Tencent’s Innovative Business Model

Hi everyone,

this week I will be discussing Tencent’s innovative business model. I stumbled upon this company and realized that they are the developer of WeChat. As I’ve started using WeChat, I thought it would be interesting to look at Tencent and what makes them innovative.

Tencent was established in 1998 in China and is a leading provider of internet value added services. Their vision is to become the most respected internet enterprise and mission is to enhance the quality of life through internet services (Tencent 2018). The company states “with each new product and invention, Tencent strives to embrace philanthropy, expand the internet, and be a model for all corporations who strive to improve our world through technology” (Tencent 2018). As of June 2018, the companies market cap is at $491.3 Billion and it is ranked 25th on the list of Forbes’s innovative companies of 2018 (Forbes 2018). The company is the largest business to consumer (B2C) e-retailer in China. Services provided range from social network, web portals, e-commerce,  education, comics, entertainment services, and multiplayer online games (Vizologi 2018; Tencent 2018b).

What makes Tencent different from competitors like Facebook and Amazon?

It’s simple…Their revenue model isn’t the standard revenue model where revenue is generated through advertising.

The multi-billion dollar business generates revenue through millions of micro-transactions (Anthony 2013). Value added services is their main stream of revenue. The value added services are available on their social media platforms, gaming platforms, and mobile games (Forbes 2018). An example of a value added service the company provides for popular games is that users can pay for fancy weapons and costumes for their online VIP rooms and avatars (The Economist 2014). Other revenue is from digital content subscriptions, membership subscriptions, advertisement, and online games (The Conversation 2018). Below is the breakdown of Tencent’s revenue for Q3 2017 and it demonstrates that the company does not rely on advertising revenue.

                Image source: Denlinger 2018

Another component that makes Tencent innovative is that they have payment options through their social networks. Tenpay is the second largest online payment platform across China. It is a comprehensive and integrated online payment platform that allows for B2B, B2C, and C2C interactions (Tencent 2018b). WeChat Pay users can make payment through the app providing a safe and efficient transaction. Another payment solution is QQ Wallet, this app has multiple payment options, QR code, NFC payment, and bank card payment. The QQ Wallet provides a comprehensive experience for their users which incorporates payment, life services, government services, public services, and financial services (Tencent 2018b).

Before doing research for this post, I had no idea just how big and influential Tencent is in China. The company has managed to successfully generate revenue through value added services, creating an innovative business model. The lives of people are influenced everyday with these services and is integrated into the daily routine of consumers.

As a user of WeChat I am pleased with how their app is developed. Does anyone use WeChat, QQ or any other services?

 

References 

Anthony, S 2013, The three innovative companies of 2013, Harvard Business Review, 31st December, viewed 4th of September 2018, <https://hbr.org/2013/12/the-three-most-innovative-companies-of-2013 >

Denlinger, P 2018, Does Tencent have a better revenue model than facebook?, Pandaily, 24th May, viewed 5th September 2018, <https://pandaily.com/does-tencent-have-a-better-revenue-model-than-facebook-pd/ >

Forbes 2018, The world’s most innovative companies, Forbes, viewed on 4th September 2018, <https://www.forbes.com/companies/tencent-holdings/?list=innovative-companies >

Tencent (n.a), Tencent, viewed 4th September 2018, <https://www.google.com.au/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwi-vtPy_p_dAhXHFYgKHcFICVAQjRx6BAgBEAU&url=https%3A%2F%2Fwww.techzim.co.zw%2F2016%2F09%2Fchinas-new-valuable-company-tencent-owners-qq-wechat%2F&psig=AOvVaw2J1OloVM1yHlEldBkEwMWj&ust=1536103662193622>

Tencent 2018, Core Values, viewed 4th September 2018, <https://www.tencent.com/en-us/culture.html >

Tencent 2018b, Company Structure, viewed 4th September 2018, <https://www.tencent.com/en-us/system.html >

The Conversation 2018, How Tencent became the world’s most valuable social network firm – with barely any advertising, The Conversation, 19th January, viewed 5th September 2018, <https://theconversation.com/how-tencent-became-the-worlds-most-valuable-social-network-firm-with-barely-any-advertising-90334 >

The Economist 2014, Tencent’s worth, 24th June, viewed 4th of September 2018, <https://www.economist.com/business/2014/06/25/tencents-worth >

Vizologi 2018, Tencent business model canvas, Vizologi Inc., viewed 4th September 2018, <https://vizologi.com/business-strategy-canvas/tencent-business-model-canvas/ >

5 I’s of Internet Marketing

The 6 I’s of internet marketing consist of: interactivity, intelligence, individualization, integration, industry restructuring and independence of location. This post will focus on interactivity, intelligence, individualization, integration and independence of location.

Interactivity

Chaffey and Ellis-Chadwick (2016, p. 37) states the characteristics of interactivity are: customers will initiate contact, and the customer uses the site to seek information. JB Hi-Fi’s website allows for their customers to engage with the products they offer through the search bar. Customers that have any enquires can contact them through the ‘contact us’ page and the business will respond within a 24 hours. JB Hi-Fi’s website is well designed as customers can easily maneuver and engage with the content.

 

Intelligence

Intelligence is a cost efficient method of collecting data on customers. This method provides intelligence on customer’s activities and preferences (Chaffey & Ellis-Chadwick 2016, p. 38). JB Hi-Fi uses cookies to gather data on their customers that they will use in the future (Versaw 2011).

Individualization

Individualization refers to the customization based on a customer’s location, gender, interests, age etc to provide more personalized content (Chaffey & Ellis-Chadwick 2016; Versaw 2011). When I go onto JB’s website I am greeted with ‘Hi Inkyin’.

Currently when customers visit the website, they are greeted with ‘Father’s day gift guide’, this can be deemed as personalization as the ad is targeting individuals that might be looking to purchase a gift for their father.

Integration

Integration is the use of multiple marketing channels to communicate with their customers (Chaffey & Ellis-Chadwick 2016, p. 38). JB Hi-Fi uses Facebook, Twitter, Youtube and Google Plus as tools to communicate with their customers and customers can also use these social media platforms to communicate with the business. Communication between the business and customer is more efficient on these platforms.

   

   

Independence of Location

Independence of location is being able to connect with customers no matter where they are. Customers can use their mobile phones, tablets and personal computers to access the website from anywhere at anytime to their convenience (Versaw 2011).

 

References 

Chaffey, D & Ellis-Chadwick (eds) 2016, Digital Marketing, Pearson, UK

JB HI FI 2018, JB HI FI, viewed 23rd August 2018, <https://www.jbhifi.com.au/&gt;

Versaw, K 2011, ‘The 6 I’s of internet marketing’, Hubshout, web log post, 16th August, viewed 23rd August 2018, <https://hubshout.com/?The-6-I%E2%80%99s-of-Internet-Marketing&AID=324&gt;

 

Business & Revenue Model of Uber Eats

 

Business Model

Uber Eats is an online food delivery platform that was launched by Uber in 2014 in California. The platform was launched in April 2016 in Australia, and since the launch more than 5000 restaurants and customers have signed up (Waters 2017). The app allows customers to access multiple restaurants based on their location and preferences (Taneja 2018). When going into the app, restaurants based on the customers location will show up – “popular near you”. Customers can scroll through the list or search a category of food: Thai, vegan friendly, Japanese, American, gluten free etc. Once the items are chosen, customers proceed to the check out and then wait for their order to arrive.

Uber Eats has two transactional business models: Business to Business (B2B) and Business to consumer (B2C). Business to business is the transaction that occurs between Uber Eats and the restaurants, and B2C is the transaction between Uber Eats and the customers.

                                                             (Taneja 2018)

There are four components of Uber Eats.

1.Customer real-time ordering -there is a list of items from a variety of menus and restaurants the customer can choose from. Customers can even rate the restaurant and add it as a favorite so it appears on the feed, and the location of the delivery is flexible (Taneja 2018).

2. Customer custom ordering -The customer customizes their order with regards to location, product and specific delivery times. This process also helps Uber Eats to be efficient as they can process orders that are similar (Taneja 2018).

3. Uber Eats drivers – The drivers register to become apart of the delivery network. The location of the driver will determine if they are selected for that certain order. The proximity of the restaurant and customer is important as orders need to be delivered within a reasonable time (Taneja 2018).

4. Restaurant partners – Restaurants partnering with Uber Eats helps the business to have a virtual presence on the platform. The demand for food delivery apps is increasing as customer’s behaviour is changing (Taneja 2018).

Revenue Model

1.Delivery fees – The delivery fees from customers has a fixed price ($5) plus surcharges depending peak hours.

2.Revenue sharing – Reoccurring revenue is achieved by the amount of orders fulfilled by Uber Eats. The shared revenue from restaurants can range from 15%-40%, currently the commission is 35% (Chau 2018).

3.Advertising – Marketing fees are charged to restaurants that wants to maintain their position as top searches within the app. The use of the app by many competing restaurants is increasing, therefore restaurants has no issue paying the fee to ensure their visibility to customers (Taneja 2018).

After reviewing Uber Eat’s business and revenue model, do you as a consumer think they will change their business and revenue model in the near future to maximize profits?

 

References

Chau, D 2018, ‘Uber eats imposes unfair contracts’ and ruins deliveries, restaurateurs allege’, ABC, 22nd April, viewed 23rd August 2018, <http://www.abc.net.au/news/2018-04-22/uber-eats-criticised-over-conditions-on-restaurant-owners/9662814&gt;

Taneja, S 2018, Cost to make a food ordering app like ubereats, JungleWorks, viewed 21st August 2018, <https://jungleworks.com/cost-to-make-a-food-ordering-app-like-ubereats/ >

Uber Technologies 2018, ubereats, viewed 20th August 2018, <https://www.ubereats.com/en-AU/ >

Waters, C 2017, ‘How ubereats is changing the way we eat and how restaurants run’, The Sydney Morning Herald, 30th June, viewed 22nd August 2018, <https://www.smh.com.au/business/small-business/how-ubereats-is-changing-the-way-we-eat-and-how-restaurants-run-20170629-gx15dq.html&gt;