A Tencent Time Capsule

Many years ago (almost 10), when Tencent wasn’t on most people’s radar, I was running a consulting boutique named +8* in Beijing, researching the esoteric world of “Asian Innovation”, covering China, Japan and South Korea.

We had Fortune 500 clients like Microsoft or Adidas, but also iconic startups like Tumblr, IMVU, and even Asian companies curious about their neighbors.

Among the many services we dived into was Tencent and its QQ messaging platform. It was so interesting, in fact, that we decided to publish a detailed report about it, which we sold for thousands of dollars to many clients.

With the recent Tencent investment into Snapchat, Connie Chan from Andreessen Horowitz said Tencent could learn a lot from Snapchat. It is clear Snapchat could learn a lot from Tencent too. Dusting off this old report, I thought it would be interesting to share it as a “Time Capsule”. It captures a few ideas still relevant today. The full deck is also available as PDF on slideshare.

I added below what I think are the most interesting slides.

In addition to our own research, we interviewed a bunch of experts for this report. Several have done very well in various ways.

  • Wang Xing (Xiaonei, etc.) founded Meituan, a local Groupon now vastly bigger than the original.
  • Song Li’s Zhenai became the market leader for online matchmaking.
  • Kaiser Kuo became a China pundit and hosts a successful podcast.
  • Several others have become investors (including yours truly). Last but not least, my co-author and colleague
  • Bo Yiqun went on to co-found the largest internet conference in China GMIC, then a local WeWork called DayDayUp.

Back in 2008, MIT Technology Review titled “social network is not a business (but it might be soon)”. Truth is, it already was, in Asia. More interestingly, most of the revenue was from users, not advertising.

In addition, lots of those users were monetizing very well, some largely via mobile.

In the broader context of China’s internet and mobile scenes, 2008 was barely marking the middle of the “S curve” of innovation spread.

The acceleration could be felt in the shape of the curves.

The future behemoths were already scoring notable revenue.

Next is a series of slides about “Why global giants fail in China?”. Nothing much has changed in 10 years, except the salary range between salaries at foreign and local companies.

It is amusing to think Western aesthetics actually got in the way of localizing well for the Chinese market. As if they forgot the purpose of design.

Fast communication and decision making, as well as face-to-face trust-building, have been the hallmark of Chinese companies.

In a rare interview, Jack Ma praised Pony Ma about how strong QQ (the messaging platform created before WeChat) was. WeChat leveraged all this knowledge and user base.

Another comment hammering how localization and speed wins over capital and technology. All this mostly predates the heavy censorship faced by foreign companies (which, mind you, mostly concerns those dealing with user-generated content).

Some ideas on how censorship works, using the grant of internet licenses as a deterrent to promote self-policing.

Compared to the NSA, Facebook algorithms and other Western two-faced shanenigans, the policing of online content in China is pretty direct. The reality is also that the vast majority of Chinese users browse content in Chinese, are not very politicized and generally quite satisfied with their government, and do not really “suffer” from the lack of access to Western content.

Internet entrepreneurs in China tend to be pragmatic.

Though WeChat took it to another level, Tencent had been operating a payment platform for over a decade.

The advantage of being such a giant is that there is little cost in keeping users or launching new services. This monopolistic situation is comparable to the GAFA in the West.

Even without censorship, it is questionable whether Facebook would have succeeded. They rarely had to battle an entrenched local champion.

Many good ideas in Tencent’s QQ! Today, it is pretty obvious WeChat has lots to teach too.

The mobile opportunity was pretty obvious. At that time, mobile apps were mostly JAVA. Android and iOS were in their infancy.

In short:



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Benjamin Joffe

Benjamin Joffe


Partner @ SOSV — Deep Tech VC w/ $1B AUM | Digital Naturalist | Keynote Speaker | Angel Investor | Mediocre chess player, worse at Jiu-jitsu