Businessmodel of Tencent

Customer Segments

Tencent has a segmented market business model, with customer groups that have slightly different needs. The company targets its offerings at consumers and businesses.

Value Proposition

Tencent offers three primary value propositions: innovation, risk reduction, and brand/status.

The company embraces innovation as part of its culture. More than 50% of its employees work in research and development. Also, it maintains patents for technologies in several areas, including eCommerce, instant messaging, search engine, online payment services, gaming, and information security.

Lastly, it invested over RMB100 million to set up the Tencent Research Institute, China’s first Internet research institute, which has campuses in Shanghai, Beijing, and Shenzhen. The program engages in the development of core Internet technologies for innovation purposes.

The company reduces risk through high safety and security standards. It uses the following strategies to protect intellectual property on its network of platforms:

• Reminds visitors to respect IP through user agreements, notifications, and announcements
• Operates an automated monitoring and integrated IP protection system that monitors for infringement around the clock, investigates and gathers evidence of infringement, serves takedown notices, and creates infringement reports
• Proactively deals with infringement through deletion, filtering, and removal of URLs
• Works with law firms across China to document, collect, and preserve evidence of infringement on all prominent Internet and mobile platforms
• Works with other Internet companies, media companies, and intellectual property rights holders to combine strengths to fight infringement
• Maintains a team of dedicated IP enforcement attorneys

• Enforces IP rights through a multi-pronged approach that includes administrative actions, civil litigation, industry alliances, and criminal prosecution The company has established a strong brand due to its success. It is the largest online services provider in China. Its portfolio features many top properties, including the following:

• QQ:com, China’s largest portal in Chinese, which offers news, entertainment products, interactive communities, and basic services. As of July 2016, it had 899 million monthly active user accounts.
• Weixin/WeChat, the world’s fastest growing social app. As of 2016, it had 864 million monthly active users. Lastly, Tencent has over 700 clients, including many Fortune 500 firms such as Coca-Cola, Procter & Gamble, IBM, HP Samsung, Intel, Ford, BMW, Toyota, and Nike.

Channels

Tencent’s main channel for consumers is its website, while its main channel for businesses is its direct sales team. The company promotes its offerings through its social media pages, advertising, and participation in road shows and conferences.

Customer Relationships

Tencent’s customer relationship is primarily of a self-service nature. Customers utilize its services through its platforms while having limited interaction with employees. That said, there is a personal assistance component in the form of phone and e-mail support.

Key Activities

Tencent’s business model entails designing, developing, and maintaining its platforms for customers.

Key Partners

Tencent’s key partners are content providers that provide material for its platforms, as well as various online and mobile service providers with which it has formed collaborations.

Key Resources

Tencent’s main resources are its human resources, who include the computer engineers and scientists that design, develop, and maintain its platforms.

It maintains important physical resources in the form of its network of Tencent Research Institute campuses; a research and development center in the Chengdu Hi-Tech Industrial Development Zone; and a data and R&D center in Tianjin’s Binhai Service Outsourcing Industry Park. Lastly, it places a high priority on its intellectual property.

Cost Structure

Tencent has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is cost of revenues, a variable expense. Other major drivers are in the areas of sales/marketing and administration, both fixed costs.

Revenue Streams

Tencent has three revenue streams: revenues it generates from value-added services, revenues it generates from online advertising services, and revenues it generates from other services.