{"id":213127,"date":"2017-11-27T07:26:40","date_gmt":"2017-11-27T05:26:40","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=213127"},"modified":"2017-11-27T07:26:40","modified_gmt":"2017-11-27T05:26:40","slug":"why-tencent-wants-to-be-more-like-facebook-in-advertising","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/internet\/213127\/why-tencent-wants-to-be-more-like-facebook-in-advertising\/","title":{"rendered":"Why Tencent wants to be more like Facebook in advertising"},"content":{"rendered":"
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Tencent Holding\u2019s rise into a $500 billion company was fueled by a culture of internal competition, where teams\u00a0raced against each other to make ideas work.\u00a0To become an advertising powerhouse like Facebook, the internal barriers are starting to come down.<\/p>\n

The seven main business units of China\u2019s largest company are working to synchronize 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.<\/p>\n

That\u2019s 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.<\/p>\n

Tencent is counting on its user data \u2014 from the music people play, the news they read and the places they go \u2014 to deliver targeted commercials and capture a bigger share of China\u2019s 350 billion yuan ($53 billion) online advertising market.<\/p>\n

Success in games and social media has meant the company hasn\u2019t had to rely on ads, a business that generates just 17% of its revenue compared with\u00a0 97% for Facebook.<\/p>\n

\u201cThe outside world knows our core DNA is internal competition, but it needs to be healthy,\u201d said Lau, who took over the newly created advertising role in March.<\/p>\n

\u2018We spend a lot of time resolving our silos, torching our teams, and integrating the so-called strength of team.”<\/p>\n

The fierceness of competition is exemplified by the fact that Tencent\u2019s businesses actually vie with each other, with its WeChat and QQ social networking services having close to a billion users each.<\/p>\n

Its operations aren\u2019t 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\u2019s team is in Shanghai. Tencent itself is based in Shenzhen.<\/p>\n

Alibaba Group Holding now dominates Chinese digital advertising but investors are betting part of Tencent\u2019s future growth will stem from social media marketing.<\/p>\n

That\u2019s helped Tencent more than double this year and briefly pass Facebook to become the world\u2019s fifth most valuable company – cementing its position alongside Alibaba as standard bearers for China in an increasingly digital global economy.<\/p>\n

Tencent\u2019s ad revenue could more than double to $11.4 billion by 2019, according to researcher eMarketer. The company is estimated to increase its market share in China\u2019s digital ad space to 15 percent from about 9 percent, eMarketer said.<\/p>\n

\u201cIf you think about why advertisers like Facebook\u2019s social ads, it\u2019s because the data it has on users enables more precise targeting,\u201d said Alex Yao, a Hong Kong-based analyst at JPMorgan Chase & Co.<\/p>\n

\u201cTencent has more abundant data on users than Facebook does.”<\/p>\n

Social advertising, which relies on information from a user\u2019s network, is still a nascent business in China. The model that drives Facebook only accounts for about 10 percent of mainland digital marketing with e-commerce and search ads still taking the lion\u2019s share. Lau expects that to change.<\/p>\n

\u201cSocial advertising can play a larger role,\u201d said Lau. \u201cIn China, we are kind of pioneering the categories\u201d of that.<\/p>\n

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.<\/p>\n

In that time, the company\u2019s WeChat became practically ubiquitous in China, although Tencent still remains largely non-existent outside the mainland, especially in the US and Europe.<\/p>\n

To Lau, building the advertising business requires a delicate balance between monetizing assets and avoiding pushback from consumers already suspicious of handing over too much private information.<\/p>\n

Take Facebook. Seeking to boost revenue, it\u2019s 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\u2019t keep up that pace without driving people away.<\/p>\n

So Tencent\u2019s chosen to exercise restraint, usually showing just one ad per day on WeChat\u2019s \u201cMoments\u201d, a function similar to Facebook\u2019s news feed, capping inventory by intention.<\/p>\n

That\u2019s why it earns just $2.10 per daily active user on WeChat, versus Facebook\u2019s $30.10, Morgan Stanley estimates.<\/p>\n

\"\"<\/a><\/p>\n

The Chinese company can afford to take a gradual approach because the online gaming division is buying it time.<\/p>\n

More than 40% of revenue comes from the business and breakout hit Honour of Kings was the top grossing title in China\u2019s iOS store for a year, fueling the strongest quarterly revenue growth in seven years.<\/p>\n

The company\u2019s two new first-person shooter games have each amassed more than 20 million players within weeks.<\/p>\n

\u201cSeriously, we are all users of WeChat, you don\u2019t want to be overloaded with unnecessary information,\u201d said Lau. \u201cI\u2019m 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.\u201d<\/p>\n

To do that, it\u2019s enlisted an army of more than 250 computer scientists to expand in artificial intelligence, focusing on natural language processing, image recognition and user behavior prediction.<\/p>\n

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.<\/p>\n

The end game is converting ads into purchases, which is why the company\u2019s exploring also hotels, dining and property, Lau said.<\/p>\n

With its frenzied growth, Tencent has hired at a rapid rate and the average age of employees is 29. That\u2019s why making sure the teams align has become ever more important.<\/p>\n

\u201cWhen the ultimate goal is to win, there are times where people just go all the way to win,\u201d said Lau. \u201cManagement is trying to figure out how do we make sure we can encourage the tasks of building trust.\u201d<\/p>\n

\"\"<\/a><\/p>\n

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Read: Naspers hits record high as Tencent reports blowout quarter<\/a><\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Tencent Holdings Ltd\u2019s rise into a $500 billion company was fueled 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.<\/p>\n","protected":false},"author":59,"featured_media":196098,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9882],"tags":[45,1977],"class_list":["post-213127","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-internet","tag-facebook","tag-tencent"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/213127","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=213127"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/213127\/revisions"}],"predecessor-version":[{"id":213131,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/213127\/revisions\/213131"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/196098"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=213127"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=213127"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=213127"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}