1. Inside QQ
The Chinese leading online community
SKEMA Business School
December 2009 - Suzhou
Case Study provided by the Maochistes team

3. QQ
Being a very successful internet service company in one of the most controlled media
environment on earth? Tencent’s QQ did it, and how! After becoming the most used instant
messaging application in the world, QQ is becoming the biggest information platform in China
with a simple concept: Keep it easy, keep it powerful, and keep it fun. However QQ is often
presented in foreign countries as the biggest Internet company no one has never heard of, let’s
see the success story of a local web based company.

4. SU
Inside QQ The Chinese leading online community

5. OMMARY
6 CHINA INTERNET MARKET
OVERVIEW
7 CHINA INTERNET MARKET 11 QQ FACTS & FIGURES
9 IM KEY PLAYERS 12 WHAT ABOUT QQ ?
Hiistory & Governance
Figures
14 QQ STRATEGIES
Positionning
Segmentation & Targeting
4 P’ s strategy
19 QQ SWOT & PESTEL
ANALYSIS
20 PESTEL ANALYSIS
21 SWOT ANALYSIS
22 QQ FUTUR(S) DEVELOPMENT
23 WHY QQ IS SO SUCESSFULL ?
24 WHAT FUTUR FOR QQ ?
On the domestic market
International growth

6. PART I
OVERVIEW
OF THE
CHINA INTERNET
MARKET

7. THE CHINA
INTERNET MARKET
The Chinese Internet Market has become at the end of 2008
the world largest market in term of users (almost 300 millions).
It’s a very fast growing sector of China (20~30% YoY) with a
low rate of penetration. China Internet Market model is still in
early age and has a very strong growth potential.
Internet, the fastest growing “S” curve of adoption and far from saturation.
sector in China ! This low rate indicates that there is a huge
The Chinese Internet market is a very fast Potential growth.
growing sector in China and all around the world.
This strong growth in recent years is due to a Regarding the increase in Internet accessible
robust GDP growth, low price computers, computers, home has become the preferred
affordable internet connection fees, government place for most users to access the Internet, with
support to Internet usage and low-cost more than 2/3 of all Internet users accessing
entertainment. Moreover, the rural population Internet from home. Access from an Internet café
growth has exceeded the overall population lost share to the home, but still grew.
growth, even low income groups continue to However, with the low price of Internet access
adopt the Internet. from an Internet café, about 51.6 Rmb per
month, younger population are drawn to Internet
At of the end of 2008, Chinese Internet users has cafes. While Internet access at home is more
outpaced US ones and its now the biggest online expensive for those who pay for it, about 74.9
community, it represents 17.3% worldwide Rmb per month ($10.83). According to JP
market shares vs 15 % for US. Morgan, Internet access from home will continue
to grow at a fast rate as population continues to
This market has known a very strong increase buy more computers and get more Internet
these last 4 years, only 100 million users in 2005 access from home.
and 298 million users at the end last year. It’s also
42% growth YOY in 2008. Chinese Internet users are spending more and
more time online, a survey showed that they
Despite this fast growth, China's Internet spent on average 19 hours per week, it’s almost
penetration rate reached 19.1% and this rate is doubled compared to the 8.7 hours per week in
slightly lower than the global average (21.1%) June 2001. If we take a look on what they are
penetration rate and still largely below developed doing, we see that 94 % of them use Instant
markets one such as US, Japan and Korea over Messaging service, 85 % online music and video,
70%). China is still at the beginning of the 73% search engine, 70% games and news and
7

8. (figure 1.1)
Country Mobile Phones Internet Users (MM) Mobile Phone to
(MM) Internet Users
Ratio
China 574 221 2,60
US 256 216 1,19
Japan 107 86 1,24
South Korea 43 34 1,26
UK 71 37 1,92
(figure 1.2) 2009 CHINA INDUSTRIES GROWTH
30 %
25 %
Internet 20 %
Healthcare
15 %
Consumer staples
Retail 10 %
Telecom 5 %
Power demand 0 %
only 57% use email services. The market is One of the China’s internet market characteristic
focused on young people and entertainment, is that there is few business models and still in
almost 70% of the netizens are 30 years or early stage, so there is a huge potential.
younger.
We also have to consider that part of China
A large media online Industry Media and Internet are censured. In fact China
has the world’s largest population with extreme
Concerning the characteristic of this market, the gaps between haves and have-nots, East and
Chinese Internet industry is a large online media West. Within this context, the key objective of the
industry at the moment: Chinese Government is the stability whatever the
cost. The consequence of this on Internet is that
• Online commerce for real goods is not websites are required to get an ICP license
(Internet Content Provider) and to filter some
here yet, there is a real problem of
politically-sensitive and illegal keywords.
monetization.
• Online commerce for virtual goods, on the
other hand, is well proven
• C2C e-commerce sites for real goods are
essentially free
• B2C sites are in a very tough business in
general because margin is usually very low
after taking into account of warehousing
and delivery logistics.
8

9. IM KEY PLAYERS
Internet Chinese Market is furiously competitive with several hundred
competitors, but focused on the Instant Messaging market there are only few
main worldwide actors. In fact more than 80% of China’s IM market is sharing by
Tencent with QQ and Microsoft with Windows Live Messenger (MSN).
A ferociously market Chinese local players won the top spot in all the
The chinese web market is very competitive with main Internet sectors. For example QQ Instant
hundreds of actors due to f the large influx of Messaging and Baidu search engine enjoy a
venture capital and the low entry barriers. strong lead in their sectors in terms of market
Moreover it is also ferociously competitive share.
because of the relative low level of disposable However the three biggest Chinese Internet
income. portals (Sina, Sohu and NetEase) didn’t pay
attention to IM and didn’t touch this market.
(figure 1.3) WHERE ARE THE GLOBAL PLAYERS
Sector Local Player Global Player
Portal #1 QQ #4 Yahoo
Search #1 Baidu #2 Google
E-commerce #1 Taobao #3 Ebay China
IM #1 QQ #3 MSN
Online Game #1 NetEase WoW
(figure 1.4) REVENUE 2008 OF KEY MARKET PLAYERS (mln USD) - source plus8star.com
1047
1100
825
468 522
429 452 439 550
370
275
97
0
Mobile Web IM Portal + Online Online Search Online BtoB e-
content Portal Game Games Games engine games commerce

10. Instant messaging (IM) product permits real - t million active users and Windows Live Messenger
ime text-based communication between two or with 322 million active users.
more participants over the internet or some form
of internal network/intranet. IM products can If we focus on the IM Chinese Market, 97 % of
typically be categorized into two types: Enterprise the market is shared as below:
Instant Messaging (EIM) and Consumer Instant
Messaging (CIM). • QQ (68%)
• Microsoft Windows Live Messenger (24%)
The two main worldwide leaders on Consumer
• Yahoo Messenger (8%)
Instant Messaging products are QQ with 377
• Google talk (7%)
(figure 1.4) - source
FRANCE CHINA
70 % 60 % USA 40 %
52,5 % 45 % 30 %
35 % 30 %
20 %
17,5 % 15 %
10 %
0 % 0 %
0 %
MSN AIM ICQ Yahoo Jabber Gtalk QQ
(figure 1.5) - QQ vs MSN vs Yahoo
Product Product Core users Main function Feature Strengthness
positionning
QQ Individual Age: 70% under 30 1. IM Text 1. Groups: Include 1. Perfect function
entertainment years old- 2. Conference text group chat, photo 2. Aim at
platform Education : 44% 3. Multi voice chat albums, BBS entertainment mode
under high school, 4. Video chat 2. QQ Online games: 3. Quantity of user,
53% high school 5. Send file have quantity of users, CCU average 30
and college 6. Offline message the N°1 casual games million
portal in China
Windows Business affair Age: Mostly above 1. IM Text 1. MSN space 1. Clean and Clear
Live and part of 22 years old 2. Conference text conformity interface, simple to
Messenger entertainment Education: 72% 3. Video chat 2. Hotmail Conformity use
undergraduate 4. Voice chat 3. Share document file: 2. Stable, strong
5. Send file send file to server backend
6. Offline message 3. Interconnection with
Yahoo
Yahoo Email and IM Age: Mostly under 5 1. IM Text 1. Audible, photo 1. Interconnection with
Messenger interactive years old 2. Conference text sharing, interactive mini MSN
entertainment 3. Video chat games 2. Stable , strong
platform 4. Voice chat backend
5. Share file
6. Group message
7. Offline message
10

11. PART II
QQ
FACTS & FIGURES

12. WHAT ABOUT QQ ?
QQ, the china’s greatest Internet success !
In less ten years the e-firm born in 1998 in Shenzhen has
becoming the world largest online community with 485 million
active IM user accounts and the most lucrative social network
with 1,047 million USD revenue.
In China Internet is QQ into an array of services ranging (figure 2.1) from
QQ is the main service brand of Tencent, the Internet portal (first in China, source: Alexa.com),
world largest Instant Messaging (IM) service blogs (first in China), avatars, virtual items, virtual
provider in China, and a leading provider for pets, online games (first casual game platform) to
Internet and mobile value-added services. WAP portal (first in China).
Founded in November 1998 and located in
Shenzhen the firm manages by Ma Huatengi The firm is now operating in three main lines of
(CEO) count 6 194 employees (in 2008) and is business :
register at the Hong Kong stock exchange since ‣Internet value-added service (IVAS)
2004. ‣Mobile and telecommunications value-
added service (WVAS)
Launched in 1999 the original name of QQ was ‣Advertising service
OICQ (for Open ICQ which means “Oh, I seek The first two represent about 90% of Tencent’s
you!”). The service were Largely inspired by ICQ, revenues in 2008.
an originally and famous US IM tool. However,
due to the possible trademark infringement with The company, which using a penguin as its brand
ICQ, and also the fact that neither the program mascot, has become the most powerful online
nor the protocol is considered "open", Tencent media in China, more, a Lifestyle. For millions of
changed its name to QQ. Nowadays Due to the Chinese, “Internet is QQ”, “IM is QQ”. QQ meets
popularity of its service the company is therefore their needs on entertainment, communication,
generally called QQ. business, learning, etc. Even the police uses QQ
In less ten years QQ evolved from the initial IM to communicate with residents.
soso.com Jan. 2009
IPO at HK Stock Exchange paipai.com
QQ Pet
xiaoyou.qq
QQ Game/RTX
Q Zone Jun. 2005
QQ Game/RTX Mar. 2005
Internet VAS Jun. 2004
Dec. 2003
Mobile QQ
Sep. 2003
OICQ
Jun. 2001
Company founded
in Shenzhen Aug. 2000
Feb.1999
Nov.1998 Source : Tencent Holding Ltd.

13. The world largest online The IVAS revenue category contributed to 70.5
community percent or $719.1 million, a 95.5 increase over
QQ is China’s largest online community with over 2007. WVAS contributed $204.7 million whereas
1,057 million registered IM user account and 485 online advertising contributed “only for” $120.9
million active IM user accounts (Q3 2009) and is million. (cf figure 2.3)
said to be covering 95% of Chinese Internet In comparison MySpace brought in around $800
users and 78% of China’s IM market in terms of million, coming in at less than the hoped-for $1
frequency of use (2008). (cf figure 2.2) billion goal. Facebook brought in $250 to $300
These spectacular results can be materialize by million.
comparing Qzone, the QQ social network (cf
part ), with the most world famous social Other core metrics
networks. With more than 200 million monthly 75.5 million peak simultaneous online IM user
active users (January 2009), Qzone, is the world accounts
5.7 million peak simultaneous online user accounts on
largest network neck and neck with Facebook QQ Game portal (for mini casual games only)
which is somewhere right around the same 47.9 million paying subscriptions of Internet value-
number, and growing at 5 million users a week, added services
but it spread all around the world. MySpace, it 17.7 million paying subscriptions of mobile value-
has around 140 million users, with over half in the added services
U.S.
The world Most lucrative
social network
The firm generated 1,047 million USD in total
revenue, an increase of 87.2% over 2007 and
412 million USD in net profit in 2008. Close to
90% directly from users.
(figure 2.2) ACTIVE IM USER ACCOUNTS (mln)
500
400
300
200
100
0
3Q 2005 3Q 2006 3Q 2007 3Q 2008 3Q 2009
Source : Tencent Holding Ltd.
(figure 2.3) REVENUE BREAKDOWN (mln USD)
1500
1200
900
IVAS WVAS 600
Online Ad Others
2001 300
2003
2005 0
2007
Source : Tencent Holding Ltd. 13

14. A WELL GROUNDED
STRATEGIES !
QQ is becoming the biggest information platform in China with a simple concept:
Keep it easy, keep it powerful, and keep it fun. The firm offers a large range of
adapted online services to target a huge part of the China Internet users. With a
strategy base on the valued ad services QQ had found the way of the success
and the notoriety.
An innovative & simply to use (figure 2.4) QQ users’ distribution
global online platforms
We must recall that positioning is the way a
company wants to be seen by consumers. At its 11,5 %
beginning, Tencent would establish IMQQ as a 9,7 % 35,4 %
major Instant Messenger on the head of Chinese
people. But, face to the IMQQ success and the 8,6 %
growing Internet market QQ had diversified it’s
range of services and involved its positioning.
11,2 %
According to the firm investor factor sheet, QQ is
nowadays providing a “comprehensive range of 23,7 %
Internet […] services” in order to “ fulfill the user’s
needs for communication, information and e- 19-24 25-30 31-35
Commerce on the Internet”. 36-40 Above 40 Under 18
So by developing their products, they are looking
Source : Research Inc
for simplicity, that’s why QQ is easy to use. As
they said they want to fulfill user’s needs so they Main target, the 19 to 30 years old
must have products that respond to every Like we said before, if QQ aims to target at its
Chinese Internet users segment, that is why QQ beginning a specific range of Internet consumers,
has a large product range compared to a Google the IM users, we might think, with an external
or Microsoft for instance. approach, that today all the Chinese Internet
users are the current target of the penguin firm.
Besides, if the design looks like the competitor’s
products, they have sometimes more tools. For Let us comment the criteria which define QQ’s
instance in the IM, the keyboards shortcuts are targets.
more efficient than in windows live messenger.
We can infer that QQ want also to be seen as an First the user has obviously a computer and the
innovative technological firm. Internet in order to use QQ, so the target belongs
to the middle class at least. Then the Internet is
In fact, QQ develop, around its core IM plateform, commonly used by people who have seen the
services based on the successful services of beginning of the era of this new technology, that
western competitors but with a specific approach is to say generally speaking people between 15
to the Chinese needs and culture and within an and 40 years old. But as QQ decided to target
original (vs western firm) business model. This is this segment through a specialized marketing
trough this way that QQ try to implement its strategy, we can divide this segment in many
positioning. parts :
14

15. • The young, students, who are in China or So, if we have to sum up, QQ users (cf figure 2.4)
abroad : They use the basically and generally are people aged from 15 to 40 years old
free services as the instant messenger (specifically the 19-30 years old which represent
services, entertainment. 59%of the QQ users), Chinese most often, living,
studying or working in China or abroad as expats
• The worker, the active person, who use the
or students. But the customers are also
premium version and services such as foreigners – who use the version in English
TENPAY and the IM services too. IMQQ-, with the same criteria as Chinese people,
There is another growing segment we must take and companies (also foreign companies) who
into account. The companies using the Online Ad tries to extend their reputation through this way of
services of QQ to extend their reputation communication.
throughout China such as KFC.
(figure 2.5) TENCENT content portfolio
IM & Community! IM Games! IM
•!Mini Games!
•!IM, Email, Avatars! •!Advanced casual games!
QQ!
•!SMS! •!MMOG!
•!VoIP! •!Network PC game
Advertising platform!
search!
Contents! IM E-commerce! IM
TM!
•!News & information!
•!C2C!
•!Music, movie, radio!
•!B2C!
•!MMS, IVR, CRBT!
RTX!
QQ.com!
More than services, a Online, which is its core business channel, the
community brand offers a large range of 18 services to
Through the years, QQ had developed an answer the Internet consumers needs in
important range of services to answer to an information, entertainment… and built a large and
evolving Internet consumer needs and a fast strong community of QQ user’s. (cf figures 2.5 &
growing market. The firm is now operating in 2.6)
three main lines of business :
As follow some of the mains QQ services :
•Internet value-added service (IVAS)
•Mobile and telecommunications value-added IMQQ : The Instant Messaging services is the
service (WVAS) historical and core service of QQ. With 377 mln
•Advertising service active accounts the first born of the penguin firm
is the leading IM service in china.
15

16. QQ.com : is the largest online in China featuring strategy of this service is also to become an
news, interactive communities, entertainment interactive platform featuring community based
products and widely-used basic services. This results and commenting search results
website is dedicated to becoming a trend-setting commenting options.
and main-stream internet platform with a great
interactivity. PAIPAI.com : is QQ’s online trading platform
which features a lot of products in several major
SOSO.com : is Tencent’s search engine website channels (women, men, online games, digital
launched in 2006. It has became Tencents main products, services …). This service helps QQ to
search engine and is essential to Tencent’s online build a fashionable and trendy brand culture. In a
life strategy. This service provides more than 16 short laps of time (launched in 2006), this service
QQ service map
search services including websites, images, has become the netizens’ most favored e-
music, blog, news and video search. The
QQ service map commerce website.
QQ service map
QQ service map
QQ service map
QQ service map
QQ service map
service map
QQ service map (figure
QQQQ serviceservice map 2.6) QQ sevices Map
QQ
QQservice map
QQ service map services
Internet
service map Wireless services
Internet services Wireless services
QQ service map QQQ service map
Internet services Wireless services
Internet services
INTERNETservices
Internet SERVICES Wireless servicesservices
Wireless
Wirelessservices
Wireless services
QQ service map
Zone
Internet services services
Internet services
Internet services Wireless services
WIRELESSservices
Wireless SERVICES
Wireless services
Internet services Wireless services
Internet
QQ service map Internet services
Q Zone Wireless services
Internet Zone Q Zone
InternetservicesInternet services
Q Zoneservices Wireless services
Wireless services
Wireless services
QQZone Wireless services
QQ service map QQ service map services
Zone Zone Internet
QQ Zone
QQ Zone
QZone
Internet Portal Internet services QQZone Search
QQZone Q QQ
Search Wireless services
Internet Zone
Internet Portal
Internet Portal services Q Zone Search Search WirelessSuper QQ
QQ QQ
services
Super QQ QQ Notice QQ Notice
Internet Portal QQ QQSearch
Search
QQSearch
QQ SearchSearch Super QQQQ
Super QQ
Super QQ Notice
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Internet Portal Portal Zone Zone Internet QQQQQQ Search QQ SearchSuper Super QQ QQQQ NoticeNoticeNoticeNotice
InternetPortal
Internet Portal
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QQ QQ Online StorageOnline Storage
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QQ Show QQ Show Show Show QQ Online Super Super QQ
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QQ QQ Online Storage QQ Mobile QQ Mobile Mobile WAP Mobile
QQQQOnline Storage
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QQ Show Show Online Storage QQ MobileQQ MobileWAP WAP Mobile
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QQGames Arbitrage
Innovation : The interactive entertainment since user can share and comment the music
platform of QQ is the largest online game and discover the hottest music trends.
community in China. Lots of game are available,
from mini games to rich 3D Games like Xunxian.
QQMusic : Is the largest music platform in China
and the leader in providing copyrighted digital
music in China’s intenet field. This service both
provide online and offline music service. The
community also plays a large role in this platform
16

17. QQ Model vs Western Business Model, being of a company. Let’s get have an overview
“Internet Valued Ad Services” vs of the QQ business model vs the western e-
“Advertising” company business model.
In most advanced Internet markets, the only way
When e-firm build their model they should answer
to gather revenues on the Internet seemed to be
3 mains questions :
by using online advertising, in the form of
•How to attract users and build a community?
banners, customization, paid search or paid
(Virality)
listings (houses, cars, personals, etc.).
•How to keep them interested? (Engagement)
Facebook, MySpace and Twitter might be the
•What do users value? How to monetize it?
poster boys of the new wave of Internet services
(Monetization)
but many experts have questioned their business
The last one but not least determine the well
models, mainly base on advertising.
(figure 2.7) QQ Business Model
Personalization, value-added! Interactivity!
Fee-based revenue! Traffic-based revenue!
IVAS! WVAS!
(Internet value-base service)! (Internet value-base service)! Advertising!
Fee-based IM! Fee-based IM!
IM Client-end!
Premium QQ, QQ Xing Mobile QQ
Online identities!
Content-based SMS QQ.com!
QQ Show, Qzone, QQ Pet
QQ Games! 2.5 G!
Search!
Casual, MMORPG MMS, WAP…
Others! Mobile Voice VAS!
SNS!
Dating, e-card, e-magazine… IVR+CRBT
QQ, virtual goods focus The QQ business model is sum up on figure 2.
QQ isn’t quite analogous to the traditional social
For instance the avatar service “QQ Show” is a
network, either, as it’s a conglomerate of
good example of how the company is making
consumer-facing web services. The point is that
money. In it, “QQ users can choose virtual
its revenue model is built into how people use
clothing, jewelry, backgrounds and cosmetics to
their site. Means that the company monetize
customize the avatar they use in services, such
users directly, via digital goods or games, like
as QQ IM, QQ Chat Room, Tencent Community
avatars, dating services, online memberships,
and QQLove.
music and community sites.
The company is seemingly focused on making
The whole amount was paid using QB, Tencent‟s
money from everything but display advertising.
virtual money. With QB, QQ users can buy virtual
17

18. items to personalize their avatar or homepage, QQ doesn’t only use the instant messenger to
pay for online anti-virus software, download films, advertise but also its wide net of services (QQ
play online games, etc. portal, SoSo, Paipai, Game & Music portals).
New products and services are often presented
QB became so popular that it can be used to pay as related content on the different websites and
the services or products offered by other encourage people to click.
providers, for example game points of World Of
Since QQ controls a large virtual communication
Warcraft. The official rate between QB and RMB
channel, it doesn’t advertise much in the “real
defined by QQ is 1:1.
world”. However, QQ also partners with other
1 QB = 1 RMB = 0.146 USD
companies to create cobranded products. Some
7 QB = 7 RMB = 1 USD
of them are for instance Chery’s QQ car, QQ
In 2008, Internet VAS generated 719 million USD,
noodles, QQ candy …
as such 8% of the QQ’s active accounts and
68.7% of Tencent’s revenue. Due to the Let’s take the example of the QQ car : QQ has
increasing user loyalty and stickiness over 3 mln decided to choose products that are not very
USD of donations from QQ users was collected expensive and that users can actually buy.
via the QQ platform. Chery’s QQ is a very cheap car (between 30.000
and 45.000 RMB), so cheap that a lot of chinese
We are not able to explain the success of this people surname it “ernaiche” which means “the
kind of business model at all, perhaps Chinese car that a married man buys to his mistress”.
users like virtual goods more than people in other
places? But the takeaway from QQ numbers
today is that the company is moving faster to
make what appear to be more reliable revenue
streams. MySpace is exploring music, mobile and To see pictures of the cobranded products and
other services for their money-making potential. advertising channels of QQ please visit our
Facebook is focused on experimenting with ads dedicated website on http://imqq.fr/images
that appear in feeds of user activity. Those could
one day prove to be more profitable as well.
Virtual goods revenue is one of many ways that
social networks could prove the value of their
traffic — but at this point, its the most profitable
business model and QQ had well understood it.
From Web to Noodles
First of all, QQ chose an easily recognizable logo,
its mascot: a little penguin. By doing so, QQ
created a strong brand awareness and used the
“cute” factor of the penguin to give a friendly
touch to the communication.
QQ provides monetization spaces which allow
third companies to advertise on the QQ network.
This advertising solution indirectly adverts for QQ
since the client companies often use this as a
selling argument “As seen on QQ”
QQ mainly uses its wide network to launch new
products: Having for instance millions of people
using the instant messenger allows QQ to reach
them in a matter of seconds to launch a new
service with popup screens.
18

19. PART III
QQ
S.W.O.T & PESTEL
ANALYSIS

20. QQ PESTEL &
SWOT ANALYSIS
The Chinese market is influenced by several factors which have an impact on
the demand, this factors include Political, Economic, Social, Technological,
Legal. QQ operates in one of the fastest growing country in the world which also
have a powerful and restrictive government.
PESTEL Analysis
Political aspects Technological aspects
•Censorship in China which restricts the •At the end of 2008, the number of chinese
competitors internet user outpaced US ones. But there is still
a long way to go until saturation, barely ¼ of the
•China yet doesn’t apply the OMC rules on
population is online.
copyright infringement and individual properties.
•The price of computers able to run web based
•China doesn’t really support the internet : All
services has become very low (netbooks from
cybercafés have been closed in china.
Acer, HP or Dell)
Economic aspects •Internet capable cellphones are very common
•Chinese online industry sales is expected to
and inexpensive in China
grow 20%-30% each year from 2009 on
•The number of people able to pay for services Legal aspects
•The chinese law on copyright isn’t very strict.
(including online services) is increasing
Social aspects
•More and more chinese young people feel the
need to use the internet (mobile phone 3G
internet connection are becoming more and more
popular in china)
•For chinese people QQ means “internet”
•Chinese people love games
•For chinese internet users their #1 goal is
entertainment while in the US it’s information.
20

21. SWOT Analysis
QQ is the leading company in china in the instant messaging, online portal,
gaming (…) industry. This huge success is a virtuous circle for this service,
however some negative aspects and threats are still present.
Strenghts Weaknesses
•Advanced payment system which allow 1-click •Almost no international presence
payments
•Structure based on fun/gaming, which isn’t
•The currency QB (QQ’s virtual money) generates adapted to western vision of internet.
a large amount of money and is even used to pay
other services or products from other providers, Threats
•Western competitors which innovate a lot and
even if unauthorized.
could leave QQ lagging behind
•Main websites of China are from Tencent
(QQ,Baidu,Taobao …) •The interest of the younger generation of
chinese people to use western services
•Tencent is seen by the government as the best
•Not focusin enough on businessmen opens a
internet company, the Shanghai Expo 2010
website is powered by the QQ’s founders. large niche to a chinese online professional
network (linkedin-like)
•Having a huge IM userbase makes it easy for
QQ to launch new products
•Very limited global competitors threat due to
internet censorship
Opportunities
•L i m i t e d a l t e r n a t i v e s f o r a f f o r d a b l e
entertainement, since the media industry is tightly
controlled.
•Local competitors (Sina, Sohu and Netease)
didn’t enter the IM market when QQ grew
•Other competitors gave up on IM since they
could not get any revenue from their service
•Western companies like Microsoft and Yahoo
focuse on global strategy and don’t adapt their
goods to the local chinese market.
•Future ability to use chinese characters in
domain names, which will make it impossible for
international companies to compete.
•It will be soon allowed to register new domain
names with chinese characters, so chinese
websites will have a competitive advantage
because they’ll have domain names chinese
people can memorize easily. 21

22. PART IV
AND KNOW
WHAT ?
QQ INTERNATIONAL
DEVELOPMENT

23. A SUCESS STORY
BUT FOR HOW
LONG ?
QQ is a successful business story and has become a real cultural phenomenon
in China. In spite of its undoublty competitive advantage on the Chinese Market,
is this enough to get global ?
Why is QQ so successful entertainment and it’s one of the most valuable
in China ? and monetizable internet sector. That’s why QQ
The 1980s and 1990s generations grew up has developed diversified products adapted to
user needs.
together with QQ, the style of entertainment in
Moreover foreign companies SNS have a hard
QQ has significant influence on them. It’s much
more than a successful business story, it’s a time in China, they have a lot of difficulties to
cultural phenomenon. In Chinese people’s minds, succeed. In fact, China is probably the most
competitive market in the world now for foreign
“QQ” is synonymous with the Internet and online
SNS because of its culture. Foreign companies
chat. Teenagers chatting online use the “Q” to
imply “cute,” as in “You’re so Q!” QQ has are trying to re-use their global strategy to
developed a lifestyle and a new kind of language, conquer China which obviously is wrong.
which is called Words from Mars , it is mainly
We also have to know that in China, Media and
used in QQ chatting and QQ’s Qzone.
Internet are censored. The key objective of the
QQ has largely defined the way that young Chinese Government is the stability whatever the
Chinese people communicate with one another cost. The consequence of this on Internet is that
online, creating by its convenience and its sheer websites are required to get an ICP license
ubiquity a preference for IM over email. In fact (Internet Content Provider) and to filter some
they don’t ask one another for email addresses, politically-sensitive and illegal keywords. Some of
they ask for QQ numbers. It has created a the main competitors of QQ are forbidden in
powerful channel for the viral spread of news and China as Facebook or MySpace. Within this
information, entertainment, and even of brand political context, QQ enjoy a very strong
messages. competitive advantage comparing with foreign
companies.
One of the key of success in the Chinese internet
market that QQ has well understood is the But there is a risk in the future for QQ. The
entertainment. In fact, more than 80 % of political environment will probably change with
Chinese Internet users spend their online time on the entrance of China in the OMC.
23

24. The consequences will be that the government as the same way that today in America the term
could not censor media and internet anymore “google it” or to be “youtubed” is employed.
and the market will be more competitive with the Which means QQ can have a great reputation in
entrance of new competitor as Facebook. foreign countries.
To avoid this risk TENCENT will consolidate his
So QQ is now working with partners in Asia, Italy
position focused on R&D and long term
and the USA to provide services beside the
development and maximize its monetization.
common instant messenger. In Asia Tencent has
There is more to come, despite its incredible
partnered with Ibibo in India by bringing services
Internet influence, it derives only a minor share of
such as game, mail chat. Then with VinaGame in
its revenues from online advertising. Recognizing
Vietnam to bring the QQ Casual gaming portal as
this untapped potential, Tencent is beefing up its
well as the QQ Messenger as an addition to the
advertising team and working on building a
already Vietnamese gaming communities. In the
higher trust in their capacity as an advertising
USA, because of the importance of tools like
platform. This requires notably improving the
Google, Facebook, YouTube or else, QQ
understanding of it with advertisers, as those are
partnered with AOL to bring only QQ Games in
gradually shifting advertising dollars to Internet
this since 2007. Finally, in Italy, QQ has launched
and embrace online communities.
a Italian language version, QQItaly.
Given this political environment and the
Perspective & critical analysis
characteristics of the Chinese internet market, We must not occur that they have a lot of work to
the success of QQ in China is not in danger now
do to catch up the major competitors. Indeed,
and rest with its big competitive advantage vs despite the translation of QQ, Chinese stays the
foreign companies. But QQ succeed only in official language of the interface which makes the
China and has difficulties to conquer the global understanding of the messenger more difficult for
market.
foreign users. For instance, all the added
What is the strategy of QQ to enter and succeed services, which also make the value and the
abroad? strength of QQ, are only in Chinese characters
and language.
International development !?
Although QQ is well-known in China, it has not What are the next step to be able to compete
yet the same reputation worldwide. Besides with other instant messenger services or else? It
South Africa, QQ is mainly not used abroad, but means being known internationally. Google for
it is changing little by little since the creation of instance bought YouTube, so QQ could buy
IMQQ in 2008. The goal is first to enable some new services, or shop for foreign brands
foreigners to chat with the Chinese people and licenses in US, Europe and Japan within the
through this tools of communication, then to be next few years.
able to compete in a significant way with other
instant messenger services such as MSN. QQ could also buy competitors in developed
countries which means smaller competitors and
“ Q Q I n t e r n a t i o n a l w i l l d e v e l o p t h ro u g h implement his technology as they did in India.
applications dedicated to promote the
development of an international community in “MIH India Global Internet, which owns social
networking site ibibo.com, will sell up to 50%
China” M. Violo , QQ Product Manager
stake in five years to China’s Tencent Holding Ltd
First let us take a look at South Africa. QQ has Inc., an instant messaging service provider
owned 36.1% by Naspers.”
been used by people during 3 years, a local
music band even titled one of their song«QQ me»
24

25. “This partnership allows us to benefit from
Tencent’s expertise in providing Internet and
mobile value-added services, as well as online
advertising services,” said Ashish Kashyap, chief
executive officer at ibibo Web.”
“The deal is our initial attempt to explore
opportunities in an emerging market,” said
Catherine Chan, a spokesperson for Tencent
Moreover, as Tencent is currently ruling the roots
in Asia, they could benefit from the others who
may want to join the market by process already
tested in other industries.
❖ So they have not really adapt the product, in
fact they only do the translation of the main
interface. The added value services remains in
Chinese.
❖ They have to enter in a market by adapting
the most relevant service, gain reputation and
then extend their range of services.
❖ They should develop in the Developing
Countries Market
25

26. NOW
WHAT ?
QQ is a well established internet company in China providing a wide range of services and
entertainment solutions. Moreover its close link to the government allows Tencent to have a clear
competitive advantage since the most important international competitors are banned in China. The
logical next step for this company would be to conquer the global internet market. Doing
so isn't expected to be simple, however with the number of emerging markets (India, Brasil,Russia,
Africa ...) and QQ's adapted business model this could be a clever step of the company.

27. SOURCES
www.tencent.com
http://www.imqq.com
www.wikipedia.com
http://www.mercurybrief.com
www.web2asia.com
www.plus8star.com
www.techcrunch.com
www.mashable.com

28. THIS CASE STUDY
WAS PROVIDED
BY THE
MAOCHISTES
TEAM
http://imqq.fr/
The Financial Men The AD Men The Geek The e-Men Charlie
Jaafar Bennani Robin Garabedian Morgan Denis Laurent Igolen Johary Ramariason

29. QQ