Tencent, China’s largest technology company, has recently invested heavily in offline retail.
Pony Ma, chairman of Tencent’s board of directors, addressed the reasons for the investments. He said, “We hope that WeChat users will increasingly connect with offline merchants. In the future, Tencent will use cloud computing to support all industries and businesses, and help them use AI to process big data in the cloud.”
The opportunity of digital transformation
At this year’s IT Leaders’ Summit, Ma’s keynote address was titled “Opportunities and Explorations of Digital China”.
“Internet plus”, or the application of the internet and other information technology in conventional industries, and today’s digital economy both aim to promote the vertical integration of online and offline businesses, to promote the integration between the new economy and the traditional economy, and to bring more benefits and power into play.
As an example, Tencent focuses on smart retail and has recently invested in multiple offline retail business, such as Yonghui Superstore, in order to connect WeChat users with more offline merchants.
This connection can be divided into three levels:
- Connecting to provide more convenient payment options.
Connecting computationally, especially by cloud computing. Tencent can support industries and businesses by helping them use AI to process big data in the cloud.
Advertising and marketing. The current advertising and marketing methods are inefficient. If digital integration between online and offline is realized in the future, advertising and marketing can achieve higher efficiencies with the help of social relationships. This should help the internet industry which relies on advertising revenue.
Ma also spoke of Tencent’s open mentality towards the digital economic connection, hoping to use technology to enable the industry and involve more developers.
Ma praised WeChat mini-programs specifically. Ma said that he was a programmer who wrote programs using languages invented in the U.S. Now, he is proud of mini-programs, a Chinese innovation.
Ma additionally believes that many industries will become fundamentally changed with the digital economy trend. It is necessary to think about problems and guide the development of enterprises in a completely different way.
Automotive manufacturers, for example, are now likely to be transformed into transportation service providers under the emerging trends of AI and the sharing economy. This is not only a change in the way cars are used, but in the whole operation of the car.
Connecting to the internet can play a role in this process. Ma cited Sany Heavy Industry Group, an excavator manufacturer, as an example. When Sany changed its business model from being a vehicle seller to being a service provider, it no longer needed customers to buy excavators and instead provided this service for the customers. This is the transformation that manufacturing industry is facing.
Transformation opportunities brought by the digital economy will continue into the future.
There are many horizontal opportunities in the digital economy in transportation, medical care, civil service and government affairs.
Ma specifically discussed Tencent’s project creating a mobile app for touring the Yunnan province. Using mobile phone data, the government can collect information, data and complaints about the tourist’s experience, and govern any illegal charges. Visitors can rate their trips on their phones. The program helped the government establish a mechanism for processing complaints, track illegal travel charges and take immediate actions. This project helped manage chaos in tourism and increase information transparency.
Ma also revealed that when the Yunnan project was implemented, a large number of tourism-driven provinces in western China expressed approval, validating the demand for the project.
Finally, on the subject of the digital economy, Ma thinks that the most critical thing is talent.
The digital economy relies on innovation, and innovation depends on talent.
Ma proposed ID connection of people living in Hong Kong, Macau and Guangdong Province. The identity information for those born in Hong Kong and Macao is not connected with Chinese mainland authorities, rendering them unable to enjoy convenient mobile payment services that prevails in mainland China. So, Ma proposed to have a “connected card” so that people in Hong Kong and Macao can also enjoy the convenience brought by the digital economy.
In addition, Ma also believes that innovation is inseparable from the exchange of talent and cultural integration. In the Guangdong-Hong Kong-Macau Bay Area, Tencent hosted a summer camp which provides opportunities for children’s exchange.
Tencent bets on QR Code code
In his speech, Ma shared some short stories of Tencent’s innovation.
Innovation in mobile payments ushered in a paradigm shift due to the rapid popularization of smartphones and QR codes, which are important means of connecting offline and online.
As early as 2012, Tencent internal members agreed on the importance of QR codes, and added a WeChat feature to allow users to add new friends by scanning a QR code.
“I think neither Bluetooth nor NFC is as convenient as scanning a QR code,” said Ma.
As the return of tech companies to China for domestic listings had become a recent hot issue, Ma also talked about Tencent’s IPO.
When many Chinese technology companies opted for listing on Nasdaq, Tencent had options to list both in Hong Kong and the U.S.
Tencent finally decided to list in Hong Kong due to long-term considerations, as its the company and its users are all in the Chinese market. Ma said that he also wanted to be in the same time zone as the investors.
“Just as a husband and wife would, sharing the same routine is better.”
Ma also revealed that at the time, the investment bank said that Tencent’s valuation could be at $2 billion, but Tencent’s market value at listing was only $600 million. However, Ma felt grateful, “I am now very happy. After more than a decade of development, we can see results today.”
Ma also took the initiative to talk about the recent sell-off of major shareholders.
He said, “Our South African major shareholder supported us for 17 years and only sold a little bit the day before yesterday. He immediately promised that he would not sell Tencent stock for next three years. He is such a good shareholder.”
Ma said, “Tencent is a Shenzhen company that is listed in Hong Kong. So, I support both sides.”