Tencent Holdings Limited: Tencent’s Rise to Dominance in the Chinese Internet Industry
- ID: 2390698
- December 2012
- Region: China
- 20 Pages
Since its launch in 1998, Tencent has grown from an unprofitable, privately owned enterprise into one of China’s leading companies. The company’s continued development has transformed it from a startup to a company with annual revenues of over CNY28bn ($4.3bn) and net income in excess of CNY10bn ($1.5bn). In 2012, Tencent was placed 37th in Millward Brown’s BrandZ 100 most valuable brands.
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Although Tencent operates through four business segments, IVAs and MVAs very much remain the backbone of the business. These two divisions accounted for over 92% of the company’s total revenues in 2011, with IVAs in particular providing many of the company’s revenue streams.
The company is highly reliant on its home market of China, a geography which accounted for over 98% of all revenue in 2011, and growth in China is slowing as the market nears saturation point. Consequently, the company is looking to grow its footprint overseas.
Tencent has adopted a number of strategies aimed at diversifying its revenue streams and growing its footprint overseas. The company has strengthened its presence in online gaming through a series of mergers and acquisitions and has begun to invest more heavily in operations outside of mainland China.
Your key questions answered
- How large is Tencent as a company?
- How has Tencent achieved its position as China's leading Internet platform?
- What challenges does the company face and how is it tackling them? SHOW LESS READ MORE >
TENCENT: A BRIEF HISTORY
- Since its launch, Tencent has become a global superbrand
-- Tencent was founded as a provider of Internet value-added services
-- In 2004, Tencent undertook a successful IPO
- Tencent’s operations
-- Internet value-added services
-- Mobile value-added services
-- Online advertising
-- This offering has helped establish Tencent as the leading IVA company in China
THE PROBLEMS IDENTIFIED
- The company believes its business model to be unbalanced
-- IVAs represent the greatest concentration issue for Tencent
-- The company has also identified its reliance on China as a problem to be addressed
-- This over-reliance is a concern as active user growth in China is slowing
STRATEGIES TO COUNTER THESE PROBLEMS
- Strategies have been adopted to counter the issues identified
-- Online advertising is a fast-growing area of operation for Tencent
-- M&A and partnerships as a growth strategy
-- Tencent has benefitted from government incentives
-- The company sees online gaming as a large growth area
-- Tencent is growing its international footprint
- Tencent represents a Chinese success story for the digital age
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