Tag Archives: Tencent

Tencent latest Business & Financial news from Doug Young, the Expert on Chinese High Tech Market, (former Journalist and Chief editor at Reuters)

WeChat’s Hubris Could Open the Door to Needed Competition

Bottom line: WeChat’s growing hubris, reflected by increasingly aggressive content filtering, could open the door to a more user-friendly competitor.

WeChat gets overly agressive with word filtering

These days the following exchange seems to happen with growing frequency at companies around China.

Person 1, yelling across the office: “Did anyone see my message about [insert name of any random subject]?”

Colleague, yelling back: “Uh, don’t think we saw that one. Maybe it was blocked.”

Many in China will probably recognize what I’m talking about, but for those outside perhaps a bit more explanation is needed. The above dialogues are all talking about messages being blocked on the hugely popular WeChat instant messaging platform, which has become an integral part of most people’s social and work lives in China these last five or six years.

As readers can probably guess from the above dialogue, WeChat has become more aggressive over the past year in filtering its content for sensitive words. The service is hardly alone in such practice, since China’s cyber security law says all website and app operators must police themselves for and remove such content.

But when you talk about this kind of self-policing, it’s really up to the individual websites and apps to decide what to look for and remove. In WeChat’s case, it seems like the company has gotten lazy lately and begun filtering a growing number of keywords and topics, often without any obvious sensitive content. The result is that you often send a message or file and wait patiently for a response, only to later learn the post was never received by the intended recipients.

Rather than delve into the politics of what’s happening at WeChat, which declined to comment on its filtering policies, I want to focus the rest of this column on a more business-related topic that could have huge implications for WeChat and its parent, Tencent (HKEx: 700). The topic revolves around a basic question: Could WeChat’s recent policies turn off large numbers of its more than 1 billion users, and open the door for another more user-friendly rival?

To answer that question, I did one of my unscientific polls, putting a set of questions to my 2,000-plus friends and contacts on the very WeChat service that’s the subject of this column. The results were quite revealing, and seem to indicate that people aren’t quite ready to abandon WeChat just yet. But it could just be a matter of time if things keep up at their current pace.

More on that soon. But first I’ll quickly summarize WeChat’s current status to give people outside China a sense of how ubiquitous it has become in many people’s daily lives, mine included. I previously wrote about how entrenched WeChat has become as a work tool for many, providing convenient and cheap ways to hold all kinds of group and individual chats and calls over a wide range of distances.

Many people also use the platform these days for a big chunk of their online social interaction, including written and voice communications and group sharing through its Moments function that is similar to Facebook’s newsfeed.

And the survey says …

With all that background in mind, we’ll spend the second half of this column looking at my survey results and what they might say about whether WeChat’s filtering ways could provide a business opportunity for a smart rival app operator. My polling query returned 13 meaningful results, covering a wide range of industries that seemed somewhat representative.

Of the 13, seven said they had noticed the increased filtering and were frustrated by it. Three of those were from the media due to my own leanings, with others coming from such industries as education, international trade and other services. That does seem relatively significant, since it shows there’s a bit of discontent out there that a savvy alternate service provider could feed upon.

Most people who noticed the increased filtering said they were seeing it mainly in group chats, though one or two said they were seeing it in one-on-one messages as well. That said, no respondents said they were considering switching to other platforms as a result of their frustration. I would agree that at this point WeChat is so entrenched in my daily work and social routines that things would either have to get even worse, or an obviously better alternative would have to spring up for me to consider switching.

I particularly liked one response from a former student. She noted the change has been happening gradually over the last year and a half, and likened it to “using warm water to boil a frog” — in other words, a form of torture that’s so slow you may not even notice until it’s too late.

WeChat has certainly faced its challengers over the years, though in each case it fended off the competition with relative ease. One of the earliest assaults came from mobile giant China Mobile (HKEx: 941; NYSE: CHL), which accused WeChat of effectively being a rival network operator. E-commerce giant Alibaba (NYSE: BABA) would later try to mount a challenge with its Laiwang service, which ended in failure.

Last year a service called Bullet Messenger briefly surged into headlines as its downloads soared, though that also seems to have disappeared. And most recently, TikTok owner ByteDance in May launched a new challenger app called Flipchat.

So far I haven’t downloaded any of these apps, mostly because WeChat was providing me with perfectly good service at the time. But this latest behavior by WeChat is showing just how companies can abuse their position when they become near monopolies. Accordingly, I wouldn’t be at all surprised to see a new rival emerge in the next year — possibly quite suddenly — if WeChat continues in its current ways.

INTERNET: Loss Shakes Baidu to the Core

Bottom line: Baidu’s first-ever loss since going public reflects a long-anticipated decline for its core search business, which could mark the start of a longer-term decline due to lack of a strong new business lines.

Baidu in search of search replacement

It seems that profits are increasingly hard to come by these days on China’s Internet. That’s the major takeaway coming in the latest results from search giant Baidu (Nasdaq: BIDU), which has just posted its first loss since becoming a publicly listed company 14 years ago. Perhaps most worrisome, the biggest issue appears to lie in Baidu’s core search business, always a cash cow in the past, whose operating profits tumbled in the first three months of the year.

The surprise loss is one of the first-ever that I can recall for China’s three largest Internet companies or the BAT, namely Baidu, Alibaba (NYSE: BABA) and Tencent (HKEx: 700). That’s led many to wonder whether Baidu’s glory days are fast fading into the rear-view mirror, or whether perhaps this company has another trick pony beyond its search business that has sustained it for years. Read Full Post…

MEDIA: Qutoutiao in Fund-Raising Frenzy

Bottom line: Qutoutiao’s recent flurry of fund-raising, including a major  loan from Alibaba, underscores rising confidence in the news aggregator after its lackluster IPO last year.

Qutoutiao in new fund-raising frenzy

News aggregator Qutoutiao (Nasdaq: QTT) is making up for lost time following its lackluster IPO last fall that raised far less than its original target. The company has just announced a new share sale that will generate about $30 million in cash, just days after raising another $171 million from e-commerce giant Alibaba (NYSE: BABA).

Investors didn’t seem too impressed with the latest cash-raising exercises, with Qutoutiao’s shares shedding some 8 percent in the last trading session. That drop appears related to announcement of the pricing of this latest share sale, since the company first announced the move a few days ago. Regardless of that, this does provide a good opening for us to take a closer look at this company. Read Full Post…

IPOs: With Shutdown in Past, Live Broadcaster Douyu Lines Up to List

Bottom line: A slowdown in New York IPOs by Chinese firms at the start of the year was largely caused by the government shutdown, and activity could soon pick up starting with a listing by leading live broadcaster Douyu.

Government shutdown hits IPOs

We’ll kick off my first post of the Lunar New Year with a look at New York IPO activity in the first part of 2019, or more precisely the lack of activity for Chinese companies. If this were any other year, I would say such a silence is probably normal, since in the past the first quarter has been a difficult period due to the western New Year holiday on Jan. 1 followed rapidly by the Chinese New Year, which this year fell on Feb. 5.

But this is no ordinary year, coming off a 2018 that was one of the busiest years for Chinese IPOs in New York and Hong Kong in quite some time. This year got off to a relatively quick start with a New York IPO filing to raise up to $300 million by financial technology (fintech) company Futu, which actually came at the very end of last year. (English article) Now the latest reports are saying video streaming site Douyu has just made its own confidential filings for an even bigger offering that could raise up to $500 million. (English article) Read Full Post…

GAMES: Tencent, NetEase Shunned as Game Approvals Resume

Bottom line: Tencent and NetEase will become long-term beneficiaries of a cleanup of China’s online game sector, despite their lack of new launches so far following the recent end of a 10-month freeze on approval of new titles.

No new approvals for Tencent, NetEase

China’s 10-month freeze on approval of new online games has official ended, but don’t tell that to industry leaders Tencent (HKEx: 700) and NetEase (Nasdaq: NTES). China’s gaming regulator has officially just published its latest list of newly approved game titles, which is its third since it resumed such approvals in late December. (English article)

As with the first two lists, observers are focusing more on who wasn’t represented rather than who was. And as with the first two lists, both Tencent and NetEase were absent once again. That raises the question of what the regulator may be trying to do, and whether this could have long-term ramifications for China’s two leading online game companies. Read Full Post…

IPOs: Meituan-Dianping Heads List of Money-Losing New Listings

Bottom line: Meituan-Dianping’s IPO is likely to meet with lukewarm reception due to its big losses in several key areas, but could become more attractive over the medium term as it emerges as industry leader in one or two key areas.

Restaurant ratings leader takes IPO orders

As the rest of China continues to fixate on the sex scandal surrounding e-commerce giant JD.com’s (Nasdaq: JD) CEO, I thought I would end the week on a less controversial subject with a look at another blockbuster IPO by online-to-offline services giant Meituan-Dianping. The company has officially filed to make a listing in Hong Kong, and could be one of a growing number of Chinese Internet firms to choose the former British colony over the U.S. following a rule change earlier this year.

That change allowed companies to list in Hong Kong using a dual-class share structure that gives disproportionate voting power to company managers over ordinary shareholders. Previous prohibition of such a structure was the key element that led e-commerce giant Alibaba (NYSE: BABA) to make its own record-breaking IPO in New York instead of Hong Kong in 2014, and no doubt Hong Kong is still smarting over that loss. Read Full Post…

INTERNET: Tencent Slumps Under Government Wrist-Slap

Bottom line: Tencent’s sudden pulling of a popular game just days after its release shows no one is exempt from Beijing’s recent online entertainment clampdown, which could weigh on stocks of related company for the next few months.

Tencent gets wrist slapped by regulator

A new statement from leading online game operator Tencent (HKEx: 700) is dripping with contrition, following the sudden yanking of a new hit game from its platform that apparently didn’t pass muster with the regulator. This latest Tencent news, combined with some downbeat earnings from live broadcasting specialist Huya (Nasdaq: HUYA) and its parent YY (Nasdaq: YY), have cast a chill over Chinese gaming and video stocks, which took a beating in Tuesday trade.

Tencent has been leading the crowd, shedding 3.4 percent on Tuesday and down another 3.2 percent in early trade on Wednesday. Those two declines have collectively wiped out more than $4 billion in market value from one of the world’s most valuable Internet companies. The bloodbath was felt among the broader realm of Chinese companies that provide any form of video content over the Internet, be it games, live broadcasting or even traditional moves and TV shows. Read Full Post…

GAMES: Tencent Takes Gaming Act Abroad

Bottom line: Tencent’s WeGame could stand a 50-50 chance of success in moving abroad, since the company already has a proven track record in games and will face relatively low privacy protection concerns due to the less-sensitive nature of gaming.

Tencent takes its gaming global

Despite their huge success at home, none of China’s big Internet companies has ever scored a major victory outside its home market, despite a number of low-profile attempts. Social networking giant Tencent (HKEx: 700) is about to become the latest to take a stab at the market, with word that the company will soon launch an international edition of its gaming platform called WeGame.

There are a number of reasons why Chinese Internet companies have yet to really crack any major foreign markets, underscoring the uphill battle Tencent will face. The largest is probably well-established competition in most places, both from local players as well as global giants like Amazon (Nasdaq: AMZN) and Google (Nasdaq: GOOG). The second biggest element is probably trust, since many foreigners are a bit suspicious of these Chinese companies and their ability to protect customer privacy. Read Full Post…

INTERNET: Alibaba Devours Ele.me, Meituan Swallows Mobike

Bottom line: Alibaba’s purchase of Ele.me and Tencent-backed Meituan’s purchase of Mobike underscore the growing rivalry between Alibaba and Tencent, as each uses its deep pockets to try and dominate money-losing emerging sectors.

Alibaba swallows Ele.me

Trade wars are making all the big headlines these days in US-China news, forcing a couple of mega-mergers that would normally be front-page news into the back pages. Each of the latest deals is quite significant for China’s Internet, as both quietly underscore the increasingly intense rivalry between titans Alibaba (NYSE: BABA) and Tencent (HKEx: 700).

The larger of the deals has Alibaba forking out more than $5 billion to buy the remaining stake of Ele.me it doesn’t already own, adding important fire power to the leading takeout dining service whose chief rival is Meituan-Dianping. In a separate but also quite large deal, Meituan, which counts Tencent as one of its largest backers, has acquired leading shared bike operator Mobike in a deal that values the latter at about $2.7 billion. Read Full Post…

STOCKS: Lenovo, China Telecom Mull CDR Homecomings

Bottom line:  Hong Kong-listed “Red chip” stocks like Lenovo and China Telecom could eventually make secondary listings in China under a new CDR program, but will be forced to wait behind higher-profile Internet names like Alibaba.

‘Red chips’ eye China listings under CDR program

With all of the major IPOs for the week now in the history books, as most of the world takes a vacation for Good Friday, I thought I’d close out the week here in China with yet another angle on the China Depositary Receipt (CDR) program that is creating lots of buzz. Regular readers will know this is a reference to China’s planned take on the popular American Depositary Receipt (ADR) program that lets companies with a primary listing in one market make secondary listings in another one.

Lots has been written these last couple of weeks about how the CDR program could let U.S.- and Hong Kong-listed tech giants like Alibaba (NYSE: BABA) and Tencent (HKEx: 700) make new secondary listings in China, which they couldn’t do before. But today we’re getting the first few peeps about similar homecomings from top executives of a group of Hong Kong-listed companies known as “red chips”, which are major Chinese firms that are currently barred from listing at home. Read Full Post…

STOCKS: China Eyes Quick Route Home for Offshore-Listed Firms

Bottom line: A new plan allowing offshore listed Chinese firms like Alibaba and Tencent to make secondary listings at home appears to have momentum and could stand a better than 50 percent chance of success.

China eyes new plan to bring home NY-, HK-listed firms

A mix of politics and business is in the air this week, as the annual National People’s Congress takes place in Beijing, including a concurrent gathering of business leaders who advise the nation’s legislature. Those leaders include most of the country’s leading high-tech CEOs, who are all getting peppered with questions about whether they would re-list at home if given the chance.

Most of those leaders are doing the politically correct thing and saying “of course,” including chiefs of Internet giants Baidu (Nasdaq: BIDU), Tencent (HKEx; 700) and Ctrip (Nasdaq: CTRP), just to name a few. (Chinese article) Such talk is really a bit cheap and would be quite impractical in the current market, since de-listing such massive firms from their current markets would require tens of billions of dollars in most cases, and even hundreds of billions in the case of a massive company like Tencent. Read Full Post…