Q+ seeks to cement Tencent position
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Tencent, China's largest Internet company, is adding an array of enhanced services to its core QQ instant messaging site after data showed the amount of time users spend chatting online is slipping.
Tencent unveiled its Q+ desktop software last year, offering online video streaming as well as Tenpay online payment systems and other third-party platforms to its QQ messaging product. The company is also forging partnerships with film producers and online travel agents.
Tencent is merely swimming with the tide. The rise of social networking sites and online shopping platforms such as Taobao, Dangdang and 360Buy has prompted Internet portal operators like Tencent and Sina to attract users by offering a wider range of services.
"Launching Q+ is the result of our internal evolution of the QQ product because we realize that user time spent on instant messaging has been declining over the years," said Xiong Minghua, chief technology officer of Tencent.
QQ users will be able to share their applications with their friends. For example, viewers will be able to repost the link of their favorite movies on Qiyi, a joint venture between Baidu and United States venture capital firms, to their friends on QQ with several clicks.
Eying tablets
Tencent will also allow third-party software producers access to its core functions, such as file sharing, audio and video chatting.
The company said its next step will be to expand the web-based QQ service to tablet computers like the iPad, and a similar service will also be introduced to mobile phones later.
"Tencent has a stable social relationship circle consisting of more than 600 million QQ users, and third party software developers will benefit from the huge user base and interactivity between users," said senior researcher Li Zhi at Analysys International.
Tencent hopes to promote the whole Internet industry by fostering smaller and independent software developers, and similar platforms are expected to emerge in the next three to five years, she added.
In December, Tencent set up the Tencent Collaboration Fund to invest 5 billion yuan (US$770 million) over the next few years to foster third-party service providers and smaller start-ups and introduce their products to the vast user base on QQ.
Last month, it said it will inject US$84.4 million into online travel booking website eLong to become its second-largest shareholder.
Shares of eLong soared more than 50 percent after the announcement amid investor optimism about the huge business potential Tencent is tapping.
Shares surge
Tencent's shares, listed in Hong Kong, have surged 29 percent since the beginning of this year to HK$221 (US$28).
The company has also spent 450 million yuan to become a shareholder in the country's biggest listed filmmaker, Huayi Brothers Media Corp, in order to meet growing demand for higher quality films and online videos.
Under the partnership, Tencent will be in a better position to combine the traditional filmmaking industry and the new media sector, analysts said.
The strategy reminds some market watchers of Baidu's "cloud computing technology" that enables users to play small web-based games on Baidu's search results pages as they surf other Internet-based services daily.
Tencent's move is more radical than Baidu's because you don't even need a browser to enter the address of a webpage. For the new Q+ widget, you don't even have to open the web browser; you just need to run the small application from the desktop.
Tencent is by no means the only company striving to develop an open-platform strategy.
Last year, China's largest online shopping platform Taobao.com said it will invest 300 million yuan in the next three years to subsidize and support third-party software and service providers and to turn website into a platform that includes an array of services used in everyday life.
Earlier, companies like social networking site Kaixin001, have also introduced third-party game developers to their platforms. That strategy suffered, however, from a lack of a blockbuster application or games big enough to hold users for a long time on the platforms.
"Although a vast user base provides us a solid foundation to capture emerging opportunities, we still face major challenges and intense market competition as major companies are all diversifying their businesses and stepping up investment efforts in various sectors," Tencent said in its 2010 annual report.
"Third party software developers will be able to save a lot of marketing efforts to reach out to users and will enjoy high user growth if they deliver a good product because we have a huge user base at QQ," Tencent's Xiong explained.
"Tencent has received hundreds of applications to launch services on the Q+ platform, and we are looking for the ones that will provide the best services of their kind in this initial phase," said Yin Yu, general manager at the Instant Messaging Product division of Tencent.
The first batch of about 20 of the new applications will be launched on Q+ in July, according to Yin.
Still, some fear that Tencent's open platform will leave little space for smaller and independent service providers.
For users in second- and third-tier cities, Q+ may eventually become their dominant operating system because its size and scope.
Analysts seem to agree that Tencent's open platform strategy will succeed only if the company is careful about choosing third-party collaborators and only if it's willing to share resources with other parties to make the whole industry more prosperous and diversified.
One thing is certain. Competition in the domestic Internet industry will most likely take place in niche markets instead of among dominant positions because major players like Sina and Tencent have already set their footprint in every possible place of the sector.
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