Tencent: Rise and hubris

Lulu Yilun Chen's book takes a detailed look at the Chinese digital giant's birth, its rise, and market battles

Influence Empire: The Story of Tencent & China’s Tech Ambition 

Author: Lulu Yilun Chen 

Publisher: Hachette 

Pages: 214 

Price: Rs 699

Most people interested in business, and particularly technology business, would have heard of Tencent, the Chinese digital giant and its flagship product, the mobile app WeChat. Tencent’s great rivalry with Alibaba for dominance of various digital ecosystems in China often made news even outside that country.

Tencent’s founder, the reticent billionaire Ma Huateng, who goes by the English name of Pony Ma, has also been featured in the Western press with his arch-rival Jack Ma (no relation), the founder of Alibaba and Alipay. But unlike Jack Ma, who quite relished media attention and rubbed shoulders with global business celebrities till he was cut down to size suddenly by the Chinese government, Pony Ma preferred a low-profile and remained largely on the right side of the authorities, though he, too, has been rapped on his knuckles recently.

Very few except those who avidly follow global digital technology firms closely would know the extent of Tencent’s global influence though. The firm is a major investor in a range of highly popular games — Clash of Clans, Call of Duty, Fortnite and others. It is also a big stakeholder in Tesla, Snapchat, Reddit, the ride hailing app Didi as well as dozens of other global and Chinese digital businesses. It also has fingers in several other digital pies, including fintech, e-commerce, cloud services, and entertainment.

Lulu Yilun Chen has reported on finance, banking and technology in China for Bloomberg for years. Her knowledge of the region’s tech landscape is encyclopaedic. Her book is probably the first detailed look at Tencent’s birth, its rise and market battles, and its recent problems with Chinese regulatory authorities. It is also a fascinating glimpse of the changing economic and technology landscape and the regulatory environment in the country.

The book is divided into two sections — The Origins and Tencent Unbound. The first provides a glimpse of the early days of the Internet in China as well as Tencent’s stumbling journey as it tried to make a place for itself. Pony Ma was a tech nerd and with three friends he started Tencent. Its first big hit was the instant messaging platform QQ. The firm got some venture funding — from IDG and PCCW, the Hong Kong conglomerate— in 2000.

Pretty soon though, Tencent ran into trouble. The bursting of the first dotcom bubble in the US shook every big and small technology company across the world. Pony Ma was running out of money and found it hard to attract new investors. The founders tried selling the company to some of the bigger internet portals in China at that time but no one was interested. Fortuitously, an Englishman named David Wallerstein who represented Naspers and was scouting around for interesting Chinese start-ups in the internet space turned up at the nick of time and offered Tencent some funding.

The Origins section is interesting because it shows how Pony Ma’s ambitions initially were quite limited and it covers Tencent’s early growth as a fast copycat in the digital realm, not an innovator. It often bested rivals with better technology because it understood its users better. It also could take decisions quicker and hit the market rapidly unlike Western giants like Microsoft which had to take clearances from headquarters. Also, the Chinese government’s insistence on having servers and data within the country helped it and the other Chinese start-ups.

But it is really Tencent Unbound that tells the story of the epic battles the company fought with Alibaba for control of different digital arenas. The two Mas also squared off while investing in promising start-ups. They had different philosophies. Jack Ma preferred to exert significant control over the direction of the start-ups that Alibaba invested in. Pony Ma gave the start-up founders plenty of space and freedom and offered WeChat as the means of popularising their services. Indeed, WeChat, which is often compared with WhatsApp, has gone far beyond any social media platform — it has grown to a super app with an embedded ecosystem that offers a plethora of services.

Though Pony Ma was always careful to keep on the right side of the authorities, he couldn’t escape the regulatory backlash in the long run. Chen’s analysis suggests that Xi Jinping is not very comfortable with the power that the tech billionaires have accumulated. Jack Ma’s public pronouncements and his criticism of the Chinese financial regulator triggered swift action. After putting him in his place, the authorities went after Didi (the ride hailing service) and the digital coaching firms. Though Pony Ma never got into a direct confrontation with the government, the authorities grew worried about the firm’s immense and growing influence. The government needed to send him a message that no one was untouchable.

How the Tencent story — and indeed that of the other Chinese internet giants and their billionaire founders — will progress after the authorities have chastised them will be interesting to watch. One hopes Lulu Yilun Chen will chronicle it in another book after a few years.