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Baidu and its competitors (4): Tencent
Translator:
Huateng Ma's high profile appearance at Baidu World and the public demonstration of support for Robin Li reminded me of Chamberlain's meeting with Hitler at Munich in 1938. Like the United Kingdom and Germany in 1938, I am certain that these companies have a prominent place on each other's radar screens and a major battle is inevitable.
Tencent and Baidu are undoubtedly the two companies most revered by Chinese netizens. Over the past 8 years, Tencent turned a small application that few had thought much of into the world's leading online community, with 232.6m active users and up to 24.5m users concurrently online. Tencent's market value of HKD$47b (USD$6b) is 1.8 times that of Baidu. However, over the past year Baidu has invested substantially into its community capabilities, expanding from the wildly successful mp3 search engine (mp3.baidu.com) and online community (post.baidu.com) to a personalised experienced built around spaces/groups. Its platform strategy is taking Baidu away from the Google model and moving close to the Tencent model.
Having said that, Tencent certainly has not been resting on its laurels. Through QQ, the ultimate sticky desktop software, Tencent has successfully expanded into profitable market segments such as games, content (QQ gateway etc.), interactive (Qzone, QQshow etc.), e-commerce (tenpay, paipai etc.), search and mobile with the aim of becoming the market leader in "online lifestyle". Whilst Tencent offerings are not necessarily competitive across the board, the power of QQ makes it a formidable competitor in any segment it chooses to play in. In Baidu's traditional bastions such as search and music, QQ is clearly making significant inroads. QQ's permanent presence atop Baidu top keyword lists shows that Baidu is sending a substantial number of users to QQ, and that surely is a sign that QQ is encroaching on Baidu's turf.
Some believe that both sides are both keen to avoid direct conflict. These people argue that Huateng Ma's relative inaction on Soso is due to the fact that Baidu has never made a serious play in instant messaging. I am of the view that these two giants of the Chinese internet industry will not remain friendly forever. Both companies are accountable to their shareholders and as the respective product portfolio grows, their paths will inevitably converge. At the end of the day, both companies are fighting for the attention of Chinese netizens and the ability to influence them. Politeness simply wouldn't do.
I think the key question is whether Baidu will introduce its own instant messaging software. Baidu's desktop software offerings, such as enhanced search (bar.baidu.com), p2p media player (x.baidu.com) and hard disk search, are constrained by demand, competition and anti-malware software and have not been successful in creating a significant competitive advantage. Besides, these products do not support Baidu's social strategy and fail to bring tighter integration between Baidu products and services.
To the young netizen, instant messaging plays a much more important role than email, the number 1 application on the internet. Their preference for posting meaningless messages on post.baidu.com whilst chatting over QQ at the same time means that Baidu's efforts to drive a tighter, more integrated user experience has largely gone down the drain. If one describes search as the crown jewel of the information age, then instant messaging must surely be the key to the Fort Knox of web 2.0. At least that's how things are panning out in China. Why would Baidu, who has always been cognizant of the importance of community development, ignore instant messaging when Google, once adamant about never doing instant messaging, has changed their mind and introduced Google Talk?
But then, it's always easier said than done. Shanda introduced its own entertainment messenger when they were stressing over the fact that Mir players tend to chat over QQ while they play the game. However, Shanda simply had too much on and didn't give this the attention it deserves, and as a result this messenger never grew beyond the tiny ripple it created initially. UC, bought by Sina for USD$36m, is nothing but a niche play for a niche crowd. Alibaba, on the other hand, integrated Alitalk and TaoBao WangWang into AliWangWang, a client interface essential to any seller/buyer on its e-commerce platform. And what about Microsoft: despite QQ's overwhelming advantage, the MSN Messenger (Windows Live Messenger) has become such a viable platform that xiaoi.com, a service based on MSN messenger, is able to secure venture capital funding.
Baidu has a huge user base. These users need to communicate with each other. Currently, when they want to talk, they use Tencent's service. The more popular Baidu's communities become, the more Baidu contributes to Tencent's user base. Now that's embarrassing isn't it? When it comes to instant messaging, Baidu does not have a choice. Baidu must get into IM, if only to stop sending users to Tencent.
The day Baidu introduces an instant messaging client, will be the day these two giants of the Chinese internet scene officially goes to war with each other. I believe that the ensuring battles will be much more entertaining than the spitting contest between Sina and Sohu. And best of all, we'll all benefit from it.
Tencent and Baidu are undoubtedly the two companies most revered by Chinese netizens. Over the past 8 years, Tencent turned a small application that few had thought much of into the world's leading online community, with 232.6m active users and up to 24.5m users concurrently online. Tencent's market value of HKD$47b (USD$6b) is 1.8 times that of Baidu. However, over the past year Baidu has invested substantially into its community capabilities, expanding from the wildly successful mp3 search engine (mp3.baidu.com) and online community (post.baidu.com) to a personalised experienced built around spaces/groups. Its platform strategy is taking Baidu away from the Google model and moving close to the Tencent model.
Having said that, Tencent certainly has not been resting on its laurels. Through QQ, the ultimate sticky desktop software, Tencent has successfully expanded into profitable market segments such as games, content (QQ gateway etc.), interactive (Qzone, QQshow etc.), e-commerce (tenpay, paipai etc.), search and mobile with the aim of becoming the market leader in "online lifestyle". Whilst Tencent offerings are not necessarily competitive across the board, the power of QQ makes it a formidable competitor in any segment it chooses to play in. In Baidu's traditional bastions such as search and music, QQ is clearly making significant inroads. QQ's permanent presence atop Baidu top keyword lists shows that Baidu is sending a substantial number of users to QQ, and that surely is a sign that QQ is encroaching on Baidu's turf.
Some believe that both sides are both keen to avoid direct conflict. These people argue that Huateng Ma's relative inaction on Soso is due to the fact that Baidu has never made a serious play in instant messaging. I am of the view that these two giants of the Chinese internet industry will not remain friendly forever. Both companies are accountable to their shareholders and as the respective product portfolio grows, their paths will inevitably converge. At the end of the day, both companies are fighting for the attention of Chinese netizens and the ability to influence them. Politeness simply wouldn't do.
I think the key question is whether Baidu will introduce its own instant messaging software. Baidu's desktop software offerings, such as enhanced search (bar.baidu.com), p2p media player (x.baidu.com) and hard disk search, are constrained by demand, competition and anti-malware software and have not been successful in creating a significant competitive advantage. Besides, these products do not support Baidu's social strategy and fail to bring tighter integration between Baidu products and services.
To the young netizen, instant messaging plays a much more important role than email, the number 1 application on the internet. Their preference for posting meaningless messages on post.baidu.com whilst chatting over QQ at the same time means that Baidu's efforts to drive a tighter, more integrated user experience has largely gone down the drain. If one describes search as the crown jewel of the information age, then instant messaging must surely be the key to the Fort Knox of web 2.0. At least that's how things are panning out in China. Why would Baidu, who has always been cognizant of the importance of community development, ignore instant messaging when Google, once adamant about never doing instant messaging, has changed their mind and introduced Google Talk?
But then, it's always easier said than done. Shanda introduced its own entertainment messenger when they were stressing over the fact that Mir players tend to chat over QQ while they play the game. However, Shanda simply had too much on and didn't give this the attention it deserves, and as a result this messenger never grew beyond the tiny ripple it created initially. UC, bought by Sina for USD$36m, is nothing but a niche play for a niche crowd. Alibaba, on the other hand, integrated Alitalk and TaoBao WangWang into AliWangWang, a client interface essential to any seller/buyer on its e-commerce platform. And what about Microsoft: despite QQ's overwhelming advantage, the MSN Messenger (Windows Live Messenger) has become such a viable platform that xiaoi.com, a service based on MSN messenger, is able to secure venture capital funding.
Baidu has a huge user base. These users need to communicate with each other. Currently, when they want to talk, they use Tencent's service. The more popular Baidu's communities become, the more Baidu contributes to Tencent's user base. Now that's embarrassing isn't it? When it comes to instant messaging, Baidu does not have a choice. Baidu must get into IM, if only to stop sending users to Tencent.
The day Baidu introduces an instant messaging client, will be the day these two giants of the Chinese internet scene officially goes to war with each other. I believe that the ensuring battles will be much more entertaining than the spitting contest between Sina and Sohu. And best of all, we'll all benefit from it.
