Tencent has drawn a lot of attention lately, especially around whether its habit of copying existing products and business models is reasonable. Among Chinese internet companies, Alibaba aside, I still see Tencent as the one with the most potential. A few observations help explain why the copying debate keeps circling back to it.
Tencent’s reputation among internet companies is poor, and that is not hard to understand. Its entry into a market usually threatens smaller players. Even if most of Tencent’s imitations are not especially successful, once it plants a flag in an industry it can wipe out a group of early participants.
Anyone with a little knowledge of internet history also knows that Tencent, despite being called the king of copying, has rarely copied an original domestic business model. The models it reproduces usually originated elsewhere and were recombined for the Chinese market. That distinction matters, even if it does not make the competitive pressure disappear.
The real moat is social stickiness
China has many software products with enormous installed bases: 360, Baofeng Player, Thunder, and others that ordinary users once considered essential. Their install numbers can reach hundreds of millions, but they are still not in the same category as QQ. If they behave slightly too aggressively, users delete them without much hesitation and replace them. In a free internet market, QQ is perhaps the only product that can persuade users to pay to remove ads.
From a purely technical standpoint, QQ has no clear advantage. Other instant messaging tools may even offer features QQ lacks. What built such a strong company is not a technical breakthrough but an enormous base of active users.
Users are the foundation of the internet, and stickiness is the foundation of users. You can abandon any software that disappoints you because there is no human relationship embedded in it. Giving up QQ is different: it means giving up part of your social circle. QQ provides an interaction platform, and the stickiness comes from users themselves, from relationships among people. That is how one IM product helped create one of China’s most promising internet companies.
Weibo shows where copying works
Take Tencent Weibo. As long as Twitter cannot enter China, the microblog market belongs to Sina and Tencent. Very few companies have been able to share the space with Sina. Two of the four major portal sites ended up winning in microblogs. The other two failed, and there is little need for research to explain why; their blog traffic already made success unlikely.
Tencent made the right move early when copying Weibo: it used an invitation system for a long time. That produced healthier, more active users, because the model rested on the six degrees of separation idea. The team behind Tencent Weibo clearly put thought into this. In terms of user experience, the microblog platforms were broadly similar. One day a service adds backgrounds, another day it improves an operation. Those details were not the key. Tencent Weibo succeeded because it started from a base of active users.
That case also points to a limit: not every Tencent copy is built on human relationships. Without interaction, traffic alone does not create a real advantage.
Not every copy inherits the network effect
QQ Player, QQ Input Method, and QQ Doctor are examples. These products generally do not create person-to-person interaction. Tencent entered late, made no major technical breakthrough, and did not create a strong switching risk for users, so it did not pose a huge threat to the market. If anything, its presence can constrain the market and impose some discipline, preventing a product with an early advantage from turning into genuinely abusive software once it dominates. From the user’s side, the benefits tend to outweigh the costs.
People sometimes ask me how a small grassroots site should respond if it accidentally creates a new internet model and Tencent enters to copy it.
That worry is largely unnecessary. If someone truly finds a new internet business model with real promise, venture capital will rush in, invest heavily, package the company, and push it toward becoming a first-class internet company. Even if it cannot monopolize the market, it should be able to live well. The companies that get copied are often those that copied others first. If they end up struggling, they have little to complain about, especially since they may already have earned substantial revenue early on.
Even in the worst case, when Tencent does enter, there is no need to panic. The company usually moves one or two steps behind the market, waiting until a business model is relatively mature, at least abroad, before it gets involved.
Focus versus the copy machine
Tencent became a focal point mainly because it became the king of copying in volume, and most of those copies were not very successful. Ma Huateng’s thinking may be something like this: launch ten projects, and if one or two end up monopolizing a market, that is enough. This spread-the-net approach is actually harmful to Tencent.
Vanke once did everything and was a conglomerate in the fullest sense. Later it concentrated on real estate, the area where it was strongest. Tencent’s speculative approach would benefit from the hedgehog idea: find the direction where it is strongest, keep it simple and clear, and focus. At the right time, it can still explore one or two other reasonable directions. That kind of focus may be what it takes to build a truly excellent company.