Tencent In Rare SNS Pullback On Microblogs

Tencent pulls plug on microblog service

Update: Since originally writing this post, Tencent has issued a statement in response to the original Chinese media reports saying it has no plans to close its microblogging service. It adds the service will be combined with its news service, as part of a broader restructuring of its online media group.

New reports are saying that leading Internet firm Tencent (HKEx: 700) is quietly halting development for its largely ignored microblogging service, in what would amount to a rare admission of defeat in its core social networking services (SNS) business. The move would be long overdue, as Tencent’s microblogging service, a variant of US leader Twitter’s (NYSE: TWTR) service, was never really a major player in China. So in that sense I have to at least congratulate Tencent for finally conceding defeat in the space to Weibo (Nasdaq: WB), the Twitter imitator founded by leading web portal Sina (Nasdaq: SINA).

According to the latest reports citing unnamed company sources, Tencent’s online media group has recently stopped developing new services and features for the microblogging unit, which would indicate it may eventually close down the business completely. (Chinese article) Sources at the company said the move simply makes official what was already happening in practical terms.

The move looks like a rare admission of failure for Tencent in the SNS space where its QQ and WeChat instant messaging services are wildly popular. As a former user of Tencent’s microblogging service, I can personally say that I never found much of an audience there, probably because the service never achieved a critical mass. One of my main reasons for using the service was to follow personal messages from Tencent founder Pony Ma, who only posted on the platform. But Ma’s posts were always a bit stilted and weren’t even very frequent, and I eventually stopped using the Tencent platform last year.

Tencent certainly isn’t the first company to admit defeat to Weibo, which has about 100 million active users. Leading search engine Baidu (Nasdaq: BIDU) was one of the many other big web companies to jump on the microblog bandwagon when the original Twitter was first blocked in China in 2009. But Baidu quickly realized that Weibo was the winner in the battle for the space and shuttered its own microblogging service in 2011. (previous post)

From a broader perspective, the bigger questions become whether this move represents a big setback for Tencent and also whether the company may try to shift more microblogging functions to its more successful WeChat and QQ services. In answer to the first question, this withdrawal looks like a marginal setback since microblogging is clearly an SNS service with a big audience.

In China such microblogging services are even more popular than in the west, because many Chinese look to them as strong alternative sources for news compared with traditional media, which are all state-owned and have a strong government bias. But the reality is that Tencent has been a non-player in the microblogging space for several years now, so its quiet phasing out of the service won’t have much impact on the company’s actual financials.

In answer to the second question, Tencent is indeed trying to build more microblogging-type functions into its other SNS platforms, especially WeChat, whose users now number around 600 million. WeChat currently hosts thousands or even millions of public accounts, which function much like Weibo accounts by allowing owners to disseminate news or other information to anyone who wants to follow the account.

WeChat also encourages users to forward interesting articles to their circles of friends, which can also allow such news and information to quickly become widely disseminated. At the end of the day this microblogging retreat does look like a bit of a disappointment for Tencent, but it also represents a smart tactical shift from a product that never found an audience to a new focus on its more popular platforms.

Bottom line: Tencent’s phasing out of its stagnant microblogging service represents a small setback, but is also a smart tactical move as it focuses on development of similar functions for WeChat.

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