Ten years ago, Ma Huateng felt deeply wronged for the charge of "Tencent’s Monopolization":
"Monopolization is an annoying charge, but sometimes it is just a hypothetical charge."
Ten years have passed, do people still think that Tencent is a monopolized company? When I collected your questions about Tencent in the last episode of DannyData, the one that got the most likes was: "Will Tencent become a monopolized company?" It seems that Ma Huateng needs to explain more.
And I predict that 10 years later, the criticism of Tencent's monopolization will still be there. Let’s see then if Old Danny is a prophet or I have to eat my own words again.
In this episode, I will answer the question in three aspects: Will Tencent become a monopolized company?
I'm Danny, I talk about tech and cars. As usual, all information used in my video is authentic and first-hand. You're welcome to disagree with my arguments, but don't doubt my sources. Well, what I mean "disagree with my arguments" is that I welcome a rational debate with facts and data, but if you are a devil’s advocate, then you must be right.
I know that many of you are waiting for a conclusion: "Danny, just tell us whether Tencent is a monopolized company." Sorry guys, I can't give you a simple and rough conclusion, but break the question into three small ones:
1. What does Tencent monopolize?
2. What does Tencent not monopolized?
3. Will Tencent monopolize on anything in the future?
Why do I talk from three aspects? This is just like you asking me: "Is Michelin-starred restaurant good or not?" Michelin-starred restaurant has French cuisine and also street sirloin. There are specialty dishes, but also token dishes. Whether Tencent is a monopolized company may be a more complicated question than whether food in a Michelin-starred restaurant is delicious.
So, the first point: what does Tencent monopolize?
Let me first give a point of view that might be repellent to you: people don't have to criticize monopolization too harshly.
Some of you may disagree with me: "Monopolization should not be criticized? Do you support dictatorship, Danny?" Hold on, don't get me wrong. Please let me explain why not to criticize monopolization too harshly. There are two reasons.
The first reason, the monopolization dispute is a dispute over the defined scopes. Pay attention to the keywords: the defined scopes.
For example, your class teacher has a monopoly on authority in the scope of your class; your mother has a monopoly on financial management in the scope of your family; you have a monopoly on time management in the scope of yourself.
Similarly, when discussing whether a company is monopolized, it is also necessary to define the scopes: what does it monopolize?
For example, if the scope is global search engines, then it is monopolized by Google. If the scope is technology products, then Google is not a monopoly.
Another example is the criticism towards Microsoft for monopolization when it forced manufacturers to pre-install its IE browser and media player. Actually, this is also a dispute over the defined scopes. Microsoft argued that the IE browser is a part of the Windows system, and other companies like Netscape sued Microsoft that the browser is independent and cannot be bundled.
As such, many issues are disputes over the scopes, just like in the previous video I debated with Lao Jiang. You can watch it if you are interested.
So what exactly does Tencent monopolize? If your scope is "Chinese Internet social products", then Tencent is a monopoly. You can see from the visualized data in DannyData that the monthly active users (MAU) of WeChat in the first quarter of 2020 has reached 1.203 billion.
The second reason is that many Internet businesses require an oligopoly. In other words, the winner takes all.
For example, the underlying application of the Internet, social networking, is a winner-take-all business. Facebook is the winner in foreign countries and Tencent is the domestic one. The rationale behind is Metcalfe’s Law:
"On the Internet, when the number of nodes or the connections between users increases, the effect caused by these connections will increase exponentially. That is, the total transaction opportunity of the network is proportional to the square of the number of nodes based on the Internet."
To put it bluntly, every one more member in your family uses WeChat, the effect is not linear but exponential growth. You can simply understand as 1+1>4, which means that when you and your friend exchange information, the two of you not only obtain the information about each other but also spark new information.
In fact, Tencent not only has a monopoly on its core business social networks in the Chinese market, but also on WeChat payment, and even on online game segments that involve social elements, etc.
The key point is to define scopes.
As Yu Jun said in "Product Methodologies":
“Monopoly not only exists whenever there is an exclusive monopoly or oligopoly of market share because a product has its contextuality. As long as it can leave users with no choice in any scenario, a local monopoly will be formed.”
For example, your scope is (mobile device) PUBG-like game, Tencent's "Game for Peace " and "Fortnite" are monopolized; if your defined scope is FPS games, Tencent's "Crossfire" and "Call of Duty" are monopolies. Please raise your hand if you have played these Tencent games.
The game market is a very typical monopoly market. Therefore, the critical business that Tencent needs to lead is actually to monopolize.
What is the critical business of Tencent?
We can analyze the underlying logic of Tencent's business from its revenue structure. Tencent's revenue structure includes five parts, social networks, online games, online advertising, Internet finance, and business services and others. The former four services provide 99% of the revenue.
The majority of revenue comes from the social network and online game, collectively referred to as value-added service revenue in Tencent's earnings report. It occupied 58% of overall revenue in the first quarter of 2020.
Let's analyze it further, you can learn from this gear diagram:
You could see this picture is long and wide. The blue gear in the middle represents the social network. It is large and round. The five small gears graphics around it are online games, media, financial technology, cloud services, and utilities. So Tencent's underlying principal business is still based on the social network, and Tencent social network is a monopoly in China.
Speaking of social network, I would like to say a few more words. Everyone knows that short videos, like TikTok and Kuaishou, are growing very fast. Do you think that TikTok and Kuaishou are big threats on Tencent?
I've noticed that some people claimed that TikTok and Kuaishou only have impact on a small part of Tencent interactive entertainment. In addition to short videos, Tencent interactive entertainment also has long videos, games, music, and text, etc. Do you agree?
Anyway, I cannot agree with it. I think that the short video of TikTok or Kuaishou not only affect a small part of Tencent interactive entertainment business but also two larger parts of Tencent's business.
Let's talk about the first part. TikTok and Kuaishou have shaken the foundation of Tencent's social network. Video socialization will be a future trend.
Like the overseas young people are using Facebook less and less, even the more trendy Snapchat, a "self-destruct" photo social platform, has also been attacked Now, a stranger-based video social platform like Monkey has been created for Generation Z. In the future, I will invite the founder of Monkey to talk on the DannyPal program.
You could look forward to it.
I agree with what Luan Pan said in the article "Tencent Has No Dream":
TikTok and Kuaishou's "algorithm + short video + open relationship" product raid his social base and opened a new path outside the scope of "acquaintance communication + closed relationship”, which Tencent has dominated more than ten years.
And the transfer from text to the video must be a general trend. There will be a large number of WeChat Official Accounts' authors gradually turn their way to various video platforms.
And here I have to say something about the staff of Tencent Video. DannyData started uploading videos six months ago, and around 6-7 different operating staff of different platforms have contacted me, and they all belong to the Tencent Video Department.
These platforms include but not limited to Tencent Video, Videl Channel, QQ Video, and Tencent Technology Channel, etc., I can sum up this experience in two words: "Chaos" + "Superficial." I know many content creators will agree that if Tencent keeps on doing this, it will only lose more and more content creators and push them to join other video platforms.
Next, TikTok and Kuaishou have shaken the second largest part of Tencent.
If we only look at the daily volume and daily user duration of Chinese Internet products, the top two are Tencent and ByteDance. Put simply, Tencent and ByteDance's products are seizing your time. For example, in the official announcement of TikTok as of January 5, 2020, TikTok's daily active users have exceeded 400 million.
Xiaolong Zhang once said that he hopes that users will "leave after using" on WeChat. At that time, WeChat was in a monopoly position and everyone could not live without it. Plus, it had no strong competitors in sight. It's like a billionaire saying that s/he doesn't want his/her house to be too large. But now products such as TikTok and Kuaishou have occupied a lot of users' time. WeChat still needs to launch Video Channels, Video on Moments, etc. to meet the challenge?
As the first batch of content creators invited to the WeChat Video Channels, I am not optimistic about its current development. That will be discussed in detail later when I talk about the short video.
Because of the strength of TikTok, which in turn affected Tencent's advertising revenue. From the first quarter of 2019 to the present, Tencent has experienced a decline in revenue from the first quarter of 2019 to now, either in online advertising or media advertising.
Although Tencent has always attributed the decline to the objective macro-environment. Doing this for the first time is acceptable, but saying the same thing for five consecutive quarters is Tencent's fault.
In fact, everyone knows that the real reason is that competitors' videos have a significant and negative impact on Tencent's advertising revenue.
So, I said that TikTok and Kuaishou directly attacked Tencent's foundation. The direct impact is on the advertising revenue. To be frank, ad sponsors like to ditribute ads on TikTok and Kuaishou but not on WeChat.
After talking about what Tencent has monopolized, let's move on to the second point, what does Tencent not monopolize?
In order to analyze Tencent's monopoly better, here we will introduce Danny's Four-quadrant Monopoly Model.
The horizontal axis of the model indicates whether it is easy or difficult to monopolize, and the vertical axis demonstrates whether it is easy to change or difficult to change. Difficult and easy mentioned here are relative.
For example,the upper left corner quadrant of the model represents difficult to change and easy to monopolize, the typical representative is the tobacco, wine and oil industries.
Although I have done some consulting projects in these industries and have a certain understanding, I will not talk about it in detail in DannyData's video. Everyone knows why these industries are difficult to change and easy to monopolize.
After all, they all are big taxpayers, and these are not the industries where Tencent is involved in. These industries leave no entrance for other companies, even Internet giants such as Tencent cannot get in.
As for the quadrant in the lower left corner, it means "easy to change + easy to monopolize." The typical example is the core business of Tencent that I mentioned earlier. It includes social network, payment, games and so on.
Compared with "tobacco, wine and oil", these businesses are easy to change. For example, every several months, there will be huge changes for games, and every few years there will be huge changes for payment and social network. The reason for "easy to monopolize" was also mentioned in the previous point, because the network effect caused by Metcalfe's Law naturally formed a winner-take-all situation.
The upper right corner of the Danny Four-quadrant Monopoly Model refers to difficult to change and difficult to monopolize, where Tencent has no monopoly in my opinion.
The typical example is the Industrial Internet repeatedly emphasized by Ma Huateng in recent financial reports:
For example, Tencent has empowered some traditional industries through WeChat Mini Programs. What you are more exposed to is when eating out in restaurants. By scanning the barcode on the table, you can make an order and pay the bills. And this has improved the overall efficiency of the catering industry, and the consumption records can also be traced back.
This is a manifestation of the Industrial Internet. Besides, in the past few years, the chain restaurant industry has gained popularity in the investment circle. This doesn't necessarily because the food of these brands is delicious but because the existence of WeChat Pay and Alipay makes the consumption records traceable, and rebuilds the business logic of the entire franchise system.
This will be discussed in detail later when I talk about mobile payments.
To be honest, if you are a businessman, and there's an opportunity that allows you to monopolize, will you refuse it? I believe that the vast majority of businessmen will certainly not refuse, because monopoly can produce excess profits.
The upper right corner of the Danny's Four-quadrant Monopoly Model is not monoplized, not because Tencent is not willing to do so but for the following two reasons.
The first reason is Tencent's own reason that Tencent does not have enough energy.
Even Ma Huateng himself can't tell how many products does Tencent have, and which one is competing with Alibaba's products. There are also some cases where Tencent started too late or does not have "genes". Such as Tencent's investment in Jingdong, Pinduoduo, Meituan, and even Bilibili. Tencent has developed similar products but failed, so it can only recruit its former little rivals to fight against the bigger Boss. Who is the big Boss? Type it on the screen.
The second reason is that the characteristics of these industries themselves are difficult to monopolize and do not have the effect of winner-take-all.
For example, the offline supermarkets. No matter how hard Tencent tries to monopolize the entire market, nobody will care whether the grocery market is opened by Tencent, nor join a family grocery squad. It is because the characteristics of this industry are scattered and difficult to monopolize, so Tencent can only enter the game by investing in first-line players.
As Ma Huateng said:
"It is necessary to find a blue ocean of development in some cross-border areas where exist intersection and integration. In other words, the market segments in market segments."
For example, Tencent took a stake in Yonghui Supermarket, and in 2018 Tencent almost took a stake in Carrefour with Yonghui. However, Suning intervened. This will be discussed in detail when I talk about Suning.
Therefore, Tencent has invested in first-line players to enter the “difficult to monopolize and hard to change” industries. And it has empowered them through the lower left corner of the Danny Four-quadrant Monopoly Model, such as WeChat payment and Mini Programs based on WeChat, to help them improve efficiency. At the same time, Tencent can also share a piece of the pie.
If you still can't tell the difference between the lower left corner and the upper right corner of the Danny Four-quadrant Monopoly Model, Yu Jun has a formula to help you understand:
User Value = New Experience - Old Experience - Replacement Cost
You can simply understand that the lower left corner is a "pure Internet" product, and the upper right corner is an "Internet +" product.
The key to the “pure Internet” product in the lower left corner is the “replacement cost”. With super imitation capabilities, various Internet products will soon narrow the gap between new experience and the old experience. For example, Lei Jun's MiChat launched a month earlier than WeChat.
Is there any function of WeChat that MiChat can't do? The answer is not. The key is the replacement cost. When your relatives and friends all use WeChat, that is, the replacement cost is particularly high. Even if the new experience of MiChat is very well, the replacement cost is so high that the overall user value provided in MiChat is too low to persuade users to give up WeChat and use MiChat.
But, if you take advantage of the technological revolution and develop an unprecedented product like TikTok or Kuaishou. Plus, the product has no old experience but only good new experience, and there's not much cost of entering another battlefield. Thus, the user value provided will be high.
The replacement cost of "Internet+" products in the upper right corner is often relatively low, which is what I refer to as "difficult to monopolize".
The feature of this industry is the difficulty for one company to dominate."Hard to change" is means the addition of "Internet + traditional industry" can hardly be overturned, compared with "pure Internet" products. The key is the difference between "new experience - old experience", such as Amazon Go, the unmanned supermarket launched by Amazon. The detail will be discussed when I talk about Amazon later. Are you guys interested?
Kevin Kelly mentioned in his new book New Rules For New Economy: Ten Strategies for Network Economy:
"The fastest way to increase the value of the network is to introduce some of the remaining small networks into your network so that this network assembly can operate in the form of a larger network."
Tencent has been introducing more and more small networks into its social network through WeChat Mini Program, WeChat payment and other means, thereby consolidating its position as the Chinese social-life leader.
In other words, Tencent makes money through its main business as its capital, leverages stock and bond financing, focuses on investing in head start-ups, and enables value-added business through its channels.
好了，这下你搞懂“丹尼四象限垄断模型”的左下角和右上角了吧，你可能还会纳闷："hold on, hold on 小丹尼你还没讲右下角“易改变+难垄断”的是什么呢？"
Well, now you understand the left lower corner and right upper corner of Danny's Four-quadrant Monopoly Model.You may wonder: "Hold on, hold on. You haven't yet talked about what's in the right lower corner, the 'easy to change' and 'hard to monopolize'."
Don't worry, here's my third point: Will Tencent monopolize on anything in the future?
There is a "routine" question in the investment circle: "If Tencent or Alibaba also did what you are doing now, what will you do?" Dai Yusen gave a wise entrepreneurship strategy, simply summarized, is to fight guerrilla warfare first, doing business in those areas that the Internet titans misprised or ignored, and then defend, and finally meet them head-on.
I've already analyzed PDD in previous DannyData video and I will talk about Kuaishou later. Both of them have done their business following this pattern.
Above is about the entrepreneurship strategy and I will add one more direction for starting a business.
It is actually very simple. The direction lies in the lower right corner of the Danny's Four-quadrant Monopoly Model, the "easy to change" and "hard to monoplize" area.
You can think about it now: Which industry is easy to change and difficult to be monopolized by giants? The two are indispensable. Figuring this out and the opportunity will reveal for the ordinary entrepreneurs like us.
Although Tencent has already covered a lot of fields, the charm of the Internet is its fast-changing speed. The changing point is not only the new business direction that entrepreneurs need to pay most attention, but also the point where giants are most likely to be short-sighted.
As Zhang Yiming once commented on Tencent:
"You should flyover if you're on a very promising and very long runway. It should invest all its profits to a deeper and large-scale level. Tencent and Baidu could have achieved greater success. They are relatively short-sighted."
Let's answer my question: Will Tencent monopolize on anything in the future?
First, our old rules: defining the scope. We will talk about Tencent’s most critical business, WeChat and QQ.
I think Tecent has a big crisis in the social network domain.
First of all, WeChat has a MAU of 1.2 billion. The Chinese market is basically saturated, but at least the MAU keeps growing slowly. It seems that the crisis is not big. However, the room forgrowth has been very limited, since Facebook’s status is difficult to shake in the global market.
At least, we can not count on WeChat, which is similar to the Facebook product line, to shake Facebook. As we often say, "Another WeChat cannot overthrone WeChat." Tencent's current breakthrough in the global market relies mainly on games and investment. Tencent is the world's largest game company.
The greater crisis of Tencent can be observed from another top social network tool QQ.
Why do I say that QQ could reveal a bigger crisis?
As you can see from the visualization of DannyData, the data that Tencent is still publishing is that the monthly number of active accounts of QQ mobile terminals is 690 million, down 1% year-on-year.
It seems to be okay. You may refute me: "This is only a 1% year-on-year decline. Are you being an alarmist?"
Although there is not much decline in QQ's MAU year-on-year, note that this is only the MAU of mobile terminals, not the overall MAU of QQ. In fact, Tencent no longer announces the overall MAU of QQ since the fourth quarter of 2019, so I expect the overall MAU of QQ declined more.
This is similar to what I said in the previous DannyData video about Apple. For those non-required data, listed companies often stop publishing them as long as the downward trend is noticed, such as Apple’s previous iPod and iPhone sales figures and the MAU of QQ.
This change can only be noticed by those who have been following this company's earnings reports for a long time. Otherwise, all you'll see is good news. Following the financial reports in the long-term to help you read more objective data is one of the values that make us DannyData.
The decline in the overall MAU of QQ will have a much bigger impact on Tencent. We all know that "the old only use WeChat, the young use QQ". As the younger generation swipes more and more videos, I'm skeptical that Tencent will be able to reign supreme on social media.
Tencent itself has certainly known about this crisis, as Ma Huateng said many years ago at the WE conference：
"The giant remains warm when it falls."
So Tencent has to rely on investment to lay out its future, and it has invested in 700 companies back in late 2018.
Liu Zhiping revealed at Tencent's annual investment conference in early 2018 that the value added by Tencent's portfolio companies had exceeded the market capitalization of Tencent itself.
But investment can not solve all the problems of the future layout. Tencent is most afraid of those companies that it cannot invest in, such as Bytedance, Alibaba and those foreign Internet giants.
I agree with a comment made by Zhang Yiming:
"In the beginning, each company was competing in some old battlefields or transitional sites and didn't look forward. Now it seems that the APP stores, the PC, the traditional search engine business, etc.
are all transitional battlefields, and they are too obsessed with the old battlefields or old things. It's the same now. They're turning back to compete with Toutiao, and this may attract their attention on viewing new things."
I think the future will definitely turn into the era of virtual video social network where virtual characters communicate in a virtual world, which is similar to the movie "Ready Player One." Facebook acquired Oculus for $2 billion back in 2014 and launched Facebook Space in 2017, which is a VR app to use with friends in a virtual space.
VR and AR are not widespread among the general public,t this is not a problem with video socialization per se, rather a lack of infrastructure and a lack of a dominant app like WeChat in the mobile internet era. Plus, our main interaction device, the mobile phone, is still not powerful enough.
If the transition to the era of virtual video social network, the natural transition is using a video platform like TikTok or Kuaishou rather than a chat tool like WeChat, which is dominated by voice, texts, and pictures. Plus, Tencent is continually losing young generation users on social networking, and this also contributes to Tencent's crisis that I mentioned.
Tencent dropped Tencent Weibo back then, which had a daily activity of 87 million. Not capturing celebrity resources as Weibo did, but there are small-town youths. In the second half of the mobile internet competition, Pinduoduo and Kuaishou both started from a sinking market. But Tencent gave upon Tencent Weibo and also these small-town youths.
And now, Tencent is only able to counterbalance Alibaba by investing in Pinduoduo and Kuaishou. In fact, if Tencent Weibo hadn't given up on these small-town young users back then, instead of betting on e-commerce by investing in Jingdong and Pinduoduo, or trying out short videos on Tencent Weibo,Tencent probably won't be so passive at present.
But history cannot be assumed. Chen Lin, head of product at Toutiao, once commented:
"Dropping Tencent Weibo and Weishi are two big mistakes Tencent made."
And I agree.
To make a recap, I covered the following points today:
1、What does Tencent monopolize?
2、Tencent did not monopolize what?
3、Will Tencent monopolize on anything in the future?
Having talked about Tencent, it's time for what I want to talk to you about most: my values.
My fellow viewers know that I talked about dialectics in the last few episodes. To put it bluntly, "refute as I wish", or "I refute myself". So today I'll refute myself once again: I talked so much about Tencent's monopoly in this episode. in fact, it's not very meaningful. And I also hope that you can take Zhang Xiaolong's famous words to watch DannyData's video:
"What I've said is all wrong."
In fact, I hope that we do not pay excessive attention to the issue of monopoly. To be honest, as a young person, it doesn't matter whether you are for or against Tencent's monopoly.
Instead of focusing on whether the domestic Internet giants are monopolies, more attention should be paid on what they have done after becoming giants in taking social responsibility, investing in basic scientific research and exploring cutting-edge technologies.
Ma Huateng:"Although (China) is now talking about the new Four Great Inventions and how the mobile payment is leading the world, if we take a look at them and we will find that these are still just the application of science and technology. The fundamental scientific research in China is still very weak."
Whether Tencent is a monopoly or whether it restricts competition through some unfair means is a matter for the country to worry about not for us. Besides, we can't change anything by worrying about it, so we might as well worry more about what we can change.
Like "looking for a bigger picture, look at a small point."
Put simply, viewing the world with vision while focusing on important matters at present.
"Looking for a bigger picture" means that instead of always focusing on whether Tencent is a monopoly in the Chinese market, we might as well focus on something bigger.
For example, we may always focus on how many more luxury cars a rich man's son drives and how many hot girls he picks up, while ignore the worldwide influential theories proposed by this year's Nobel Laureates.
We may always focus on whether the speed of delivery and takeaways can get any faster, but we tend to overlook the speed of development of hardcore technologies, such as aerospace and chips.
We may always focus on whether the interior of a car is luxurious, whether the workmanship is rough, or whether the 100 km/h acceleration has improved by a second, but we tend to neglect the true core competencies of the future: the development speed of autonomous driving and the Internet of Everything.
That's that for "looking for a bigger picture". Let's move on to "looking at a small point"
Instead of focusing on the field in which Tencent has monopolized, it is better to see what opportunities are in front of you that can avoid the giant monopoly.Didn't Tencent also break out of the Mobile Dream Network monopoly?
We need to seize the opportunity of the new technological revolution, avoiding the giants. And this is what I said before, to find the"easy to change, hard to monopolize" opportunity.
Of course, finding it is not enough. What's more important is to take action after finding the right opportunity.
As a philosopher once said:"Keyboard warriors like to complain, the great warriors have seen and acted on the right direction."
Well, sorry, that philosopher is me. Bragging is not my point, the point is that I want you to remember：
Great idea + No Action = 0
正如我喜欢的一句耐克广告词：Just do it. 干就完事儿了。
Just as a Nike slogan that I like: Just do it. Yes, let's just do it.
除了"看大，看小"，Just Do It，最后我认为还有非常重要的一点，那就是保持一个平和的心态去思考、去做事，避免过于激烈的情绪，甚至产生愤怒，因为愤怒并不能帮我们解决问题，就像电影《三块广告牌》里告诉我们的：
In addition to "looking for a bigger picture, look at a small point" and "Just Do It". Finally, I think it's very important to keep thinking and taking actions in a peaceful manner and avoid intense emotions and even anger. Anger does not help us solve problems, as the movie "Three Billboards Outside Ebbing, Missouri" tells us.
“Anger begets more anger.”
我是小丹尼，谈车说科技。下集视频我会讲阿里，你想听我讲点什么呢？欢迎给我留言，别忘了帮我分享，Techs Never Die，回见。
I‘m Danny. I talk about tech and cars. In the coming episode, I'll talk about Alibaba. What do you what to know? Please leave your comments. Don't forget to give me a "LIKE" and subscribe to my channel. Techs Never Die, see you next time.
文稿/配音 | 小丹尼
校对修改 | Emma、SE、Vivian、Xuyang、Scode
剪辑/视觉 | 罗兆吉、小丹尼、Alex、忠彦、新茹、雷杰、吕晓彬、马晓羽、蔡庆俊
翻译 | Xuyang、嘉瑶、杨墨、施震、Zelda
排版 | 李扁担、Xuyang