile & Internet
With my efforts, finally I
got Level 15, and I
married my QQ girl.
For my QQ girl and our
family, I study hard all the
university courses.
When we have free time,
we help the valley to
renew the natural
environment. It is also a
good outing for our baby.
It‘s difficult to get a
chance to enter the
university. I should take
this opportunity!
By using the ‗points‘ offered
by the residents in the valley,
we received an unexpected
gift! That is a nice
encouragement for us.
Looking at the green
forest, we feel relaxed.
Sometime later, I
received the acceptance
letter from university!
I graduated from
university!
My points.

Mobile & Internet
Use case: QQ life step by step, above level 20 years old
With a happy family, cozy life,
and stable income, what
other things can a QQ Pet do?
One day, a leader of our QQ Pet
village gave me an important
mission. ―Young man, I kept this
treasure map for long time. I give it
to you to seek glory for you and all
of us!‖
It‘s difficult to get a
chance to enter the
university. I should take
this opportunity!
Facing the monsters, I
was brave and beat them.
A successful QQ Pet has
never been satisfied with
a life of routine.
I accepted this mission.
For a more meaningful life,
I started my adventure.
Facing various difficult
questions, I showed my
intelligence and what I
learned in university
The trip in Adventure Island
means challenges in terms
of intelligence and physical
strength for both the QQ Pet
and its master.

Mobile & Internet
QQ Pet community
This is the map of the QQ Pet Community. The map includes three
main islands. The one shown below is the First Island.
1
2
3
Church
Shopping
street
Hotel
Hospital
Toy city
Shopping street, decoration city, toy city, hospital, work place, church, kitchen, manor, school, University, World
Canival, stadium, happy valley, Seeking Treasure Park, hunt place, barbecue place, Adventure Island

Mobile & Internet
Performance and key factors
Key figures
Over 100 million pets have been created since the start of the service.
• Started in June 2005, QQ Pet announced 1 million PCU in July 2006.
• Note: One QQ account can only have one pet.
Estimated 40 million USD revenue in 2008.
Key success factors
Leverages the large user base of Tencent‘s IM service QQ.
Human-like community service
• Feed, cultivate, play, work, get married, make friends, etc
A casual and easygoing game
• It doesn‘t require a lot of time and energy from users.
• On the contrary, it can bring users 2 or 3 minutes of enjoyment when they
take a rest in the office, at school, in an Internet cafe or at home.
Expansion of interaction between QQ users
• QQ Pets provide opportunities for new connections and entertainment.
• When a pet visits another‘s place, it can be fed by another QQ user. Then
their owners can discuss together how to nurture their pet better.

Mobile & Internet
QQ Pet vs. Club Penguin
The penguin has been QQ‘s mascot since the 90‘s. Though design similarities
are striking, service details vary widely.
QQ Pet Club Penguin
QQ Pet Club Penguin
Launch June 2005 October 2005
Target 10-40 y.o. 6-14 y.o.
Business model Monthly membership and digital goods
User base by 2007 36 mln 12 mln
Revenue in 2008 40 mln USD (estimate)
#5 revenue source for Tencent Internet services
after games, Premium QQ, Qzone, and QQ Show
50~150 mln USD
Source: +8*

Premium Memberships
4. Key services

Mobile & Internet
Premium QQ memberships
Premium QQ membership is the #2 revenue source for QQ IVAS after games.
Yellow diamond (for Qzone), Green diamond (for music), Red diamond (for QQ Show), QQ
VIP (for QQ IM), QQ Dating VIP (for QQ IM), Pink Diamond (for QQ Pet), Blue Diamond (for
QQ game).
Yellow diamond Green diamond Red diamond QQ VIP QQ Dating VIP
Qzone Music QQ Show QQ IM, Games, Partners QQ IM
•Free or
discounted digital
goods to
decorate Qzone
such as skin,
music, music
player, active
entry, big head,
flower, grass,
background,
furniture, writing
paper, super
album (3GB), etc.
•MP3 download;
•Qzone
background
music;
•Audio/video
watching and
uploading;
•Upload own
music to Qzone;
•Music player;
•Share music with
buddy while
chatting
•50,000 QQ Show for
free, discount for others;
•Offer QQ Show to
buddies;
•No expiration for QQ
Show;
•Automatically QQ Show
changing;
•QQ Show with own
photo;
•Group photo taken with
buddy‘s QQ Show;
•QQ Show edited by SMS
•Premium functions for
QQ IM: larger online
disk/album, more
smileys, customized
profile, larger mail box,
acceleration of QQ Level,
VIP group, etc.
•Games: free game,
discounted digital goods;
•Discount offered by QQ
partners: movie theatre,
shopping, education, trip
•Advance
people search,
chatting,
contact,
privacy
Usually 10~15 RMB or 1.5~2.2 USD/month, discount or more privileges for annual fee

Mobile & Internet
Levels of Premium QQ membership
To keep these users connected QQ designed a level system.
Each membership has a level system with a similar concept.
The Green Diamond is dedicated to music related services.
The Green Diamond level depends on the experience points earned by the user.
Users get 10 experience points per day after the validation of the membership.
Users who prepay for a year will get 15 points per day instead of 10.
Users with higher level will get more privileged services, such as:
Level Lv1 Lv2 Lv3 Lv4 Lv5 Lv6 Lv7
Experience point 0 400 800 1600 3000 5000 >7000
Example of Green Diamond level system
Lv1 Lv2 Lv3 Lv4 Lv5 Lv6 Lv7
Upload music (max. MB) 32 64 128 256 512 1024 1024
Free BGM songs 0 4 6 8 20 30 40

Mobile services
4. Key services

Mobile & Internet
Mobile services of QQ
QQ‘s Mobile services can be divided into two categories
Mobile QQ
• Access QQ services via mobile.
• Client-based or WAP-based.
• Mostly free of charge.
• Monetize by mobile advertising.
Mobile value-added services of QQ
• Premium services based on wireless via SMS, MMS,
voice, mobile Internet, etc.
• Charge users by B2C model.
MVAS of QQ
Mobile QQ

Mobile & Internet
Super QQ
Three main features
Keep QQ users online via mobile
• Automatically login QQ
• Customize on/offline timing
• Accelerate QQ Levels
Send following notification info via mobile
• Buddy‘s coming
• Login code updating
• QQ email change
• QB account balance
• Weather report
• Stock market
• Other subscribed info
Chatting via mobile
• Check online buddy
• Chat with QQ buddy via SMS
• Send to no-QQ users free SMS
• Update profile
The stickiness of the service and the loyalty of
users are based on a so-called ―Gold System‖
From Gold 1 to Gold 6
Gold level depends of the experience
point (e.g. 0 point for Gold 1, 90 for Gold
2, 1350 for Gold 6)
Experience point is offered by the
system according the usage – one day
usage for one point;
Service fee
10 RMB/month (1.5 USD/month)
Higher Gold level provides mode benefits for
services such as QQ Level acceleration, more free
SMS, etc.
Super QQ is especially interesting for users
accessing mostly via mobile.

Mobile & Internet
Super SMS
Super SMS is a SMS-related
service package, including:
Send 600 SMS via web or QQ.
Send 60 MMS via web or QQ.
Send 60 times customized text.
• Color, font, size, effect, etc
Make and update QQ show via
mobile using personal pictures.
Click the mobile icon on
QQ, then send free SMS
customized text
Service fee
12 RMB or 1.8 USD/month
Key points of Super SMS
• SMS is #1 mobile data service in China
representing ~50% of operators‘ data service
revenue (1.6 bln SMS per day in 2008).
• ―Super SMS‖ by QQ is quite interesting in
terms of pricing with12 RMB/month for 600
SMS+60 MMS+60 customized text.
• Normal price of point to point SMS:
0.1 RMB/SMS.
• Customization makes text more lively and
shows personality of users

Mobile & Internet
QQ Yinxin voice messaging
QQ Yinxin is a voice-based messaging service.
1. Write a text message,
2. Send the message to a QQ number or phone,
3. The recipient will get a voice message with
background music (option).
The concept is similar to ―ecards‖ for greetings,
apologies, etc, but based on voice message.
Users can write the message from web or mobile.
If users install QQ Yinxin Recorder as a plug-in,
they can add it in their Qzone profile and visitors
can leave a voice reply.
Users can chose 1-to-many rather than 1-to-1
message. In this case, the usage is close to a
―voice-based twitter‖.
Homepage
of QQ Yinxin
Service fee
10 RMB/month (1.5 USD)

Mobile & Internet
All-in-one mobile client
WAP
Brower
Chat room
Game
Info:
finance,
book, news
Music
player
E-mail
Qzone
(SNS)
Movie
Client-based Mobile
QQ integrates various
services in its mobile
QQ IM platform

Mobile & Internet
Basic IM features
Buddy List QQ Groups QQ Show Profile
Login Chat window Smilies
• #1 mobile IM in
China
• Free service
• Traffic fee paid to
mobile operator
• Monetize with
mobile ads.
Multi-chat window Taking/sending picture Video chat File transfer

Mobile & Internet
Multimedia functions
Mobile search: Soso Mobile browsing Mobile music Mobile QQ mini player
Mobile Qzone Mobile email Mobile game Mobile video

Mobile & Internet
Mobile portal
Mobile QQ is the #1 WAP portal in traffic in China
URL: 3g.qq.com.
Over 80 million monthly active users.
50 million daily PVs for the homepage.
3.1 billion daily PVs in total.
Visits are driven by WAP-based QQ services such
as IM, Qzone and QQ Pet.
Homepage of QQ‘s
mobile portal
WAP-based QQ IM WAP-based Qzone

Mobile & Internet
Mobile extension of functions and content provided by QQ on PC
Content synchronization between PC and mobile
Mobile-PC synchronization
Mobile interface PC interface

Mobile & Internet
Ubiquitous gaming and QQ Show
Cross-platform gaming
QQ Show service
available on PC
and mobile

Mobile & Internet
Advertising within Mobile QQ
Mobile QQ brought about 3 mln USD in
advertising revenue in 2008.
Mobile advertising is at an early stage in
China, but growing.
Famous brands starting to do marketing
campaigns via mobile.
Mobile infrastructure is still largely
GPRS/CDMA rather than 3G.
Lower pricing for data is helping the
market grow.
3G.QQ.Com - Text Link PUMA WAP site 3G.QQ.Com - Title Banner – Nike WAP site
Buddy List Banner
BMW
Ad in System Message
Nokia N-Gage

Additional services
4. Key services

Mobile & Internet
QQ music
Music is an important source of revenue
for both web and mobile. Main paying
service include:
MP3 download
IM music sharing
Background music in Qzone
Music player in Qzone
Mobile music
Aside from paying per usage, the
business model around music is mainly
based on a ―Green diamond
membership‖ charging users 10
RMB/month (1.5 USD/month) for music-
related premium services.
QQ is partnering with
major music labels
Music.qq.com
QQ‘s music portal
460,000 listening
to music now
QQ music player
launched via IM

Mobile & Internet
Services: if a user dials 1258688, a voice menu will guide the user:
1. Direct call: reach people‘s mobile phone dialing directly 1258688 +QQ number
2. Voice chat room: enter different voice chat rooms defined by topics, or regions
3. Matchmaking: users will be offered a list of ―compatible‖ QQ users, and can try to
contact someone by leaving a voice message.
4. Voice mail: users can record, listen, reply with a voice message to other QQ users.
5. Administration: personal information, settings, blacklist configuration, call filtering.
Description: this service allows users to call a
QQ number instead of a mobile number.
Service number: 1258688
Availability: QQ and China Mobile
subscribers.
Voice QQ
Call a QQ number instead of a phone number

Mobile & Internet
Voice QQ
China Mobile Post-paid Pre-paid
Normal fee (RMB/min) 0.4 for local call
1.1 for long distance
0.6 local call
1.1 for long distance
Mobile voice QQ
Peak time (RMB/5min)
2.0 3.0
Mobile voice QQ
Off-peak time (RMB/5min)
1.0 1.5
Note: Peak time is 09:00-12:00 and 14:00-20:00
• Low price
• Privacy (the telephone number
is kept secret andonly the QQ
number is shown)
Advantages
Call a QQ number instead of a phone number

Mobile & Internet
Little Q: QQ chat robot
It is a chat robot. In the case a user doesn‘t want to chat with others or has nobody to chat with,
Little Q offers an alternative.
User can teach Little Q. If she doesn‘t know who is Zidane, the user can tell her. She will know the
answer the next time she is asked by someone.
平和: Hello, how is it going?
小Q: Very fine. Is it really you?
平和: It‘s me. Who are you?
小Q: I am Little Q.
平和: Do you know Zidane?
小Q: I am not sure. It‘s been long time that
I don‘t watch sport news.
平和: Zidane.
小Q: A great soccer midfielder.

Mobile & Internet
QQ’s web portal
Compared to the home pages of
foreign Internet portals, Chinese
websites are a lot more crowded
(―the Las Vegas school of web
design‖), and so is QQ.com.
Chinese netizens are used to
this situation which is a
consequence of the online
advertising market structure.
www.msn.com www.yahoo.comwww.qq.com

Mobile & Internet
Web portal details
Flash Ad
Flash Ad
Ad
News center
Movie Ad
Sport news
Entertainment
news
Video/BBS
Ad
Flash Ad
QQ services
Paipai Ad Paipai Ad
Content Channels
Search
Content
highlights
Tech/eco
news
Auto/game
news
TV show Ad
Education
news
Woman/fashi
on/health
news
Tencent
news
News
Ad
Flash Ad
Flash Ad
Flash Ad
Content
highlights
Content
highlights
Upper half Lower half

Mobile & Internet
QQ levels
QQ operates a ―level‖ system
"QQ Levels" are indicated by a number of "suns", "moons" and "stars".
Levels are earned by staying logged in for certain amounts of time. The system
counts the number of "active days", which is a day during which the user is
online for a certain number of hours.
QQ users above level 16 are allowed to upload their own icon avatars, 40x40
pixel images shown beside contacts' names.
One moon + one
star: level 5

Mobile & Internet
QQ Groups focused on hobbies and location
QQ Group is one of the core services of QQ.
Compared to one-to-one IM, QQ Group is many-to-many
IM service.
QQ Group is a communication space between users
sharing the same interests or hobbies.
There are over 22 million QQ groups in total.
Main features
Many-to-many IM.
Group space: shared by all members, BBS, album,
member list, chat history, online disk. The space can be
opened to public, or just to group members.
100 members in maximum for a general group.
200 members in maximum for a super group.
Group management
User who has ―one sun‖ level can create a group.
One QQ VIP can create 4 groups in maximum.
In ―super group‖, the member who pays the most can
become the shareholder of the group and gets
administrator rights.
Game 3,069,014
Real estate 239,343
Automobile 147,671
Music/movie 963,506
Fans 1,214,891
Travel 117,054
Shopping 313,173
Sport 355,244
Same city 809,548
Countrymen 1,769,018
Colleague 2,013,485
Exam/training 195,023
Career 451,443
Technology 599,714
Animation 613,429
Business/finance 270,141
Writing 1,528,300
Reading 409,881
Life 2,142,604
Horoscope 1,179,871
Classmate 1,271,832
Others 2,706,458
Total 22,380,643
Group categories

Mobile & Internet
QQ Groups drive stickiness and socialization
QQ Group is one of the most important services contributing to QQ‘s stickiness.
One group means one social network.
It is difficult to abandon QQ for a user who has joined several active groups.
Pricing
General group creation and membership is free.
In order to expand the group population from 100 to 200, the group should pay 1 QB per
additional member.
In order to maintain a ―super group‖, the group should pay 1 QB per day.
Group Number: 38823257
Brief introduction: a new QQ group for people to practice their colloquialism English by using
QQ's Multi-voice function.
Welcome new friends! Free talk is the best way to improve your oral English skill.
In order to maintain a comfortable conversation environment, the creator needs to set some rules.
Politics & sex (maybe I'll append more later if necessary) are prohibited topics in the group.
Important Information: applicant shall has an intermediate or above English level (at least CET6 with
oral passed). We will arrange an examination for you to classify your English standard.
We only welcome mature members, thus the person under 25 years old with less than 2 years
working experience is not allowed to join the group.
A group member
recruiting ad placed in
English learning
channel of Sohu.com

Mobile & Internet
Taotao: QQ’s “Twitter”
URL: www.taotao.com
Launched in 2007
Over 48 million subscribers by July 2009.
The number of active users is unknown.
6 ways to send message
Website of Taotao
QQ IM signature
WAP Taotao: m.taotao.com
SMS/MMS
QQ robot
MSN robot
Key points of Taotao
• Combine with QQ account, easy to access.
• Multiple ways to send messages.
• Combination with QQ other services.

Mobile & Internet
QQ in English
―I'm QQ‖ (www.imqq.com) is a website in English launched by Tencent
introducing QQ to English speakers.
Download an English version of QQ IM and register a QQ account.
It is a sign to showing Tencent is paying more attention to overseas.
The English QQ version has existed for years but was in a sub-menu on a
Chinese page.
The English version is compatible with the Chinese one and very similar.

Online Advertising
4. Key services

Mobile & Internet
Tencent is catching up with online ad leaders
Tencent‘s advertising sales are likely more
resistant to economic slowdown.
Tencent‘s top 3 advertising categories include online
games, apparel and food & beverage, which tend to
be resilient throughout economic cycles.
In contrast, cars and real estate are in the top 3
advertising categories for Sina, and both are
experiencing a slowdown.
Community power helps spend less money on
sales & marketing than other portals.
Note: E = Morgan Stanley Research estimates
Source: Company data, Morgan Stanley Research
Company
Sales & Marketing Costs
% of Total Revenue
Tencent 7.2%
Sina 21.6%
Sohu 19.8%
Source: Company 2008 Annual Reports, +8*

Mobile & Internet
Tencent MIND: online marketing/advertising
In the last quarter of 2007, Tencent launched its MIND strategy to grow its
online marketing/advertising revenue.
Until then, Tencent has been relatively weak with advertising solutions
offered to advertisers and advertising revenues (only 10% of total)
compared to other large Internet players like Sina, Sohu or Baidu.
MIND is the online branding and advertising philosophy of the solutions
provided by Tencent.
M: Measurability, measurable effect of online marketing/advertising.
I: Interactive Experience, improve end-user‘s experience with interactivity.
N: Navigation, ensure the precision of selected targeting end-user.
D: Differentiation, customize online marketing solution for different advertisers.

Mobile & Internet
MIND leverages Tencent’s channels
Provide IM platform to
all Chinese in the world,
and largest in China,
377mln active accounts
QQ IM
#1 casual game
platform, 4.7mln PCU,
125 minutes of usage
per day, more than 50
games, 240mln
accounts
QQ Game
Provide to young
people a customized
multimedia online
space and
communication tool
Qzone
A platform of self-
promotion, self-
expression, 50mln
active accounts,
everyday 1.5 mln users
update their QQ Show
QQ Show
Cover 95% internet
users in China, 18~30
y-o, students and white
collars relying on
Internet for
communication.
86% of subs are 18~30
y-o, mainstream
consumers, care about
life quality, advertisers
need to use their
language to reach them
25~35 y-o people,
strong brand
awareness, ready to
use future‘s money to
satisfy today‘s need, 2
or 3 bank cards/person
18~25 y-o people,
interested in brands,
with some income or
depending on familly,
but with consumption
power.
• #1 IM in China
• #1 online media, large
coverage
• Client-end solution
• High user loyalty
• #1 casual game
platform
• High user stickiness
• Available for in-game
advertising
• #1 blog platform, 150 mln
active users
• Most active Internet
demographics, effective
world-by-mouth platform
• High interactivity
• Bundled with QQ number,
easy to build user‘s
database and measure the
ad effects
•#1 virtual image
• Fashionable user target
• High interactivity
• Bundled with QQ number,
easy to build user‘s
database and measure the
ad effect
Product
orientation
Target
population
Platform
features

Mobile & Internet
Tencent MIND: QQ Skin
QQ Skin (custom design of the IM client) can be customized by users but is
also used by QQ as an Online advertising solution.
QQ IM client UI and in-IM advertising
Skin category
Design
contest
Skin
search
Skin
examples
Top skin list
of download
Top skin list by
users‘ vote

Mobile & Internet
Ad element is naturally integrated in the skin design.
in-IM branding cases: Samsung, KFC, Lenovo, Nike
Samsung
MP3
KFC
Juice
Lenovo
PC
Nike
Shoe

Mobile & Internet
Combination between online advertising and QQ product/service
Nissan pays a fee to QQ who designs a customized QQ Skin.
These attractive skins are used by QQ members who like them.
Nissan
TIIDA
in-IM advertising cases: Nissan TIIDA

Mobile & Internet
Tencent MIND: Qzone
Interactive online marketing case: Dior
Measurability
Statistics for one month‘s Dior HydrAction campaign:
Total PV 3,813,772
Homepage PV 2,644,966
Registers: 25,171, including 400 models, 10,000 white collars
60% of phone-call purchases comes from qq.com
68% of those purchasers were not Dior members before.
Interactive Experience
Young ladies were engaged to blog their experience and knowledge with skin care products.
Their personal diaries could be viewed and then voted on by netizens in an online competition.
The participants became ‗Opinion Leaders‘ by publishing their personal skincare experience.
Their Qzone webpage and message would be updated on a real time basis. But, most
importantly, their thoughts on skincare were shared amongst their circle of friends.
Objective
(1) Launch Dior HydrAction defense,
Christian Dior‘s summer skin care solution.
(2) Recruit new Dior Club members and
boost sales.
Target
20~30 y.o. fashionable & affluent urban
women
Mechanism
(1) Using Qzone as a platform to start a
discussion on skincare which was a hot
topic for young women.
(2) Engage users with the romance of
Dior HydrAction campaign and bring
attention to the launch of this high end
product.
Navigation
Dior campaign utilized targeting based on
interest groups and locations. Product info
was delivered to the target consumers.
Gender: female, 69%
Age: 20~25 y-o, 79%, <20, 16%
5,000 users in Guangdong,
Jiangsu,and Zhejiang (top 3
provinces)
Differentiation
Brand challenge: Promote Dior's 'youthful
luxury' idea online, drive demand for Dior
products amongst the target audience
Consumer insight: Young ladies tend to heed
the advice of 'opinion leaders' on skincare;
‗luxury‘ is something 'desired by many, owned
by few‘
Online communication strategy: Qzone 'Dior
HydrAction Luxury Journey' placed up the
desirability of the product with the slogan
'desired by many, owned by few'. Dior's brand
awareness increased among young ladies.

Access solutions
4. Key services

Mobile & Internet
PC client software
The registration is quite simple, and not restricted.
No personal ID check
One person may register different QQ accounts.

Mobile & Internet
Web client for QQ IM
Launched in January 2009 as part of the im.qq.com family, it allows users to access
QQ IM via a web interface instead of a desktop client.
No Flash or Silverlight required, this version runs in any browser (IE, Firefox, Google
Chrome/Opera/Maxthon/Safari, etc).
Great for environments where QQ client is not available, especially useful in some
companies which prevent QQ IM usage.
My online friends
Friends upates
- Change in Qzone
- Update status or
profile, etc.
New feature
See what people say
about your friend
(personality, etc.)
Chat window
My open chat dialogues
My email
My customized groups
Switch from user-
view to group-view

Mobile & Internet
QQ on mobile | SMS
QQ connection with SMS offers a low-barrier mobility solution for all phones
No need to install software
No need of a smart phone
No need for WAP access (as it uses SMS only)
After sending ‗Q‘ to 1700
by SMS, the user
receives a reply
Main menu, reply the
number:
1, chat with QQ buddy
2, online dating
3, online status
configuration
4, entertainment
5, client service center
6, lottery
7, QQ level
After replying ‗1‘,
for chat, the user
receives another
reply.
4 friends online
100: xxx
101: xxx
102: xxx
103: xxx
Over. For chatting
with someone,
reply with his code,
e.g. ―100hello‖

Mobile & Internet
QQ on mobile | WAP
With GPRS connection, QQ users can access the WAP site and chat with
other users regardless on the platform (PC, mobile, PDA, etc.)
WAP QQ Mobile QQ
Costs Free 5 RMB/month
Client software No Yes

Mobile & Internet
QQ on mobile | Client software
The mobile client
is free to download
(excluding data
fees to carriers).
Friends list
•My friends
•My colleagues
•My classmates
Status
•Mobile online
•PC online
•Video available
Log in by mobile phone
The mobile
version offers the
same main IM
functions as the
PC version.
See who is online
1.See profile
2.Add to friends
3.Update

Mobile & Internet
QQ for iPhone, Mac and Linux
To maximize reach, QQ clients were developed for key non-Windows OS.
QQ for Mac
QQ for Linux
QQ for iPhone

Future Developments
4. Key services

Mobile & Internet
More users!
More Internet users
298 million Internet users in 2008, vs. 377 million QQ IM active accounts
China‘s Internet penetration was a mere 25% in 2008 and shows high potential,
especially new users from second and third-tier cities.
More mobile users
641 million mobile users in 2008 vs. 200 million mobile QQ active accounts.
Mobile penetration stood at 50% in 2008 and shows high potential in rural areas.
Networks effects should yield high growth
QQ‘s fabric of social links helps foster growth.
The service is a fundamental communication infrastructure with high degree of
recognition.
Tencent serves core user needs in an accessible way
Simple access of service
All kinds of services (communication, search, shopping, news, personalization)

Mobile & Internet
“3D” concept of social links
QQ‘s SNS strategy is based on ―3D‖ concept
QQ has built a strong position with the first two, which are ―opt-in‖ networks:
• Friends (QQ IM, Qzone)
• Groups based on interests (QQ Group)
The third ―dimension‖ is based on various user segmentations such as
• Demographics. e.g. white collars
• Location
• Tencent launched its real-name SNS Xiaoyou in January 2009 to address
this dimension.
Friends in QQ IM
and Qzone
Based on
categories and
interest
Segmented by age,
career, interest,
location, etc.
1D
2D 3D

Mobile & Internet
Web IM with Silverlight QQ
This service is co-developed by QQ and Microsoft using Silverlight
Rich user experience integrating IM functions.
Gives access to email, SNS and web games.

Mobile & Internet
Future
• File transfer
• Friend
grouping
• Custom install
• Etc.
Development roadmap for Silverlight QQ
First developments
The first wave rapidly added key IM features.
The service will be expanded as usage grows.

Mobile & Internet
Tencent launches its own mobile browser
Tencent announced it was preparing its own mobile
browser.
Tencent did a first small-scale integration with Nokia S60
and is preparing a more advanced browser.
Prior to this announcement, Tencent was rumored to
have attempted to invest in UCWEB (#1 in China‘s mobile
browser with 70 million downloads).
Why invest in a mobile browser?
China‘s mobile internet is taking off.
3G licenses were awareded in January 2009.
With 2G, China already had 118 million mobile Internet
users at the end of 2008.
By releasing its own browser, Tencent has a much higher
chance to direct users to its own ―walled garden‖.

5. Strengths & Weaknesses

Mobile & Internet
Tencent’s strengths
One of the most valuable brands in China‘s Internet industry
For a lot of Chinese young netizens, Internet = QQ, because most key Internet
usages are part of QQ‘s universe (communication, search, gaming, shopping).
User base built on IM
It is easy for Tencent to launch any new service thanks to their massive user
base of 892 million accounts including 377 million active accounts.
Creativity on R&D
QQ Labs dedicated to research and innovation.
Various payment channels
Combining online and offline to lower the monetization barrier.
When you have a huge and ever-growing peer-to-peer communications network
like QQ, you can just sit there waiting for someone else to prove a new
revenue model (as long as it‘s entertainment-related and youngsters-targeted),
and you can then copy the proven model and add it on top of your network and
the job is done!
More often than not, you can crush the first mover, because you do not incur
additional costs of acquiring customers. Dr. Song Li
Founder, Digu (Twitter)
Founder, Zhenai
(Match.com)

Mobile & Internet
Tencent’s weaknesses
User demographics
Average age: 20.6 years old
Majority of users: 13~25 years old
Cute, popular, but not professional image
Not very appreciated by white-collars.
Target is not very segmented
User base is so huge that QQ is not strong enough to
cover finely segmented requirements.
All the value is based on its client software
IM software is the core of QQ. Every service expands
from it and is integrated into it, making the offer more and
more complex.
QQ, TM, and RTX, 3 versions are not enough to satisfy
the differentiated need of users.

Mobile & Internet
Opportunities for Tencent
Growth of Chinese economy and consumption power
Low Internet penetration rate suggests huge potential.
Huge rural population, especially migrants.
China‘s mobile market
Entry barriers for mobile users have come down with prices.
3G-related services are emerging: music, video, e-commerce.
Service convergence
Convergence of Internet, telecom network, and broadcasting
network is pushed by government and Tencent‘s reach is a
strong advantage to deliver a cross-platform experience.
Untapped advertising market
Despite its huge population coverage, QQ derives only a small
share of its revenues from advertising compared to other
social networks. Potential revenues from this untapped source
are huge.

Mobile & Internet
Competitors
MSN‘s good image
Skype‘s good technology on VoIP
PICA‘s focus on mobile application and interoperability
Apparent contradiction between simplification and personalization
Difficulty to satisfy everybody
Importance of R&D
How to keep users when they grow up?
QQ is excellent for teenager or young adults.
Those users might grow out of QQ‘s childish image.
Uncertainty of market environment
Government regulations on online games, virtual currencies, mobile services.
Social responsibility
Interconnection
Interconnection between MSN Messenger and Yahoo Messenger
give those services additional value. QQ remains a closed system.
What are the risks for Tencent?

6. Users Interviews

Mobile & Internet
Methodology
A good way way to understanding a service‘s reality is to ask its users.
With this in mind, we conducted interviews over QQ chat with six different
users to get a sense of what QQ is about for them.
Interviewees were selected to represent a reasonable variety of profiles (age,
gender, activity, experience with QQ).
Questions revolved about their general usage and their feeling and social links
within QQ.
Illustrating the social impact of QQ
Among other things, we could verify how strong was QQ‘s influence on Chinese
netizen‘s lives: from maintaining social ties, to creating new ones, sometimes
even leading to marriage!
Interviewees were rewarded for their time with Q Bi.

Mobile & Internet
Profiles
Pang Yanwei
Male, 25
IT Network
administrator
QQ number:
5586XXXX
Chen Tingting
Female, 21
University
student
QQ number:
12507XXXX
Zhang Yuchen
Male, 13
Middle school
student
QQ number:
843XXXX
Gao Hong
Female, 30
Cashier
QQ number:
41892XXXX
Gao Xingwei
Female, 37
Restaurant
owner
QQ number:
34818XXXX
Tang Juanjuan
Female, 21
Receptionist
QQ number:
8477XXXX
Note: the last four QQ numbers are masked for privacy reasons

Mobile & Internet
User interviews
Why did you
register to QQ?
More convenient to communicate with friends. Some functions are very entertaining. I
registered 3 QQ accounts. one for friends, one for work, the other one for people I just
know online.
--- Pang Yanwei, male, 25, IT admin
Almost all my friends have QQ number. So I registered one. Just like when everybody has
a cell phone, I have to have one. Otherwise, it will be not convenient.
--- Gao Hong, female, 30, Cashier
When I wanted to buy DVD movies on eBay from a girl, I registered to QQ in order to
communicate with her.
--- Gao Xingwei, female, 37, Restaurant owner
How about your
contacts list?
Do you know all
of them offline?
I have 108 contacts in my list and below to 8 groups, I know 55 of them offline.
--- Chen Tingting, female, 21, University student
45 contacts. I know 40 of them offline.
--- Tang Juanjuan, female, 21, Receptionist
More than 200 in my list, I know about a fifth offline. I also joined 3 QQ groups.
120 contacts , 6 groups, I know almost all of them offline.
--- Zhang Yuchen, male, 13, Middle school student
About two dozens, they are all people close to me, I know everybody.

Mobile & Internet
User interviews
Do you use your
Q Bi?
Not often. But I bought a QQ Show as my QQ image. Otherwise, my the default image
offered by QQ is a standard girl, very basic, without beautiful cloth. I could not bear it.
Yes, I buy QQ VIP identity, decoration for my Q Zone, and food for my QQ Pet. I have
bought three QQ Show, a headgear of 4.8 Q Bi, clothing for 4.5 Q Bi, and a background
of 5.5 Q Bi.
About 15 Q Bi every month for QQ VIP identity, and QQ Show
How do you buy
Q Bi?
My boy friend paid Q Bi with his account.
Buy Q Bi card offline.
--- Chen Tingting, Zhang Yuchen, Gao Xingwei, Gao Hong

Mobile & Internet
User interviews
A story about
QQ and you
My first love story happened through QQ. I met a boy when I was 16 years old in high-
school.
I met my husband on QQ.
I found long-lost some friends and classmates by QQ..
One of my classmates in primary school moved to another city. I really miss him. We
keep in touch by QQ, text chat, webcam chat, and game.
The first buddy in my QQ list is the girl from whom I bought DVD on eBay. Later we
became friends. But she hadn’t been online for a while because she got ill seriously. Then
I lost her contact because the owner of her QQ number changed. I don’t know what
happened to her.
Pros and cons
of QQ ?
Pros
• Convenient to communicate
• Learn about stranger’s life
• Help save on telephone fees
• Ease of use
• Entertaining
Cons
• Too many paying services
• Account security
• Some useless functions and services

Mobile & Internet
User interviews
What does QQ
mean for you?
What are QQ‘s
values?
If I am online, I log on QQ. If one day I don’t log on, it must be I cannot access Internet.
For me, QQ means Internet. The main purpose to connect to Internet is QQ.
QQ means chatting.
QQ means youth and energetic. All the young people have QQ number. QQ is also a good
tool against loneliness.
QQ means entertainment and playing games.
What are the
three types of
Internet
services you
use most?
Online video, chat rooms, BBS (forums)
--- Chen Tingting
Online video, IM, online gaming
Information, email, online advertising
QQ, online shopping, online animation
IM, news, open an online store
News, online gaming, IM

Mobile & Internet
Image of QQ
Image Comments
Popular QQ is the most popular IM/chat service and has the largest user base.
Young Most respondents feel both QQ image and the users are young,
compared to other I.M tools. Students tend to perceive the users are
mainly composed of students especially at the very beginning.
Fashionable QQ is a fashion in communication. One would be out of date if he/she is
not a QQ user.
Amiable Both the penguin image and the interface feel amiable and warm.
Cute The penguin image looks cute, and the name ―QQ‖ sounds cute too.
Innovative QQ is considered a pioneer of IM tools, and quick in version updates of
interface and functions.
Leisure QQ is considered more leisure and fun, because it is closer to personal
life.
Ubiquitous QQ allows communication across various platforms, from PC to mobile.

7. Insights from Experts

Mobile & Internet
Experts interviewed in this research
Leo WANG
Founder
Mobile 2.0 Forum
Jim LEE
General Manager
EA Mobile
Gang WANG
Founder
Mobile 2.0 Forum
Xing WANG
Founder
Brian RU
Senior Analyst
Matrix Partners
Zili REN
Founder
Appleap
Project Manager
China Mobile
Olivier GLAUSER
Managing Director
Steamboat Ventures
Gang LU
Founder
Mobinode
Yong LV
Investment Director
SK Telecom, China
Leon HUANG
Product Manager
Jiapu.com
Tencent
Catherine CHAN
IR General Manager
Tencent
Kaiser KUO
Digital Strategy Director
Ogilvy China
Tangos CHAN
Editor
Alex LIANG
CEO
Pica.com
Dr. Song LI
CEO
Digu, Zhenai
Buddy YE
CEO
Wangyou Media
Wayne SHIONG
Partner
WI Harper
2008
2009
Dirk HE
Senior Manager
Huawei

Mobile & Internet
Experts interviewed in 2009
Name Title Company Description
Olivier
GLAUSER
Managing
Director
Steamboat
Ventures
The VC arm of the Walt Disney
Company. Invests in early &
expansion stages in digital
media & consumer technology.
Jim LEE General
Manager,
EA Mobile
Electronic Arts One of the world‘s largest global
entertainment software
companies.
Dirk HE Senior
Manager
Huawei China‘s #1 telecom solution
provider.
Brian RU Senior
Analyst
Matrix Partners One of China‘s top VC firms
covering IT, media, telecom,
healthcare & cleantech.
Gang LU Founder Mobinode.com Leading blog on Asia‘s web
scene.
Leo WANG Founder Mobile 2.0
Forum
Highly popular offline forum in
China‘s mobile industry.
Mr. A Former
Project
Manager
Tencent Tencent is the company operating
QQ.

Mobile & Internet
Leon
HUANG
Product
Manager
Jiapu.com Part of Ancestry.com, SNS on
family history records.
Yong LV Investment
Director
SK Telecom,
China
#1 telecom operator in South
Korea. It owns Cyworld, the leading
online community in Korea.
Mr. B Project
Manager
China Mobile
Research
Institute
#1 telecom operator in China with
over 400 mln users.
Zili REN Founder &
CEO
AppLeap Inc. Online platform that monitors and
provides analytics on 2,500+ social
applications on SNS.
Xing WANG CEO & ex-
CEO
Fanfou.com
Xiaonei.com
Hainei.com
Xiaonei: leading SNS for students
Hainei: business SNS (current)
Fanfou: Chinese ―Twitter‖ (current)
Gang
WANG
VP Sina E-
Commerce &
Sina Music
Sina.com is China‘s leading Internet
portal.

Mobile & Internet
• Note: Xiaonei and Kaixin001 are the leading real-name SNS in China.
• They don‘t compete directly,
as QQ IM is not using real
name and is also used to
meet strangers. Xiaonei and
Kaixin001 are based on real
identity and respectively
target students and young
white collars.
• The large IM user base of
QQ makes it easy to launch
any new service.
Olivier GLAUSER
Managing Director
Steamboat Ventures
Leo WANG
Founder
Mobile 2.0 Forum
• QQ‘s SNS (Qzone &
Xiaoyou) compete directly
with them.
• Xiaonei, Kaixin001 and
51.com have potential to
steal QQ users' attention
and QQ has felt this threat
for the first time.
Gang LU
Founder, Mobinode
• QQ‘s users are also users of other social networks for different purposes.
• Despite QQ‘s special functions (e.g. super large file transfer) or private chat with
important friends, Xiaonei is better for social networking as it looks more
―mature‖. This is rather a difference of product orientation than competition.
• QQ cannot combine all of social networks and IM. Users will mature and move to
more mature services. I call that ―graduation of users‖.
Does QQ face competition from Xiaonei, Kaixin or others?
Project Manager
China Mobile
They compete for users‘ time, as QQ
covers almost all the internet users.

Mobile & Internet
• Note: Xiaonei and Kaixin001 are the leading real-name SNS in China.
The competition is not clear.
QQ targets teenager and
adults with medium or low
education level. Xiaonei
users are university students
and Kaixin001‘s are young
white collars.
Yong LV
Investment Director
SK Telecom, China
QQ is competitor of all the
B2C-based services. That‘s
why it is regarded as a
―public enemy‖. SNS must
be an important strategy of
QQ and the combination of
IM and SNS is key. Leon HUANG
PM, Jiapu.com
Gang WANG
VP, Sina E-commerce
• QQ is a giant which covers almost
all internet users and services. The
target demographic is not that clear.
• In contrast, Xiaonei and Kaixin001
focus on a certain group of users.
• As a consequence, QQ users may
play ―Parking‖ or ―Slave Trading‖
games in Qzone or QQ Xiaoyou.
Just as well, Kaixin001‘s users may
play the same games in Kaixin001
while keeping QQ IM on.
Does QQ face competition from Xiaonei, Kaixin or others?
• Facebook has about 240,000
registered users in China while
MySpace.cn has 3.5 mln.
• They take different approaches
but neither seems like taking
off. Both may soon go into
dead pool as they have lost
momentum and will not have
much chances in China.
• Twitter won‘t work either
because of the unique social
and political censorship
environment here.Zili REN
Founder, Appleap

Mobile & Internet
• Note: MySpace opened an office and launched its service in China in April 2007.
Facebook translated its service in June 2008 but does not have a local office.
Does QQ compete with Facebook and MySpace?
• Foreign SNS have a hard time in China.
• MySpace was doing ok in terms of registered
users, but again like many other foreigners in
China, it wanted to re-use its global strategy to
conquer China which obviously is wrong.
• It‘s too late for Facebook as its copycats are
already very strong. Furthermore, Facebook‘s
strategy is not well adapted to entertainment.
• Twitter is too much "information" and not
―entertainment‖ either. In addition, QQ could
easily create a Twitter-like feature.
Gang LU
Founder
Mobinode
Leo WANG
Founder
Mobile 2.0 Forum
Facebook and MySpace
are weak in China due to
the difficulty in localization
of product design and
promotion.
Xing WANG
Founder
It is hard for any SNS to succeed
across cultures in markets when
there is strong local competition.
China is possibly the most
competitive market in the world
now for foreign SNS.
Tencent
• QQ follows what Facebook
and others are doing.
• Qzone launched social
apps based on what is
successful elsewhere.
• Taotao by QQ competes
with Twitter and could
reach quickly a mass
audience if usage grows.

Mobile & Internet
Could foreign companies use virtual goods ideas from QQ?
Pretty sure it works.
Virtual goods already
started with Playfish,
Zynga, etc. Habbo in
Finland uses the same
avatar model. Olivier GLAUSER
Managing Director
Steamboat Ventures
For sure in Asia, and the gap is not so large with the West. Offer something
appealing and people are always willing to pay small amounts for it.
Western SNS are already learning but not fully exploiting the potential.
Leon HUANG
Product Manager
Jiapu.com
International Employee
Tencent
It is not new in Asia. Korea and
Japan are earlier than QQ. The
concept is even more
advanced in mobile than in
Internet. Ring Back Tone (RBT)
can be regarded as a
precursor for the avatar on
Internet, as the fundamental is
the same: self-expression!
The virtual goods model responds to users' psychological
needs such as showing off.
Yong LV
Investment Director
SK Telecom, China
Yes, people need
differentiation and self-
expression. It is the
same in China and the
West. Zili REN
Founder, Appleap
Gang WANG
VP, Sina
It is not an invention of QQ. QQ
is inspired by Netmarble in Korea
Jim LEE
General Manager
EA Mobile
The idea comes
from Korea so
not entirely
Chinese.And
yes, I believe it
will spread.

Mobile & Internet
Which other innovations could foreign companies use?
Various features: screenshot in QQ, chat groups, VIP model (charging
for premium services), diamond levels, integration of services, etc.
International Employee
Tencent
• Tencent is smart. It incubates many
services such QQVideo, Taotao (Twitter
serQQ Bookmark etc, and wait for the
market to mature.
• The CEO of Tudou, one of China‘s
leading video sharing sites, said he does
not worry its direct competitorsvice),, it is
the services run by giants such as Tencent
that are the real threat.
Zili REN
Founder, Appleap
Gang LU
Founder
Mobinode
• QQ Music is a good example. It is music streaming and download client software. One of the cool
features it has is a lyrics button where you can pop up lyrics while the song goes on your
computer screen.
• QQ group chats that lead to dinner parties and night clubbing on a regular basis, solving the
issue of 1 to 1 meeting of strangers that are seen as unsafe.
• Foreign companies need to dive into the culture to identify common human needs hidden behind
the curtain of China‘s Internet culture. That is where QQ and Baidu do better and set themselves
apart from the competition.

Mobile & Internet
Tencent almost doubled its revenue in a year. What could be
the limit to its growth?
I‘m quite positive about its revenue growth. It will not stop growing until
user penetration of China‘s Internet and mobile internet reach a
considerable high level unless a revolutionary rival comes.
• What is the limit for Facebook? The core
difference is: QQ is making money.
• Now, we should also be aware that QQ is
not the leader for services like search.
Zili REN
Founder
Appleap
Gang LU
Founder, Mobinode
• Tencent is a media company
and should have disruptive
R&D too, otherwise it might
end up like Yahoo!
• Open source and open
platform are the themes of
today. Facebook has opened
many doors and created a
good ecosystem. QQ should
keep up or might miss the new
wave of social media economy.
Brian RU
Senior Analyst
Matrix Partners
The risk is the
conflict between
diversification and
focus.
Leon HUANG
Product Manager
Jiapu.com
• User base is
growing but
ARPU is stable.
• Tencent is not so
strong on search
and e-commerceXing WANG
Founder
• Users move to MSN when they start to work.
• Business model mostly in entertainment
Jim LEE
General Manager
EA Mobile

Mobile & Internet
What could go wrong?
Dirk HE
Senior Manager, Huawei
• QQ‘s user base is so huge that they can
do everything they want. That is a big
challenge for QQ. What does not QQ do?
• QQ might be the next Yahoo! if they
cannot solve well this problem.
Gang LU
Founder
Mobinode
Leo WANG
Founder
Mobile 2.0 Forum
Xiaonei is expanding to
younger demographics
while further promoting its
open platform. That will put
some pressure on QQ.
• QQ could stop innovating as it is
easy for any project manager to push
new products to millions of users.
• Tencent could miss trends. For
instance: no map service on QQ.
Former PM
Tencent
Zili REN
Founder
Appleap
• Payment and e-commerce
remain a challenge as Alipay
and Taobao by Alibaba are
the ―industry standard‖.
• Transition to SNS is difficult.
• 51.com stole a lot of people
from QQ. If QQ is unable to
hire or retain key people, it
will face severe
consequences.
Management
has to follow
the growth of
the company.
Xing WANG
Founder
QQ becomes like
AOL. Too focused
on a highly
lucrative walled
garden.
Jim LEE
General Manager
EA Mobile
• China cannot be
entertainment-
centric forever and
might become info-
centric. QQ should
get ready before
users become
mature.
• Not embracing the
"open web―.

Mobile & Internet
What is the potential of mobile for QQ?
Note: Two Japanese mobile SNS, Mobile Game Town and GREE are highly
profitable and worth over 1 billion USD on the Japanese stock market.
• Mobile is really a tremendous
opportunity for QQ.
• Its WAP portal is the leader in
traffic in China and became a
powerful mobile platform after it
started 5 years ago.
• Other mobile players will have
a hard time to build their user
base and compete with QQ.
Olivier GLAUSER
Managing Director
Steamboat Ventures
Gang LU
Founder, Mobinode
No doubt, but it is
harder to replicate
successes in the
mobile space and
newcomers might
succeed too.
Leo WANG
Founder
Mobile2.0 Forum
Yes, China‘s mobile SNS market
shows high potential. QQ will
lead the market for quite a long
time. 3G is not a big driver, as
bandwidth is not so critical for
mobile QQ.
• Definitely, it's a natural
match for QQ. There is
already a deal in place
with China Mobile.
• You can hear alert
sounds from Mobile
QQ everywhere!
Former PM
Tencent
Zili REN
Founder, Appleap
For sure. Japan is a good
reference and China will
only become bigger on
mobile.

Mobile & Internet
Overall Consensus
Tencent is a great company. It will be even greater if it opened its platform.
-- Leo WANG, Zili REN, Gang LU, Jim LEE
The virtual goods business model can definitely spread globally.
-- Olivier GLAUSER, Gang LU, Leon HUANG, Brian RU, Former Project Manager at Tencent, Yong
LV, Project Manager at China Mobile, Jim LEE
The Virtual goods business model is not an invention of QQ.
Japan and Korea were first. The idea then spread & was implemented in China.
-- Yong LV, Gang WANG, Jim LEE
It is dangerous to want to do everything. Disruptive innovation is a must.
Otherwise you might become like Yahoo!.
-- Dirk HE, Zili REN
There is little chance for foreign SNS in China.
-- Gang LU, Leo WANG, Former PM at Tencent, Yong LV, Zili REN, Gang WANG

Mobile & Internet
Catherine
CHAN
GM,
Investors
Relations
Tencent Tencent is the company operating
QQ
Tangos CHAN Chief
Editor
China Web
2.0 Review
Leading English website covering
Internet innovation in China
Kaiser KUO Group
Director,
Digital
Strategy
Ogilvy
China
Leading advertising agency.
Editor of the ―Ogilvy Digital Watch‖
blog focused on digital media in
China.
Alex LIANG CEO Pica IM service, competitor to QQ and
MSN
Dr. Song LI CEO Digu
Zhenai
Digu is one of China‘s leading
―Twitter‖ services.
Zhenai is a leading matchmaking
service.
Wayne
SHIONG
Partner WI Harper China-focused Venture Capital firm
Buddy YE CEO Wangyou
Media
One of the leading Chinese user-
generated content community sites

Mobile & Internet
Exclusive interview with Catherine Chan
General Manager for IR at Tencent
• Q. How would you define Tencent/QQ's core competence?
• Large user base and sticky community experiences.
• Better understanding of user needs, continual innovation
and focus on R&D and long term development.
• Ability to develop diversified products based on core IM platform to cater to user
needs.
• Q. What were the strategies to reach the "tipping point"?
• We launched QQ in February 1999 for users to free download on the website, it
gained popularity soon and registered users grew to millions quickly. In April
2000, QQ registered user accounts reached 5 million.
• By July 2007, QQ peak simultaneous online user accounts reached 30 million
• Q. How would you describe the QQ’s influence on Chinese society?
• As of July, 2007, Tencent‘s active IM user accounts reached 273 million,
covering most of Chinese internet users.
• In June 2007, Tencent was awarded the ―Best Chinese Lifestyle Brand‖ which
shows QQ has become a part of people‘s lives. Through its various online
platforms, Tencent fulfills the user‘s different needs for communication,
information, entertainment and e-Commerce on the Internet.

Mobile & Internet
• Q. What would be needed to make QQ competitive globally?
• We will focus on the domestic market for the time being because there is still
great growth potential in China and most of our users are Chinese. On the other
hand, we will also consider overseas opportunities.
• Q. How do you see the next step of QQ?
• Tencent aims to be an integrated provider of a broad range of online lifestyle
services. We will address the many facets of QQ users‘ needs for
communication, information, entertainment and e-Commerce on the Internet.
• Long term goals:
• Maintain leading position in IM.
• Most popular Internet and wireless portal in China.
• Extend our leadership as no.1 online casual games portal and a major
player in MMOG

Mobile & Internet
• Q. What is your view on MII's policies regarding virtual money?
• Q coin is a prepaid mechanism to facilitate the consumption of our Internet value
added services. For Tencent, Q-coin cards do not have the important
characteristics of a ―currency‖. On April 25, 2007, an official of PBC (Director-
General of Payment System Department) said that so-called ―virtual currencies‖
are not currencies because they do not have the functionalities of legal currency.
• Q. How about policies on Wireless Value-Added Services (WVAS)?
• For WVAS, the industry environment remains challenging, but we think the
government regulations are healthy for the long term development of the
industry.
• Q. How do you see the social responsibility of a company like QQ?
• We commit to enhance people's quality of life via Internet value added services.
• In the fourth quarter of 2006, we formed the ―Tencent Charity Fund‖ to support
charitable initiatives in China. We made an initial donation of RMB20 million (2.7
million USD) to the fund. We believe that, as a good corporate citizen, we should
contribute to the development of a better society.
• Tencent encourages its employees to be volunteers and organize charity
activities.

Mobile & Internet
• Q. How did you select a penguin as QQ’s image?
• In a user survey we conducted in early days, most participants voted for the
penguin as our corporate image, which we believe was very suitable to Tencent‘s
products and services.

Mobile & Internet
How would you define the characteristics of China’s
Internet industry?
1. Lack of innovation
2. Entertainment-oriented
3. Internet is still mainly a channel for getting information, rather than a
tool to use in their daily life and work.
4. Big Internet companies still dominate the market.
• Low penetration (12%) indicates great growth potential
• Still in early stage of development, reflected by the fact that wireless and
online games have well developed but online advertising and e-Commerce
are still in their infancy.
• Unique Chinese culture. For the time being, major internet companies like
portals, game operators, ecommerce services are local companies.
• Entertainment-focused to the point of distraction; both more- and less-
regulated than the industry in the U.S. (more in terms of acceptable content; less in
terms of things like P2P and pirated media)
• Ferociously competitive because of the relatively low level of disposable income
• Plagued with very bad and unreliable metrics
• Less obsessed with privacy issues.
Tangos Chan
Kaiser Kuo
Ogilvy

Mobile & Internet
How would you define the characteristics of China’s
Internet industry?
Focused on young people and entertainment. Few business models and still in
a growing stage, and having huge potential.
• The Chinese Internet industry is by and large an online media industry at
the moment, online commerce (which generates transaction-based
revenues) for real goods is not here yet
• Online commerce for virtual goods, on the other hand, is well proven
(QQZone, or those online games that are free to pay but sell virtual items).
• C2C ecommerce sites for real goods are essentially free thanks to
Taobao.com and B2B sites for real goods do not really exist (Alibaba,
despite its marketing itself as a B2B ecommerce site, is really a B2B online
media for classifieds because it does not generate revenues from
transactions)
• B2C sites are in a very tough business in general because margin is
usually very low after taking care of warehousing and delivery logistics.
• Early stage with an entertainment focus
• Low monetization
• I see a future in user behavior-based
lead generation, RIA, AJAX and
ubiquitous video services
Song Li
CEO, SinoFriends
Alex Liang
CEO, Pica
Wayne Shiong
WI Harper
It is large but in
a chaotic state. Buddy Ye
Wangyou Media

Mobile & Internet
QQ first created a huge and free peer-to-peer communications network and
then makes money by providing value-added services such as avatars.
Unlike a content-oriented site, members of a communications network tend to
use the service frequently. A communications service is something that you
must have, not something that is nice to have. Most Internet services
ventures offer something that is nice to have.
What made QQ so successful?
Song Li
CEO, SinoFriends
• Network effects: QQ is so popular that almost all of your friends are using
it. If you don‘t want to be left out, you will need a QQ account as well.
• Entertainment-oriented: QQ has developed various entertainment
features for QQ IM client, such as avatar, dynamic icons, QQ pet, which are
highly welcomed by youngsters, and also increased the stickiness of QQ.
• Group Chatting: Group chatting is one of the most important factors that
pushes users to switch from MSN to QQ. Tangos Chan
QQ is good at learning from others
for its own use. QQ also had a
strong persistence, to go through
tough times until its success.
But they are getting de-focused and
doing too many things now.Alex Liang
CEO, Pica
QQ has an extremely
good understanding of
customer needs and acts
quickly in promoting
services when they see a
good initial response. Buddy Ye
CEO, Wangyou Media

Mobile & Internet
What is your professional opinion of QQ services?
The company‘s success is predicated on the original QQ messenger‘s early lead
in the market.
I believe that Tencent/QQ has earned its enormous market cap and its impressive
user base by offering a suite of products and services ideally tailored to the young
Chinese Internet user. The integrated, complementary range of products—
from the wildly popular IM client to the casual games and MMOs, from the Internet
portal to the tagging/bookmarks and the video sharing service—taken together,
this all creates a brand offering that’s really unmatched anywhere else on the
Chinese Internet.
It‘s a brand so popular that the automaker Chery (and they may deny this, but I
don‘t think many people doubt it) even borrowed its name for its Chevy Spark-
clone subcompact, the QQ.
Kaiser Kuo
Ogilvy
I think that Baidu and QQ have the two best business models among all Chinese
Internet services companies. I wish I had created one of these two companies.
When you have a huge and ever-growing peer-to-peer communications network
like QQ, you can just sit there waiting for someone else to prove a new
revenue model (as long as it‘s entertainment-related and youngsters-targeted),
and you can then copy the proven model and add it on top of your network and
the job is done!
More often than not, you can crush the first mover, because you do not incur
additional costs of acquiring customers.
Song Li
CEO, SinoFriends

Mobile & Internet
Kaiser Kuo
Song Li
What would be QQ’s weaknesses?
QQ seems prone to being a ―victim of its
own success‖, two examples stand out:
• Its mobile chat did so well that the
business was eventually appropriated
directly by China Mobile
• Its virtual money (Q Bi) was so widely
traded that it drew the attention of
regulators, who then forbade any virtual
currency from being tradable in the real-
world economy.
There‘s a tendency to see QQ as mere
―greasy kids stuff‖ that users eventually
grow out of. But as there’s more growth
in the 18-24 demographic than in any
other sector, so I don‘t see this as a
significant problem in the medium term.
1. Entertainment-oriented. Most of users just think QQ is for amusement and
entertainment. Its attempts with business products have not been very successful.
2. Too complex. QQ IM client has too many features and is getting too complex.
3. Lack of in-house innovation. QQ copied many innovative ideas from Korean
Internet services, such as Cyworld, but lacks homegrown innovations.
Tangos Chan
• High user loyalty vs. lacking
regional marketing
• Sales channels are sensitive to
regulatory impacts
Wayne Shiong
• The key weakness is that its
revenues mainly rely on
paying members and unlike
advertising-supported services,
most member-paid services
have a limited life.
• It is a lot more difficult for QQ
to generate revenues from
business advertisers because
its core members are young
people. However, this is more
than compensated by its
monopolizing the youth market.

Mobile & Internet
Who could compete with QQ and how?
MSN and Skype are the chief competitors to
the QQ IM. 51.com is probably the chief
competitor in SNS.
MSN and Skype are perceived as being
more grown-up and sophisticated, and
Skype permits calls to fixed-line and mobile
phones, but those are the only real
advantages I can think of.
Baidu: broad user base, maybe the only one who has as big as or bigger user
base than QQ, and it may launch its own chatting tool soon.
Ali Wangwang: Leverages the users of Taobao and Alibaba, Ali Wangwang is
very popular among them. It might be already the 2nd most popular in China.
51.com: 51.com is a strong challenger to QQ‘s Qzone service.
Kaiser Kuo
Ogilvy
Tangos Chan
For e-commerce related it will be Alibaba, for mobile Internet it will be PICA.
After years of accumulation, Alibaba could fully understand and adapt to the
development of China's e-commerce market. And also they‘ve built up a large
number of user resources and have got the absolute leading position of the
market share in China.
PICA is in a leading position in mobile IM, not only as a leading technology,
but also has the best user experience and the largest number of users.
Alex Liang
CEO, Pica
MSN and Baidu,
they have a
strong cash flow-
supported core
businesses and
global resources Wayne Shiong
WI Harper

Mobile & Internet
Can Tencent internationalize?
Network effects is a disadvantage to explore overseas market. I think QQ should
start from teenagers, but it is very difficult to make it suitable to teenagers in US or
Europe. Maybe it could start from East Asia, such as Korea or Japan, because East
Asian countries share similar cultures.
I think that had QQ entered into the US youth market several years ago, it would
have become MySpace by now, but most Internet entrepreneurs in China have
never studied or lived abroad and they are quite content with being a leader in China
in what they do. Partly because they think that the China market is big enough: why
make an extra effort in competing in an unfamiliar culture? The situation is very
different in manufacturing where everyone is compelled to sell products overseas
because of a higher margin.Song Li
SinoFriends
From my point of view - and I‘m not a QQ user personally - I don’t see a unique
selling point that elevates QQ (or the more ―grown up‖ Tencent Messenger)
above other existing IM clients like Yahoo Messenger, AIM, Skype, or MSN.
But within the Chinese Diaspora my understanding is that there‘s already a large
QQ footprint in all geographies where mainland Chinese have settled. Kaiser Kuo
Ogilvy
If QQ would like to become
globalization, they must strengthen
the communication and cooperation
with others in the industry. Alex Liang
CEO, Pica
Global talents
are what is most
needed
Wayne Shiong
WI Harper

Mobile & Internet
What is QQ’s influence on the Chinese society?
QQ has has largely defined the way that young Chinese people
communicate with one another online, creating by its convenience and its
sheer ubiquity a preference for IM over email.
Young Chinese people don’t ask one another for email addresses;
they ask for QQ numbers. It has created a powerful channel for the viral
spread of news and information, of entertainment, and even of brand
messages.
The 1980s and 1990s generations grew up together with QQ, the
style of entertainment in QQ has significant influence on them.
They developed a QQ lifestyle and a new kind of language,
which is called Words from Mars (―huoxingwen‖), it is mainly
used in QQ chatting and QQ‘s Qzone.
Young people
think that “QQ”
has the same
meaning as “IM”.
Kaiser Kuo
Group Director,
Ogilvy & Mather Advertising
Tangos Chan
Song Li
CEO, SinoFriends
QQ brought the
entire young
generation to
Internet, i.e.,
millions of users Wayne Shiong
WI Harper

Mobile & Internet
Which are your favorite Chinese Internet services?
Maxthon (tabed web browser)
VeryCD (eMule-based P2P media directory)
Xunlei (P2P file sharing)
I like services that not only generate large revenues but also do so in a clever
way. QQ is my favorite, more than Sina and Sohu. Alibaba has done a great job in
execution but its business model is far less elegant, from an intellectual standpoint,
compared to search engines like Baidu or IMs like QQ: its sales people (both on ground
and telesales) have to work their butts off to generate the kind of revenues that the QQ
people can simply sit there collecting automatically - purely online.
P2P file sharing platform Xunlei is another good one - it‘s clever from an intellectual
standpoint - it has also got this framework of a platform plus value-added services. But
it may raise intellectual property infringement issues if and when it grows to the point at
which it wants to go public overseas. It could argue that it‘s just a piece of downloading
software, but big entertainment companies would argue otherwise.
I use regularly:
Douban (books &
music social
bookmarking /
commenting)
Tudou (YouTube-
like video sharing)
and various BBS
(online forums).
Song Li
CEO, SinoFriends
Tangos Chan
Wayne Shiong
WI Harper
In addition to
Maxthon and
Xunlei, I would add
Anothr, an IM-based
RSS feed.
Kaiser Kuo
Ogilvy

Mobile & Internet
What’s next in the Chinese Internet?
• I think that pronunciations of the end of the portal era‖ have been premature:
Portals will continue to dominate, and transform themselves into ―Web 2.0
content aggregators‖ in addition to producers of professional content.
• As mobile bandwidth improves and users are habituated into using mobile
data, we‘ll see a lot of repurposed user-generated Internet content (especially
video) delivered to mobile handsets.
• And we‘ll see much, much more peer-based streaming media along lines of
Joost—Internet VOD.
• Development of broadband and telecommunication infrastructure will bring
new applications and new opportunities. Web 2.0, for example, will play
increasingly important role due to its community and interactivity characteristics
• Wireless internet begins to show great growth potential.
Specialized search engines
and social networks are the
two areas that offer the biggest
opportunities for Internet
entrepreneurs in China over the
next few years.
Kaiser Kuo
Ogilvy
Song Li
CEO, SinoFriends
I believe that the Internet will be further decentralized, the content
generated by pro-amateurs will play a more important role.
Tangos Chan
Vertically, dedicated, niche
audience sites will rise.
Buddy Ye
CEO, Wangyou Media

8. Appendix

Mobile & Internet
Glossary and Links
Services and technologies
2G services SMS, IVR, CRBT and others
2.5G services WAP, MMS and Java/Brew
3G W-CDMA, CDMA 2000, TD-SCDMA
CP Content Provider
SP Service Provider
SMS Short Message Service
MMS Multimedia Message Service
IVR Interactive Voice Response
RBT/CRBT Ring Back Tone / Color Ring Back Tone
Monternet China Mobile‘s WAP portal
Uni China Unicom‘s WAP portal
MMORPG Massively Multiplayer Online RPG
PCU Peak Concurrent User
PHS Personal Handyphone System
VAS Value Added Services
WVAS Wireless Value Added Services
WAP Wireless Application Protocol
UCC User-Created Content
UGC User-Generated Content
Operators and Authorities
CMCC China Mobile
CU China Unicom
CT China Telecom
CNNIC China Internet Network Information Center
MII Ministry of Information Industry
MCSC Music Copyright Society of China
Tencent www.tencent.com
QQ www.qq.com
Telecom operators
China Mobile www.chinamobilehk.com
China Unicom www.chinaunicom.com.hk
China Telecom www.chinatelecom.com.cn
China Netcom www.china-netcom.com
Internet and mobile companies
Alibaba www.alibaba.com
Baidu www.baidu.cn
Changyou www.changyou.com
KongZhong www.kongzhong.com
Netease www.163.com
Pica www.pica.com
Shanda www.snda.com
Sina www.sina.com
Sohu www.sohu.com
WangYou www.wangyou.com
Government and Associations
MIIT www.miit.gov.cn
VASC www.vaschina.org
MCSC www.mcsc.com.cn
Mobile Monday Beijing www.mobilemondaybeijing.com
Glossary Links

Mobile & Internet
About +8*
+8* | Plus Eight Star is the leading cross-market consultancy on mobile, telecom and Internet
in China, Japan and Korea.
We work with large companies, SMEs, investment firms and governments worldwide to bring
them strategic advice and the best practices from advanced Asian markets.
Our services
Research of proven best practices and business models from Asia.
Market entry and local strategy advisory.
Other services: executive study trips, M&A advisory, partner identification.
Our expertise
For Internet, our work covers social media, social networking, e-commerce, web 2.0
services, online gaming and virtual worlds.
For mobile, we have extensive experience with mobile marketing and advertising, mobile
commerce, mobile TV and mobile communities.
There are more ideas
outside of your country
than inside.
Tom Kelley
Author, The Art of Innovation

Mobile & Internet
Our Clients
EUROPE USA
ASIA

Mobile & Internet
Selected Projects
Adidas | E-commerce and mobile commerce market analysis and strategic
recommendations for China, Japan & Korea
Bouygues Telecom | Cases studies of leading Asian Web 2.0 services and virtual
worlds
Deutsche Telekom / T-Online | Benchmark of Korean mobile & Internet
convergence strategies
EU-China Information Society | Research on e-commerce and virtual worlds to
support the regulatory dialogue between the EU and Chinese authorities
Microsoft | Analysis of Japan‘s key players and market catalysts for mobile
commerce market positioning in China
DeNA | Benchmark of leading SNS in China and South Korea (DeNA operates
Japan‟s leading mobile social network)
China Mobile | Benchmark of Korean leading online communities
Sands Capital Management | Evaluation of investment opportunities in social
networks in China
MIH / NASPERS | Analysis of leading online verticals in China (MIH is the largest
shareholder in Tencent, China‟s leading online community)
IMVU | Benchmark of monetization and engagement best practices in Asian virtual
worlds & SNS (IMVU is a leading US-based 3D virtual world & chat)

Mobile & Internet
Social Contribution
Mobile Monday Beijing
Founder of the Beijing chapter of Mobile Monday, the leading global
network of mobile industry professionals.
30 events inviting over 100 speakers and attended by more than 3,000
professionals from the telecom value chain.
Media
Quoted regularly by various news and research outlets such as
The Economist, CNN, Ad-Age, Asia Venture Capital Journal, etc.
Monthly column on Asian innovation with the leading Chinese business
magazine Asian Business Leaders and news site Interfax.
Speaking engagements
Regular keynote, speaker & moderator in IT, Media & Investment events.
Selection of speaking engagements in 2008/09
• PICNIC (Amsterdam), Lift Asia (Jeju, Korea), Infinity Ventures Summit
(Sapporo, Japan), Ad-Tech (Shanghai), O‘Reilly‘s Graphing Social Patterns
(Washington, D.C.), eComm (San Francisco), Red Herring Asia (Hong Kong),
Asia Venture Capital Forum (Hong Kong), China Mobility International
Summit (Beijing), Media 08 (Sydney), Wireless Developer Forum (Beijing),
Open Web Asia (Seoul), XMediaLab: Virtual Worlds (Seoul), Mobile Monday
Global Summit (Kuala Lumpur, Helsinki), ITU Asia (Bangkok), EU-China
Virtual World Conference (Beijing), Startonomics (Beijing), UnConference
(Singapore), BarCamp (Shanghai), Mobile 2.0 (Paris), La Cantine (Paris),
Mobile Focus (Stockholm).

Mobile & Internet
There is more to know that QQ!
Cyworld is also very relevant to your business
A broadband country since the late 90s, South Korea is today enjoying super-
high speed broadband and its society has evolved accordingly, making Korea
today the most ‗Internet literate‘ country on the planet and a perfect laboratory for
new broadband Internet services.
Among Korea‘s success stories, the online community Cyworld has been the
shiniest star: over 30% of South Korea‘s population, and 90% of Korean netizens
in their 20s have a personal page on the service.
What you will learn
The critical elements that made Cyworld a success
The money-making services and payment systems generating 200 million USD
Original services that could help differentiate and plan some great innovations!
Pricing
Company-wide license | USD 2,000

Mobile & Internet
Contacts
Benjamin Joffe, Founder & CEO
9 years experience with mobile & Internet in Asia.
Regular speaker at events on mobile and Internet in Asia.
Selected among ―China‘s Top 100 mobile industry
influencers‖ in 2007 and 2008.
Senior Expert for the EU Delegation to China.
Fluent in English, Japanese, French with working
knowledge of Mandarin, Korean and Spanish.
Contacts
benjamin@plus8star.com
benjamin0123
http://twitter.com/plus8star
www.linkedin.com/in/benjaminjoffe
www.slideshare.net/plus8star
Beijing Office (HQ) Tokyo Office
Oriental Kenzo, Tower A-20D Room 511
48, Dongzhimenwai, Dongcheng District Ota-Ku Ikegami 2-12-7
100027 Beijing, P.R. China 1000 Tokyo, Japan
Tel: +86 (0)10 8447 7985 info@plus8star.com
+81 | Japan
+82 | Korea
+86 | China
Telecom & Internet
+ Added Value
* High quality

Inside Tencent

More Related Content

What's hot

Viewers also liked

Similar to Inside Tencent

More from Benjamin Joffe

Recently uploaded

Inside Tencent