CHINA: QQ INSTANT MESSAGINGOne of the most innovative companies in the world during 2007 is one you've probably never heard of. China's Tencent runs an instant messaging system called QQ with entertainment functions and a few other quirks, and its focus on innovation and constant evolution means 100 million people use it every day on their mobile phones.
Young people in China are obsessive about downloading video games and songs onto their mobile phones, watching movies on their tiny screens, even reading novels, buying and selling virtual goods.
They develop online personalities, or avatars, and spend the time on the increasingly lengthy commutes through China's cities buying clothes, choosing hairdos, even buying pets for their alter egos. Then, they IM their friends to tell them how their avatar is doing.
In the West the main priority for webizens is information, but in China, where the flow of information is strictly controlled, the main focus is on entertainment. Instant messaging and online gaming have become national obsessions.
Sometimes you wonder what people in China did before the mobile phone was invented. On the bus, in the restaurants and teahouses, everyone sits there gazing at their screens, often in groups. Most of them are probably using QQ, which completely dominates the market for instant messaging with various entertainment functions, with penetration of around 80 per cent.
QQ is the brainchild of Pony Ma, a high-profile internet entrepreneur worth at least half a billion euro on the back of Tencent, which started life in the southern boomtown of Shenzhen in 1998 and went public in Hong Kong two years ago.
During 2007, Ma fine-tuned and developed his company's strategy of "Online Lifestyle", which is a bit Facebook, a bit YouTube, a bit MySpace and utterly unique.
Tencent is now a major player in China, which has 160 million webizens, and 70 per cent of them are under 30.
In the third quarter of this year, the number of active IM user accounts grew 5.7 per cent quarter-on-quarter to 288.7 million. Most of Tencent's earnings come from entertainment services sold through mobile phones.
"Generally speaking, it has been developing in a very healthy way. In the past one or two years, it was sort of crazy ... but now it has become much better," Ma said in a recent interview.
"Online advertising also registered strong growth because of favorable seasonality, continued growth of traffic in our internet platforms and better execution of our sales team. Going forward, we will continue to invest in strengthening our integrated Internet platforms to better serve our users and to deliver more measurable results to our expanding advertiser base," Ma said as he announced the company's strong third-quarter results.
In a sign of how dominant Tencent and QQ have become, the Chinese Central Bank has launched an investigation into Q-coins, which allow users to shop online for games and music. The regulating bank was worried that the coins could pose a threat to the yuan, or perhaps be used to launder money.
The government, worried that QQ could be used to organise opposition to the Communist Party, also keeps a beady eye on the system.
While Tencent and other domestic internet companies such as Baidu and Alibaba thrive in the world's second biggest internet market, the big global players like Yahoo!, Google and eBay are struggling here.
Google has around one third of Baidu, while Yahoo recently switched its operations to local player Alibaba.com. eBay bought one of its biggest competitors but was still forced to hand over the operation of its China business to a joint venture with Hong Kong-based Tom.com.
Part of this is because Chinese firms are much better at dealing with the country's complicated regulatory structure.
But it is also because they largely failed to understand that China's internet market is geared towards entertainment and to mobile phones.
And it is in that arena that companies like Tencent have proven themselves to be far more innovative than even the biggest Western stars.
