How China’s Tencent Avoided an Antitrust Push, For Now.

A couple of months after Wang Xing based a Groupon-like e-commerce service referred to as Meituan, he realized that China’s greatest web firm, Tencent, had began an identical enterprise.

“Is there any business that Tencent wouldn’t do?” he requested.

Mr. Wang’s quote led a 2010 journal article about Tencent with a headline so famously profane — assume the tough Chinese equal of an F-bomb — that two high editors had been fired shortly after it was revealed. The cowl depicted Tencent’s mascot, a chubby penguin sporting a crimson scarf, stabbed with knives, blood dripping to the ground.

Dramatic, maybe, however again then the Chinese know-how trade thought-about Tencent to be Public Enemy No. 1. It wouldn’t hesitate to repeat someone else’s thought and drive the upstart out of enterprise. Its high executives had been confronted at trade conferences and in media interviews. Entrepreneurs referred to as it the trade’s most brazen copycat.

More than a decade later, the Chinese authorities is lastly reining within the nation’s strongest know-how firms — however not, a minimum of for now, Tencent. While the corporate has drawn small penalties, the federal government has targeted most of its consideration on Tencent’s archrival, Jack Ma’s Alibaba empire. The authorities’s subsequent goal? It is likely to be Tencent’s onetime rival, Meituan.

Only China’s antitrust regulators know why Tencent hasn’t drawn their full consideration to this point. As China’s greatest and strongest know-how firm, with an outsize energy to choose winners and losers, it nonetheless may — and doubtless ought to.

(Reuters has reported that the Chinese authorities is contemplating a positive of a minimum of $1.54 billion in opposition to Tencent for failing to correctly report previous acquisitions and investments for antitrust opinions. If true, that will be smaller than the file $2.eight billion positive the federal government imposed on Alibaba in April.)

A know-how expo in Beijing in April. Compared with the generally defiant Alibaba, Tencent has lengthy publicly underscored its willingness to conform absolutely with guidelines and rules.Credit…Ng Han Guan/Associated Press

But one motive could also be that the trade is now not clamoring for someone to take Tencent down. In reality, it has in some ways change into the trade’s greatest and most deep-pocketed cheerleader. The firm has managed to revamp its picture by throwing cash on the little guys and shopping for off opponents somewhat than driving them out of enterprise.

No longer Public Enemy No. 1, Tencent now enjoys a standing akin to an enlightened ruler of an expansive tech empire. An enormous chunk of the Chinese web trade now belongs to what’s often called the Tencent ecosystem. That consists of the a whole bunch of firms that it has invested in, together with Mr. Wang’s — Tencent is now Meituan’s greatest shareholder, with a 21 % stake. (Meituan didn’t reply to a request for remark.)

China’s tech firms “didn’t fall when Tencent was copying them,” wrote a broadly shared weblog submit. “They lost their will to fight back and surrendered when Tencent held out a check.”

Tencent’s cozy relationships with many trade gamers might serve the corporate effectively. But it may nonetheless maintain again competitors and in the end harm China’s one billion web customers.

“Both Alibaba and Tencent control a lot of online resources,” mentioned Yin Sheng, a tech guide in Beijing. “Both of them can cause tremendous harm to our society if they choose to do evil.”

Tencent declined to remark for this column. In the previous, it has mentioned that it invests in prime quality and modern firms and that it embraces honest competitors.

Few know-how traders and executives will discuss both firm publicly. But even confidentially, once I put my pen down and my pocket book away, I hear a variety of grousing about how Alibaba treats the businesses it invests in and the retailers who use its platforms — complaints that Alibaba hotly disputes. By distinction, these similar folks typically describe Tencent and its founders as respectable, humble and effectively behaved.

Some of that niceness comes from enterprise necessity. Cozy relationships assist cement Tencent’s energy in China.

There’s no firm on the earth like Tencent. It’s a real monopoly on many ranges. It wields the type of affect in China that Facebook, Amazon, Apple and Google can solely aspire to.

Tencent is a mega leisure platform. It is the world’s largest on-line sport firm, proudly owning stakes in Riot Games and Epic Games. It owns China’s greatest on-line video, music and on-line literature companies, too.

Tencent is a enterprise capital investor. In 2020, it lagged solely Sequoia Capital, the Silicon Valley funding agency, when it comes to the variety of unicorns — start-ups valued at over $1 billion — it has invested in, in line with the Hurun Report, a Shanghai analysis agency. By its personal account, it has invested in additional than 800 firms, together with a 12 % stake in Snap and 5 % in Tesla. By comparability, GV, previously Google Ventures and probably the most lively company enterprise capital arm within the United States, has invested in additional than 500 firms.

WeChat, which Tencent runs, wants different firms to maintain its one billion customers glued to the app.Credit…Richard A. Brooks/Agence France-Presse — Getty Images

Most essential, Tencent is a platform operator. It runs WeChat, a cellular messaging app with social media and monetary providers talents. The WeChat enterprise is the place it turns into essential for the corporate to have pals.

WeChat wants different firms to maintain its one billion customers glued to the app. An working system and an app retailer in its personal proper, WeChat permits customers to run miniprograms created and run by different firms. Those customers could make purchases utilizing WeChat’s fee system. Tesla, Airbnb and Starbucks all have their very own WeChat miniprograms. So do most of main Chinese web sites — barring those who WeChat forbids.

That’s the place Tencent’s good relationships throughout the trade change into essential. Friendly firms construct miniprograms for WeChat. Tencent invested in China’s ride-sharing and bike-sharing firms as a result of their customers pay incessantly, and Tencent needed them to make use of WeChat Pay.

The Tencent chief govt, Pony Ma, likes to say that half of Tencent’s life lies within the arms of its portfolio firms and companions. “When you grow, we grow together. When you fail, we as a platform fail, too,” he instructed a TV speak present in 2016.

That’s glossing over the large energy imbalance between Tencent and the numerous satellite tv for pc firms in its orbit. Colin Huang, founding father of Pinduoduo, hinted at that in a 2018 interview, through which he groused that WeChat declined to assist censor accusations about faux merchandise on his procuring platform.

“Tencent won’t die when Pinduoduo dies,” he mentioned, “because it has tens of thousands of sons.”

No matter how respectable or humble Tencent might act, it’s a large conglomerate with $24 billion in revenue final 12 months and spends a lot of it on funding. It picks winners and losers, however the winners received’t all the time be the most effective on the market, thus harming innovation and effectivity.

It limits person entry to different services. Its WeChat app doesn’t enable customers to share hyperlinks for merchandise on Alibaba’s Taobao on-line market or for brief movies on Douyin, TikTok’s Chinese sister firm. (Other platforms block Tencent’s providers.) When three social messaging apps had been launched in January 2019, they had been blocked on WeChat instantly.

Douyin’s dad or mum, ByteDance, reveals the probabilities when an organization goes it alone. In its early days, ByteDance’s founder, Zhang Yiming, took a small funding from Tencent to fend off the corporate however resisted tighter ties. In a response to rumors that Tencent would put money into ByteDance in 2016, Mr. Zhang wrote that he didn’t begin ByteDance to change into a Tencent worker. He posted the lyrics of the track “Go Big or Go Home.”

ByteDance’s independence paid off. It’s now valued at almost $400 billion with a couple of massively fashionable on-line content material apps, together with TikTok, the primary Chinese web product that turned a world phenomenon.

Tencent doesn’t simply courtroom the trade. It has additionally lengthy tried to get near the federal government. Compared with the generally defiant Alibaba, Tencent has lengthy publicly underscored its willingness to conform absolutely with guidelines and rules.

“Now I think it’s important for us to understand even more about what the government is concerned about, what the society is concerned about, and be even more compliant,” Tencent’s president, Martin Lau, mentioned in a January earnings name. Tencent executives used the phrase “compliant” six occasions within the name.

In April, the corporate mentioned it might spend $7.eight billion on inexperienced power, training, village revitalization and different pet matters of President Xi Jinping. In the view of Hong Bo, an web commentator, Tencent is appearing for self-preservation.

“For the sake of securing its operation,” he mentioned, “it has to look like it is shouldering more social responsibilities.”