Why Tencent (HKSE:0700.HK) chose the development path of social common wealth

Tencent announced a 50-billion-yuan investment to launch the “Common Wealth Special Program” 3 days ago. The money will be invested in the basic livelihood areas of Chinese society. Just four months ago, Tencent proposed its “Sustainable Social Value Innovation” strategy, with the first 50-billion-yuan invested in basic science, carbon neutrality and other cutting-edge fields. Two 50-billion-yuan investments, one for the future and one for the present.

Tencent, 0700.HK, 700HK
Tencent, 0700.HK, 700HK

Tencent Holdings Limited (HKSE:0700.HK)
Trade Date: 2021-08-19
Open: $448.00, Close: $421.20, Low: $419.20, High: $450.80, Change: $-26.80
Country: CN, Currency: HKD, Industry: Internet Content & Information, SectorCommunication Services

As the core force of China’s Internet industry, what is Tencent doing this for?

11 years ago, Tencent was forced to adopt an open-door policy

On November 20, 2010, China’s Ministry of Industry and Information Technology issued a circular criticizing the malicious competition between two companies, Tencent and 360. On the same day, Zhang Xiaolong led a small team of six or seven people to start developing a software called “Weixin” in a small corner of Guangzhou. This was the beginning of the most shining product in the history of the Chinese Internet. In the next 10 years, Tencent began to transform itself.

Ma Huateng said, “We will try to inject more elements of openness and sharing into the future development of Tencent. We will more actively promote platform openness and pay attention to the harmony of the industrial chain, because Tencent’s dream is not to make itself the strongest and largest company, but the most respected company.” After six months of brewing, on June 15, 2011, Tencent held its first “Partner Conference” and announced its “Open Strategy”, proposing to “recreate a Tencent” outside of Tencent. “. Tencent began to export its capabilities to the outside world: to share the wealth and create together, ten years later.

Eleven years later, Tencent has driven the common wealth effect of China’s Internet
Over the past decade, whenever Tencent’s financial reports are released, calculating the annual salaries of Tencent employees based on them has become a “routine” hotspot for some media reports. Today, this latest figure climbs to 940,000 yuan. Although this calculation is not scientific, Tencent’s generosity and high benefits for its employees, and its status as the core target of the “King of Shares”, are already the consensus of the industry. Tencent has not only enabled more than 90,000 employees and investors to receive high returns, but this “common wealth” also extends to its open platform partners.

Ma Huateng mentioned a vision in his public speech. He said Tencent “hopes to make the world free of buried talents.” In September 2016, more than five years after the implementation of Tencent’s open strategy, the cumulative revenue distributed to entrepreneurs on Tencent’s open platform exceeded RMB 10 billion. If you count the individuals at the top of the list, by 2015, 50 billionaires had been born on Tencent’s open platform and 20 listed companies had grown.

Today, Tencent has driven employment opportunities to nearly 30 million through the WeChat ecology, which is jointly composed of public numbers, small programs, WeChat Pay, and enterprise WeChat. A large number of creators and entrepreneurs have achieved success in the WeChat ecology. Tencent’s open strategy has also enriched the Internet startups and employees invested by Tencent. As of January 2020, Tencent has invested in more than 800 companies, of which more than 70 have gone public and more than 160 have become unicorns with a market capitalization or valuation of more than $1 billion. A large number of entrepreneurs have realized their personal value and become rich with the help of Tencent. In turn, the companies founded by these entrepreneurs have directly driven millions of employees to work in the Internet industry. This is the “common wealth” of Tencent and the entire Chinese Internet.

Common Wealth and Co-creation

In the evolution of Tencent’s open strategy, Tencent has repositioned itself as a “connector” in the Internet industry, becoming a provider of Internet infrastructure and capabilities, connecting with outstanding companies in the industry, helping them launch innovative products and succeed together. The letter sincerely stated that Tencent recognizes that no matter how big a company is, its capabilities are limited, and that many industries are deeply specialized, and that only through open collaboration can we create a win-win future. Tencent began to invest and help more small and medium-sized entrepreneurs. The model of “common wealth and common creation” has accelerated the progress of China’s Internet ecosystem.

Since 2011, Tencent’s open strategy has made it a leader in the “common wealth” of the Chinese Internet, and Tencent has become a respected company in the Internet industry. Today, more than one billion users in China use WeChat every day, and the color of culture is life. WeChat has been deeply integrated into Chinese people’s lives and blended with Chinese culture. Rather than saying that WeChat is changing the lives of Chinese people, we should say that Chinese culture is quietly changing WeChat. From QQ to WeChat, Tencent’s corporate culture has also changed as a result. While Chinese culture has changed WeChat, it has also profoundly influenced Tencent.

Along with this, Tencent’s cultural consciousness in revitalizing traditional culture has led it to make pioneering works: the heroes of “Glory of Kings” are mostly taken from Chinese history, and it has created digital cultural and cultural windows such as “Yunyou Dunhuang” and “Digital Forbidden City”, allowing traditional cultural IPs to enter games, comics and movies…. …Tencent has advocated “new culture and creativity” in recent years, striving to create traditional Chinese cultural symbols with global influence, showing its ambition to commit to traditional Chinese culture. Traditional Chinese culture has changed Tencent’s products and quietly changed Tencent’s values and business practices.

Technology-oriented goodness

As a commercial company, Tencent operates in accordance with a modern company, while at the same time Tencent proposes an open strategy, willingly acting as an industry assistant and helper and sharing benefits with its partners. Tencent Public Welfare Charity Foundation is the first public welfare foundation initiated by an Internet company in China. By the end of 2020, the total amount of donations raised was 11.58 billion yuan, and Tencent’s accumulated donations were 6.4 billion yuan. Now, the “common wealth and co-creation” model is recognized by more and more entrepreneurs. Letting advanced companies invest in themselves and empower themselves has become a preferable option for Internet entrepreneurs.

Tencent has helped startups to “share the wealth and create together”, while also reaping lucrative commercial rewards. Of the more than 800 companies Tencent has invested in, 15 have generated a return of more than $1 billion, benefiting both people and the company. Ma Huateng once concluded that this “decentralized” open strategy has turned “a big tree” into “a forest”. This is also an important reason why Tencent has grown so big. The premise of “common wealth and common creation” is that we must first have the ability and resources to help others. Faced with the capacity crisis brought by the “open strategy”, Tencent did not choose to retreat.

On September 30, 2018, Tencent made one of the largest structural adjustments in its history. Tencent integrated most of its consumer Internet businesses into the Platform and Content Group (PCG), focusing on improving its technical capabilities, vigorously carrying out “industrialization” construction, and reconstructing its content power. At the same time, Tencent has newly established the Cloud and Smart Industry Group (CSIG) for the industrial Internet. This is Tencent’s new judgment: industry trends are changing, and the consumer Internet is shifting to the industrial Internet. Tencent will systematically export its accumulated experience and capabilities to be a “digital assistant” for the upgrading of China’s traditional industries.

A community of destiny for Chinese society

In April 2021, Tencent embarked on its fourth strategic upgrade and put forward its “Sustainable Social Value Innovation” strategy. Tencent’s open strategy further extends to the entire society. The broader context is that, with the rapid development of the Internet industry, the relationship between large Internet companies, represented by Tencent and Ali, and Chinese society is changing.

On the one hand, Internet majors and Chinese society have formed a community of destiny. Whereas in the previous two decades, Chinese Internet companies were fundamentally able to grow rapidly by virtue of China’s demographic dividend and by benefiting from the infrastructure provided by society, they have now become integrated with Chinese society. Tencent’s users cover the vast majority of China’s population; some of Tencent’s products, such as WeChat Pay, have become something like an “infrastructure”.

On the other hand, the big Internet companies have also reached a new stage of giving back to society. Internet companies have accumulated a huge amount of digital energy, where will they go in the future, for good or for evil? What is their role in the governance structure of the state and society, and how can they contribute to the development of society rather than vice versa? In April 2021, Tencent proposed its “Sustainable Social Value Innovation” strategy to put this statement into practice: basic science, education innovation, rural revitalization, carbon neutrality, FEW (Food, Energy and Water), public emergency response, elderly technology, and digitalization of public welfare……

The areas in which the first $50 billion in funding will be invested may not seem relevant to Tencent, but they are closely related to the Chinese society in which Tencent has its roots. Tencent has chosen to take the initiative to become a “servant of society”. On August 18, Tencent pushed this strategy deeper. The new 50 billion yuan “Common Wealth Special Program” will focus on people’s livelihoods today, with continued investment in areas such as increasing income for low-income earners, helping to improve medical assistance, promoting economic efficiency in rural areas, and funding inclusive education sharing.

Over the past two decades, Tencent, like other leading Internet companies, has grown into a new type of technology company that serves almost the entire population. As a commercial company, it is not an easy choice to control its own desire for unlimited expansion and help others to progress together. In the past decade, through its open strategy, Tencent has taken on the responsibility of being the “first to get rich and advanced” in the industry, helping China’s Internet and traditional industries to progress together. Today, after becoming “bigger”, Tencent intends to explore a unique development path for Chinese Internet companies: Since energy comes from society, it will also go to society.

Tencent is a unique business approach rich in traditional Chinese culture. It is also the natural choice of a business company that is rooted in Chinese society and imbued with traditional Chinese culture.

SOURCE: https://tickerinsider.com/technologies/tencent-0700hk-social-common-wealth/

Jason Quintero
Industry Insights Dept
TickerInsider News Network