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3 Reasons Why Tencent’s Qzone, the Largest Social Network in China, is a Failure

(This is a guest post by Kai Lukoff. Kai Lukoff is an analyst at BloggerInsight and an editor on China Social Games. Follow Kai on Twitter @klukoff. You can find more information on China Social Game at the end of this post. )

Qzone, “the largest social network in China,” and Tencent’s other SNS (QQ Campus and Xiaoyou), are failures for three reasons:

  1. Squandered Opportunity: Chinese internet giant Tencent was enviously positioned to dominate social networking, but blew its chance. QQ Campus failed. Xiaoyou is far behind the competition. Qzone does not reach any new demographics.
  2. The Site’s Design and Features are Lousy: The Qzone website is an unintuitive eyesore. Its applications are of poor quality and frequently inaccessible.
  3. Is Qzone Really No. 1? Tencent’s claim of 305 million active users is highly suspect; even its classification as an SNS is questionable. Its competitors are encroaching upon its core user base of young teens.

Does this mean Tencent will soon collapse? Absolutely not.

Qzone is Tencent’s “Windows Vista”

Tencent with Qzone is like Microsoft with Windows Vista: a near-monopolist that thrives despite a terrible product and lack of vision.

Microsoft remains massively profitable despite releasing a terrible OS and missing out on all the new innovations (mobile, mp3 players, search, and social networking) that its competitors have seized upon (Apple, Google, and Facebook). Microsoft suffered from a stifling, dysfunctional corporate culture.

Benjamin Joffe, Tencent expert and CEO of internet market research firm +8*, told China Social Games:

Tencent is definitely not the best in terms of products or innovation – similar to Zynga in that sense – but their ability to deliver a ‘good enough’ mass market service and integrating it within their ecosystem is impressive.

Tencent is certainly massively profitable: 2009 revenues, just announced, were 1.82 bn USD, though it’s unclear what portion of the “internet value-added services” is attributable to Qzone.

Like Microsoft, Tencent will continue to profit in spite of the junk it produces. But Qzone does dampen Tencent’s star, opens the door for its SNS competitors (RenRen and Kaixin001), and questions its corporate culture.

#1 Squandered Opportunity

Tencent’s had awesome resources for building a social network:

  1. Instant user base. QQ Messenger has 485 million active users, which Tencent uses to cross-promote new services, like Qzone, on young Chinese netizens.
  2. High brand awareness. QQ is the first introduction to the internet for most Chinese.
  3. Many complementary sites. QQ Games, for instance, could be beautifully integrated with Qzone, but is instead poorly slapped together.
  4. Regulatory environment experience. As an early internet giant, Tencent knows how to reach the right government contacts and manage user-generated content.
  5. Financial capital. Tencent has deep, deep pockets.

In addition, Tencent had long aimed to expand from its core demographic of young teens to include a more mature audience. Social networking was clearly the perfect chance to do so.

Despite all these advantages, Tencent squandered the opportunity. Qzone never gained an audience beyond young teens. Instead, RenRen, which completely copied Facebook (as Tencent also could have done), attracted the student demographic. Kaixin001 has snapped up the valuable white-collar demographic with a simple, user-friendly site.

Most damningly, even users who start on Qzone almost all “graduate” to the other networks. In September of 2008, Tencent finally tried to retain users with QQ Campus, which failed and is now shut down.

In June 2008, Tencent finally responded with the SNS Xiaoyou (classmates), but the site has virtually the same lousy interface as Qzone, except with a decent skin. The apps and games are even fewer and lesser than those on Qzone. The first five times I tried to join Xiaoyou, I was rejected because “The system is busy, please try again later.” Competent websites optimize splash pages to convert users; Tencent is clearly not concerned with such trivialities. It’s a fitting illustration of the embarrassingly poor quality of Tencent’s SNS properties.

“The system is busy, please try again later.” A warm welcome to Tencent’s Xiaoyou SNS.

In addition to Tencent’s failure to expand, anecdotal evidence suggests RenRen is encroaching upon young teens, Tencent’s traditional turf.

Tencent saw the social networking trend coming from across the Pacific Ocean, but still blew its chance. Tencent had all the advantages in the world, so resources were not the issue. The problem was Tencent’s poor execution and strategy.

Most Chinese internet experts likely disagree with my assessment of Qzone as a “failure” though, or at least with the degree of disappointment. Benjamin Joffe comments, “Considering Tencent is already reaching everybody with its IM service and Qzone started off as a blogging service, its revamping into a social network does not seem that bad… I am not sure what you would measure Qzone’s success or failure against, but in terms of reach it seems fine to me.”

Read the rest of 3 Reasons Why Tencent’s Qzone, the Largest Social Network in China, is a Failure (1,157 words)

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Post tags: QQ, QQ-Campus, QQ-Xiaoyou, Qzone, Tencent

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