Ten­cent wants to be more like Face­book in ad­ver­tis­ing

The Star Malaysia - StarBiz - - Foreign News -

HONG KONG: Ten­cent Hold­ings Ltd’s rise into a US$500bil com­pany was fu­elled by a cul­ture of in­ter­nal com­pe­ti­tion, where teams raced against each other to make ideas work. To be­come an ad­ver­tis­ing pow­er­house like Face­book Inc, the in­ter­nal bar­ri­ers are start­ing to come down.

The seven main business units of China’s largest com­pany are work­ing to syn­chro­nise data and study a bil­lion plus users to de­liver pre­ci­sion and pre­dic­tive ads, ac­cord­ing to Lau Seng Yee, the ex­ec­u­tive tasked with lead­ing the charge. That’s counter-in­tu­itive for a com­pany where ideas are gen­er­ated from the bot­tom up, and di­vi­sions span­ning games and video stream­ing to fi­nance are en­cour­aged to jockey against each other.

Ten­cent is count­ing on its user data – from the mu­sic peo­ple play, the news they read and the places they go – to de­liver tar­geted com­mer­cials and cap­ture a big­ger share of China’s 350 bil­lion yuan (US$53bil) on­line ad­ver­tis­ing mar­ket. Suc­cess in games and so­cial me­dia has meant the com­pany hasn’t had to rely on ads, a business that gen­er­ates just 17% of its rev­enue com­pared with 97% for Face­book.

“The out­side world knows our core DNA is in­ter­nal com­pe­ti­tion, but it needs to be healthy,” said Lau, who took over the newly cre­ated ad­ver­tis­ing role in March.

“We spend a lot of time re­solv­ing our si­los, torch­ing our teams, and in­te­grat­ing the so-called strength of team.”

The fierce­ness of com­pe­ti­tion is ex­em­pli­fied by the fact that Ten­cent’s busi­nesses ac­tu­ally vie with each other, with its WeChat and QQ so­cial net­work­ing ser­vices hav­ing close to a bil­lion users each. Its op­er­a­tions aren’t even all lo­cated in the same cities, with much of the WeChat team and its boss in Guangzhou, the on­line news business pre­dom­i­nantly in Bei­jing while a big chunk of Lau’s team is in Shang­hai. Ten­cent it­self is based in Shen­zhen.

Alibaba Group Hold­ing Ltd now dom­i­nates Chi­nese dig­i­tal ad­ver­tis­ing but in­vestors are bet­ting part of Ten­cent’s fu­ture growth will stem from so­cial me­dia mar­ket­ing. That’s helped Ten­cent more than dou­ble this year and briefly pass Face­book to be­come the world’s fifth most valu­able com­pany – ce­ment­ing its po­si­tion along­side Alibaba as stan­dard bear­ers for China in an in­creas­ingly dig­i­tal global econ­omy.

Ten­cent’s ad rev­enue could more than dou­ble to US$11.4bil by 2019, ac­cord­ing to re­searcher eMar­keter. The com­pany is es­ti­mated to in­crease its mar­ket share in China’s dig­i­tal ad space to 15% from about 9%, eMar­keter said.

“If you think about why ad­ver­tis­ers like Face­book’s so­cial ads, it’s be­cause the data it has on users en­ables more pre­cise tar­get­ing,” said Alex Yao, a Hong Kong-based an­a­lyst at JPMor­gan Chase &Co. “Ten­cent has more abun­dant data on users than Face­book does.”

So­cial ad­ver­tis­ing, which re­lies on in­for­ma­tion from a user’s net­work, is still a nascent business in China. The model that drives Face­book only ac­counts for about 10% of main­land dig­i­tal mar­ket­ing with e-com­merce and search ads still tak­ing the lion’s share. Lau ex­pects that to change.

“So­cial ad­ver­tis­ing can play a larger role,” said Lau. “In China, we are kind of pi­o­neer­ing the cat­e­gories” of that.

Lau, a grad­u­ate of Rut­gers Univer­sity, has been with Ten­cent since 2006. Be­fore tak­ing on the ad­ver­tis­ing role, he built the me­dia business into a gi­ant with con­tent in­clud­ing news, en­ter­tain­ment, sport and video on de­mand.

In that time, the com­pany’s WeChat be­came prac­ti­cally ubiq­ui­tous in China, al­though Ten­cent still re­mains largely non-ex­is­tent out­side the main­land, es­pe­cially in the US and Europe.

To Lau, build­ing the ad­ver­tis­ing business re­quires a del­i­cate bal­ance be­tween mon­etis­ing as­sets and avoid­ing push­back from con­sumers al­ready sus­pi­cious of hand­ing over too much pri­vate in­for­ma­tion.

Take Face­book. Seek­ing to boost rev­enue, it’s ramped up ad im­pres­sions served to users, with an in­crease of about 50% last year. But the ad load was such that ex­ec­u­tives of the US com­pany have warned in­vestors they can’t keep up that pace without driv­ing peo­ple away.

So Ten­cent’s cho­sen to ex­er­cise re­straint, usu­ally show­ing just one ad per day on WeChat’s “Mo­ments”, a func­tion sim­i­lar to Face­book’s news feed, cap­ping in­ven­tory by in­ten­tion. That’s why it earns just US$2.10 per daily ac­tive user on WeChat, ver­sus Face­book’s US$30.10, Mor­gan Stan­ley es­ti­mates.

The Chi­nese com­pany can af­ford to take a grad­ual ap­proach be­cause the on­line gam­ing di­vi­sion is buy­ing it time. More than 40% of rev­enue comes from the business and break­out hit Hon­our of Kings was the top gross­ing ti­tle in China’s iOS store for a year, fu­elling the strong­est quar­terly rev­enue growth in seven years. The com­pany’s two new first-per­son shooter games have each amassed more than 20 mil­lion play­ers within weeks.

“Se­ri­ously, we are all users of WeChat, you don’t want to be over­loaded with un­nec­es­sary in­for­ma­tion,” said Lau. “I’m not say­ing we are not in a hurry. I think we are in a hurry to try to make sure that we un­der­stand our users well.”

To do that, it’s en­listed an army of more than 250 com­puter sci­en­tists to ex­pand in ar­ti­fi­cial in­tel­li­gence, fo­cus­ing on nat­u­ral lan­guage pro­cess­ing, im­age recog­ni­tion and user be­hav­iour pre­dic­tion. That in­vest­ment is show­ing up in some ar­eas: Ten­cent worked with BMW to tar­get high-end users based on their friends and lo­ca­tion logs, send­ing them WeChat ads through which they could book test drives. The end game is con­vert­ing ads into pur­chases, which is why the com­pany’s ex­plor­ing also ho­tels, din­ing and prop­erty, Lau said.

With its fren­zied growth, Ten­cent has hired at a rapid rate and the av­er­age age of em­ploy­ees is 29. That’s why mak­ing sure the teams align has be­come ever more im­por­tant.

“When the ul­ti­mate goal is to win, there are times where peo­ple just go all the way to win,” said Lau. “Man­age­ment is try­ing to fig­ure out how do we make sure we can en­cour­age the tasks of build­ing trust.” — Bloomberg

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.