Attracting eyeballs
But next to QQ, MySpace is small fry. QQ boasts almost half a billion registered users, of which 224m are active — that means that nearly one in five people in China uses the service. QQ’s Web portal also generates more Web traffic than MySpace, according to Alexa Internet, which tracks the popularity of the world’s websites.
QQ is fifth in Alexa’s Web rankings; MySpace is sixth. MySpace is owned by Rupert Murdoch’s News Corp Murdoch, an Australian known for his conservative political views, has been lauded for his pioneering investment in MySpace.
Yet, in China, it is QQ owner Tencent Holdings, which is 36%-owned by SA media group Naspers, that rules new media.
Though Murdoch has enjoyed some success in China with his Star pay-TV service, when it comes to new media in China, it’s Koos Bekker, not Rupert Murdoch, who rules the roost.
“We were very lucky,” says Antonie Roux, CEO of MIH’s global Internet business. MIH is the operations arm of Naspers, with interests in more than 50 countries comprising pay-television platforms, Internet operations, instant messaging (IM) services and related technologies.
Naspers acquired a stake in Tencent in June 2000, not long after the dot-com bubble had been pricked. “Tencent was looking for a final round of funding. We had an opportunity to buy a stake in what was then a privately held company. We bought in when they were just starting to gain traction [with QQ].”
Roux says that at the time Tencent’s revenues were virtually nonexistent but that the company was winning the important race for consumers’ “eyeballs”.
With the early pain absorbed, Naspers is now smiling all the way to the bank. In the six months to June 30 2006, Tencent recorded a profit of about US75m on revenues of $171m (at current exchange rates).
From earlier investments, Naspers had learnt that sending SA expatriates to China to try to run investments there was not the right approach.
“We cannot think like Chinese consumers,” Roux says. “We made a mistake because we didn’t realise that at first.”
With Tencent and QQ, Naspers has taken a hands-off approach. Tencent has 2900 employees, all of whom are Chinese. Naspers’s only representation is two directors who sit on the Tencent board. “We have assisted them in top-level stuff but can’t take credit for what they have achieved. We can’t even speak the language,” Roux says.
Explaining why he thinks QQ has become so popular, Roux says that unlike other Asian markets, such as Japan and Korea, console gaming never took off. “If you play console games, you don’t meet other people. Single-child families in China may have contributed. IM from early on was seen as a social network. QQ originated out of the desire of the Chinese to communicate with one another,” he says.
Because IM applications show people when their friends or family are online — a concept known as “presence” — it gives them a sense of belonging. IM, Roux says, proved to be the embryo of a vast social network in China.
QQ now provides people with games, virtual pets and virtual homes. It operates payment platforms and its own, vast, eBay-type auction system. It has become the biggest Web media portal in China.
Though QQ was not first to market, it has been the most successful new-media company. Roux attributes this to the speed with which Tencent reacts to its users’ needs and demands. “I have never seen a company that lives so close to its users,” he says.
QQ makes money from advertising — on the portal and the IM client application — as well as from subscription fees for various products. It runs the biggest casual gaming portal in China. It also makes money from ringtone downloads and picture messages.
Almost 15m QQ users pay for value added services; another 10m cough up a monthly subscription to use QQ’s IM application on their cellphones.
Efforts to expand outside China have not proved particularly successful. A scaled-down English version of QQ was launched in SA a few years ago but didn’t take off. “They haven’t done any work in the past four years on the English version,” Roux says.
Roux does say, though, that Naspers is eyeing the vast Indian market and hints that an announcement about expansion in India could be forthcoming soon. (Naspers has already said it is eyeing opportunities in print media in both India and Russia. It recently opened offices in New Delhi and Moscow. See story on page 50.)
It’s possible though unlikely, then, that Naspers could find itself in competition with MXit Lifestyle. The SA mobile IM company has identified India as one of the markets it might venture into (see main story).
MXit, however, is focused exclusively on IM for mobile devices, whereas QQ is broader.
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