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Dragon Story: The Legend of Tencent (I)

Dragon Social > Doing Business in China  > China Market Insights  > Dragon Story: The Legend of Tencent (I)

Dragon Story: The Legend of Tencent (I)

In the past 30 years, China has become one of the most rapid growing and innovative markets in the world. Moreover, with the development of the internet, a series of Internet companies in China have achieved great success including Tencent, Alibaba, JD.com, NetEase and so on.

 

 

While we already know their names and what they are good at, many barely understand how these companies were established and what the stories are behind them.

 

 

The Dragon Story series is a new project that the Dragon Social team is planning to present. In this series, we would like to invite you with us to explore the stories behind these companies and their founders.

 

 

Also, we are extremely appreciate that you’ve visited our website to read our articles. Please leave a comment about your inspirations and thoughts about marketing in China and the development of these Chinese internet giants.

 

 

Table of Content(Click to read)

 

 

1. Pony Ma and His First Startup Read Now

 

 

2. The Success of OICQ and the Birth of QQ  Read Now

 

 

 

Ponny Ma and His First Startup

 

 

In the year 1984, after 76 years, Halley’s Comet appeared in the sky of the earth once again. Meanwhile, a 15-year-old high school student in Shenzhen said he was the first in his school to witness Halley’s Comet.

 

 

As the chairman of Shenzhen High School’s astronomy club, Ma Huateng 马化腾, also known as Pony Ma,  loved observing the night sky since he was a little boy. He’s kept this habit to this day.

 

 

Ma Huateng, often known as Pony Ma

 

 

Like other ordinary high school students in China, Pony Ma participated in the National Higher Education Entrance Examination of China in 1989 and finally entered Shenzhen Univerisity as a major in computer science.

 

 

Interestingly, during his years in university, Pony Ma became interested in the C++ programming language, which was a new thing at that time.  Through his efforts, Pony Ma became a programming expert by his sophomore year.

 

 

Pony Ma in his high school age

 

 

Pony Ma recalled many years later that he and his friends often developed different kinds of computer viruses to lock public computers in the university just for fun.

 

 

In 1993, Pony Ma joined Runxun Digital Service Ltd. as a technical supervisor after his graduation from Shenzhen University. After two years, Pony Ma noticed a new invention called the FidoNet, a new program for establishing BBS (bulletin board system) websites and establishing communication between them.

 

 

FidoNet depends on a modem for people to log in and share their ideas with other users.  Most of its users were programmers. At that time, the GreatWall.net in Taiwan was the very first FidoNet in the greater China area. Pony Ma quickly became one of the most active users on GreatWall.net.

 

 

Shocked by the emergence of the FidoNet, Pony Ma comes up an idea to develop a FidoNet website for mainland China. In 1995, Pony Ma launched his first FidoNet website called Ponysoft.net. This was Pony Ma’s first startup.

 

 

 

The Success of OICQ and the Birth of QQ

 

 

On December 11 of 1998, Ponny Ma resigned from Runxun Digital Service Ltd. and called some of his friends, Zhang Zhidong 张志东, Chen Yidan 陈一丹, Xu Chenhua 许晨晔 and Zeng Liqing 曾李青 together to discuss the idea of establishing a new company.

 

 

After a few hours of discussion, Ponny Ma proposed the name of this new company, Tencent 腾讯. More importantly, they decided the business direction of Tencent. The planned to be a company focusing on the Internet and real-time messaging/communication.

 

 

In the first few months, Tencent was providing outsourced digital services, like developing programs, search engines, websites etc.  Tencent back then was only a small technology company simply making ends meet.

 

 

An opportunity came at the end of 1998 when Pony Ma was surfing on the internet. Pony Ma noticed a program called ICQ (named for the phrase “I seek you” in America. Later, he realised that this was the opportunity that Tencent needed right now.

 

 

Soon, Tencent developed a program called OICQ, meaning the Open ICQ, in just a few months. Tencent published this product on February 11, 1999.

 

 

 

The UI of ICQ and OICQ

 

 

In order to meet the habit of Chinese users, OICQ had a series of adjustments. The most important adjustment was cooperating with the China Telecommunications Corporation for their support on infrastructures.

 

 

In just 8 months after OICQ was published, its user growth was unbelievably fast. Every 90 days, OICQ’s users had increased by 4 times. To celebrate their success, Tencent chose a penguin with a red scarf as their mascot.

 

 

Tencent’s mascot, maybe the most famous company mascot in China

 

 

However, this prosperity did not last for a long time. In 2000, ICQ threatened to sue Tencent for intellectual property infringement and asked for a 10-million-dollar penalty. Tencent faced its first real hardship.

 

 

Besides the legal dispute, Tencent was also facing the change of the change in attitude towards internet companies. At the turn of the century, lots of companies suffered from the the crash associated with the dot-com bubble in the United States. Pony Ma said many years later that he even considered selling Tencent at that time.

 

 

Luckily, South Africa’s MIH Holdings and Hong Kong’s PCCW invested in Tencent prior to any lawsuit, the capital and support from MIH and PCCW helped Tencent got through their most difficult time. However, Tencent could not depend on other people to protect itself .

 

 

As a new start (and to avoid a lawsuit), Tencent changed the name of OICQ to QQ in 2000. Besides, it also changed the UI design and added more useful functions to QQ. For example, it cooperated with China Unicom in Shenzhen to combine QQ and SMS text messages together, letting users send their message in a more effective way.

 

 

Apart from that, Tencent also added the function of chatting groups into QQ. It was the very first online chatting program that provides people with the capability to form their own chat groups in China. At the end of 2002, Tencent’s active users increased to 30 million, and 70% of China Unicom’s users sent their messages through QQ.

 

 

With huge success came huge problems, Tencent soon found out that they could not make much profit through QQ’s present business model. Changes needed to be made, but it seemed like Tencent had made it out of the woods for the moment. Tencent had survived as a young startup in China’s infantile digital economy. Their future success will be told in our next instalment.

 

Dragon Story (II): The Legend of Tencent

 

 

Conclusion

 

 

At the beginning of the new millennium, Tencent had just got through the collapse of the dot-com bubble in the United States and it finally had their own products. But, their business model still needs to be optimized.

 

Looking back on the first few years of Tencent, it is true that Tencent is very lucky enough not to go bankrupt. However, it is also true that Ponny Ma and other co-founders keenly sensed the changes in Internet technology and seized opportunities.

 

 

The success of OICQ and is an excellent example of Tencent’s acuity and the ability of adoption. This character helped Tencent a lot in the future development of Tencent.

 

 

In the next article of Dragon Story, we will introduce the path of Tencent into a great company. Moreover, we will also introduce the birth and development of WeChat and how WeChat helped Tencent conquered the market.

 

 

If you like our new series, please leave your comment on our website. And if you would like to start your business in China, the Dragon Social team is always here to help your business.

Wilson Li
Wilson Li

Acquired Master of Arts degree at The Chinese University of Hong Kong. A native of Mainland China with a strong passion for marketing and the high-tech industry in China. Currently working for the Dragon Social as a content marketer.

1 Comment
  • Dhrumil Barot
    Reply
    Posted at 12:47 pm, December 27, 2018

    Thank You very much Wilson for sharing this story. It’s an amazing tale can you please start a subscriber list so I get your articles delivered in mail directly?

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