Saturday, 25 December 2010

Tencent to Copy Features of Facebook to China



Tencent, which operates QQ, the world's largest instant messaging tool, is ongoing to offer users links to third-party websites and access to externally developed applications, mirroring some features of Facebook. QQ, the very basis of its business, started as an outright imitation of ICQ, AOL's instant messaging tool.

Tencent's president, Martin Lau said to FT in a rare interview that the move would change the way China's largest internet company by revenue makes money.

About 10 third-party applications to run on QZone are under test by Tencent. It is also testing several external websites that users could link to in the way Facebook members can link to other sites with the "like" function.

At the moment, fewer than 10 other sites are taking part in the tests, "but we want to take it to five to 10 times that in the next six to 12 months," said Mr Lau. The announcement comes as the company scrambles to repair the damage from a fight with Qihoo 360, a local antivirus software provider. Last week, Tencent stopped allowing users to log on to certain services if they also had 360 software on their computers.

The fight began when Qihoo 360 accused Tencent of letting QQ software scan its users' computers for personal data, and issued tools to block QQ components.

"Tencent is the Microsoft of the Chinese internet," says Wallace Cheung, an analyst at Credit Suisse. "They have created a platform they can use to push their own products only and squeeze others aside, just like Microsoft did in the late 90s, for example when they pushed aside Netscape with Internet Explorer."

"We were also criticised for doing a lot of things in-house, so that smaller companies are not able to grow as quickly as they can in the US," Mr Lau said. "So as a positive step, we want to lead the industry to develop into a richer ecosystem."

Up until now Tencent has focused on selling an ever-growing array of products such as online games and virtual goods to its more than 600m QQ users. Mr Lau said Tencent would share the revenues generated by the third-party applications with their developers and expected the traffic to other websites to generate a new advertising business.

In the beginning, Tencent expects most third-party applications to be games, but other applications will grow. "The non-game applications will generate the traffic, and we can provide an advertising platform to help them monetise, and share revenue in that process," Mr Lau said.

One of Facebook's revenue sources is a system for targeted ads. Tencent is eyeing a similar business. "Targeted ads in China are still not very well-developed. But if we take a five-year perspective, then I think the opportunity will be there," Mr Lau said.

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