Tencent is China’s biggest brand. It has more than 1 billion monthly users, runs the country’s most popular internet portal and messaging services, and last year generated revenues of almost £12bn.
It is also the most valuable brand in the country, worth £85bn according to Millward Brown’s BrandZ. That valuation also puts it ahead of the likes of Coca-Cola, Disney and MasterCard.
But in the UK, and most of the rest of the West, the brand is relatively unknown. Despite this, when Marketing Week catches up with Steven Chang, Tencent’s corporate vice-president, it is clear from the start how much investment and importance he places on the parent brand.
“Tencent is the mother brand. In China, trust is one of the most important [aspects of a brand] so the company itself represents a lot of value and meaning. According to BrandZ we are one of the top brands in the world, that represents the trust level, not just how available it is,” he explains.
“For China, it is the same as the rest of the world. There may be different sub-brands or product brands but the mother brand is always the key one. It has to be.”
“You can have the iPhone but you buy into the Apple brand. And [in China] people buy into the Tencent brand.”
Steven Chang, corporate vice president, Tencent
Chang believes key to Tencent’s success is a clear brand identity. Its vision is to be ‘the most respected internet company’ while its mission is ‘to enhance people’s quality of life through internet services’ – messages that are prominent both internally and externally.
Bringing sub-brands together
Yet from the outside Tencent’s brand can seem confusing. It owns messaging app WeChat, internet portal QQ, the SOSO search engine, social network QZone, Tencent Weibo – China’s answer to Twitter – and online payment service TenPay. It also owns a chunk of ecommerce service JD.com and Uber rival Didi, as well as stakes in Riot Games and Epic Games and has invested in movies such as World of Warcraft.
That broad range can seem odd to Western eyes but Chang says there is a common thread that runs across all these services: content and connections.
“We want to connect. People to people, people to devices, devices to devices. We provide platforms like WeChat so people can connect. Then on top of those connecting platforms we need to provide content,” he explains.
“[There is also] the opportunity to offer convenience to the consumer so we develop payment services. It is not just the commercial value, we look at this in a bigger way in terms of helping to provide convenience. To make their lives easier, whatever we can see we can do that. We are building an ecosystem.”
Tencent’s approach definitely seems to be working. QQ has more than 860 million monthly users and Chang claims it is the “biggest ID system in China”. WeChat has 760 million, while QZone has more than 570 million.
International expansion
But despite these numbers, Tencent is far from content. In particular, it wants to be known outside China and is making a big push in this area, particularly with WeChat and its gaming platform.
“It is important [to be known outside China]. China we are very focused on for obvious reasons. However there are two particular areas. We are the biggest game developer in in the world so in terms of games we are pretty global. Games are one area and games as IP we can develop into movies and animations, we are working with that,” he explains.
“Then there is another global expansion through WeChat usage. It currently has more than 20 languages, 180 countries use it. It is still primarily Chinese but we are getting more and more Westerners using it.”
Bringing the West to China
While Tencent may not be that well known among Western consumers, it is a different story with Western brands. And the likes of BMW, Burberry and Nike are all working with Tencent as they look to quickly transition their brands to a Chinese audience.
Yet Chang says it is not as simple as taking what has made a brand successful in the West and applying it to China. He uses the example of movies to highlight his point. Last year, the new Star Wars film was the biggest grossing film globally. But in China three of the top five were locally produced films and the biggest Hollywood movie was Fast and Furious 7.
“The local culture, interests and tastes are very important. You cannot simply bring in Hollywood and likewise you can’t just bring in Western products and everything you have been doing successfully and expect it to work. You have to understand the local nuances, local consumer needs, what they are interested in,” he says. “There is a China way.”
He points to some big differences. Mobile, he says, accounts for 90% of internet usage in China and that has a big impact on commerce, how consumers view content and news consumption. For example, QR codes are an important marketing tool and their usage is only increasing where in the Western world they are on the decline. Therefore, a retail strategy that works in the UK is likely to be irrelevant in China.
Big issues in digital advertising in the West such as ad fraud and viewability are also of lower concern in China. Instead the focus is on standards. In China there is no equivalent to the IAB so the big brands are working on setting standards, with Tencent recently doing a deal with Nielsen to develop a “digital ad rating” for China.
“The ecosystem for China digital advertising is evolving but it will be a China edition. We are not behind; the speed of change is very fast but development is different,” he explains.
Differentiating through content
One area where Tencent is doubling down is content. During our interview at Cannes Lions, Chang was keen to bring the conversation back to content and Tencent’s strategy here. It is buying in content through exclusive deals with creators such as HBO and the NBA. But Tencent is also adopting what Chang calls the “Netflix model” and creating its own content.
That, he says, offers Tencent a better way to monetise because it can get brands involved from the get-go and use its data to understand what viewers enjoy and adapt content accordingly.
“If we produce it we own the IP and we can do a lot more. For example, we can do branded entertainment, product placement and using our data and understanding of the audience we can co-create with marketers. The opportunity is much bigger,” he says.
Battling a decline in the Chinese economy
Tencent also needs to find new ways to grow its revenues as China’s economy slows. It slipped to 6.7% in the first quarter of 2016. Although this is still well ahead of the rest of the world, it is China’s lowest growth for seven years.
Chang, however, remains bullish. Although Chang predicts that growth in ad spend, like the rest of the economy, will slow this year, he backs digital ad spend will come in at just less than 30%. And he claims Tencent is growing even faster, with revenues up 43% in the first three months of the year.
Chang says Tencent is already testing new technology such as virtual reality, augmented reality and artificial intelligence, as well as working to ensure it offers the best user experience to give both consumers and advertisers a reason to come back.
He concludes: “We have the content, the data and can make best use of social inference to link all this together. This is quite unique.”