Talk about Liu Chiping, Tencent's most secretive number two figure, and the battles he fought

"If you don't accept investment and they invest in your competitors, it will be fatal."

This article describes how Tencent develops at a high speed step by step and the problems it encounters. In the process of Tencent's going abroad, the most secretive number two figure, Liu Chiping, played a key role. How did he take Tencent to the world step by step? Some details that have never been disclosed are reflected in this article.

In the past, Tencent usually chose a comfortable Japanese scenic spot or a Silicon Valley hotel as the venue for high-level meetings. But last autumn, they chose a two-day hike in the Gobi Desert. The journey of 26 kilometers a day really tired many people, but Ma Huateng, the co-founder and CEO of Tencent Holdings, and Liu Chiping, the president of Tencent Holdings, still insist on making steady progress.

Although Tencent executives go to the desert to experience another life, this does not mean that there are any problems in the development of the company. On the contrary, Tencent's share price has risen all the way in recent years, making it one of the top ten companies with the highest market capitalization in the world. Of course, what executives really care about is not the stock price, but also the future journey of the company. In the Hong Kong office a few months later, Liu Chiping said, "The last hiking trip reflects the company's culture. We pay more attention to the company's future development direction and development process than the stock price itself."

Where Tencent wants to go, and ultimately, it wants to expand globally. Tencent was founded in Shenzhen, north of Hong Kong. Its products and services are penetrating into every aspect of people's daily life. More than two-thirds of Chinese people use the company's two major information applications: WeChat and QQ. People can do many things on these two platforms. In addition to sending messages, they can also shop, date, watch videos, play games, order meals and take a taxi. According to the analysis data of Mary Meeker, the "Internet Queen", Chinese users spend 1.7 billion hours on Tencent App every day, which is far more than the time they spend on all other apps.

19 years ago, Ma Huateng, three college students and a friend founded Tencent in a small office in Shenzhen. The company's first product, which imitates an instant messaging application from Israel, has been improved and introduced to the Chinese market. Unlike Jack Ma, the co-founder of Alibaba, Ma Huateng has a low exposure overseas. He only knows some basic English and rarely appears in public. Colleagues and friends said that he was a typical Guangdong businessman, shy and cautious.

At Tencent, Ma Huateng is a forward-looking CEO, while Liu Chiping is responsible for deploying the company's strategy and daily operations, and he is also responsible for answering questions raised by investors and analysts in the company's financial report conference call. He is a devout Christian and a fanatical player. He is respected and loved by many people.

"In fact, most people in Silicon Valley don't know Liu Chiping," said Sean Liu, a Chinese born investment manager who works for Vy Capital, a venture capital firm in San Francisco. "This is shocking, because it is equivalent to that if you care about Facebook, you don't know who Sheryl Sandberg is. But in Tencent and China's science and technology circles, Liu Chiping is very influential."

Indeed, although Liu Chiping went to college in the United States and can speak fluent English, he is also the public face of Tencent, but he has successfully evaded the attention of western media over the years. Now, he can't continue to hide, because waiting for him will be a very difficult job: to bring a typical Chinese company to the world.

Liu Chiping first contacted Tencent in 2003. At that time, Tencent was founded for five years, and he was also an executive in the Asian Investment Banking Department of Goldman Sachs Group. Tencent had about 1000 employees at that time, and was slightly famous for its QQ information service. By selling advertising and value-added services on QQ, Tencent's annual revenue was 735 million yuan (about 108 million dollars), and later began to slowly access game services.

Unfortunately, the impact of the Internet bubble made many early investors worried about Tencent's development prospects. They also sold most of their Tencent shares to Naspers, a South African media company. Later, the Goldman Sachs team led by Liu Chiping was responsible for Tencent's IPO. In one process, Liu Chiping left a deep impression on Tencent's senior management team.

In fact, Tencent offered him a job before the roadshow. Ma Huateng and other co founders have computer science background, but they lack international experience and need someone to help build a sustainable business strategy of the company.

Tencent raised 1.4 billion Hong Kong dollars (about 180 million US dollars) in the Hong Kong market in June 2004. At this time, Tencent's game business has shown great prospects for development, and its revenue increased by 55% year on year. At the end of 2004, Ma Huateng and other co founders ran to Liu Chiping again. Finally, Liu Chiping accepted his new job at Tencent. He believes that the new job can tap his skills as an engineer. At first, Ma Huateng gave Liu Chiping the position of chief strategic officer, and made him responsible for investor relations and mergers and acquisitions.

Liu Chiping brought the management standards of American companies to Tencent, such as setting revenue targets and formulating a five-year development plan for new businesses such as social media and digital media. "This kind of regularity is urgently needed for young companies that were still developing at a high speed in 2004," said Hans Tung, managing partner of AnalysisPress investment company GGV Capital.

In 2006, Ma Huateng appointed Liu Chiping as the president of the company and was responsible for the daily operation of the company. Although Tencent's revenue has doubled, the five founders understand that the company needs more professional managers. Within the company, they are considered as future successors. But in the end, Ma Huateng chose Liu Chiping.

"Liu Chiping is a great business analyst. He knows what war to fight."

In the next five years, Tencent ushered in rapid growth, and its games and QQ were known by more Asians.

In 2001, the games produced by Tencent were popular in Internet cafes in China. At the same time, the company also started a business, selling virtual skins, therapeutic potions and other digital small ideas to game players. In addition, the company also has a popular social network Qzone. Yuri Milner, a Russian venture capitalist, believes that "the combination of social networks and games is Tencent's first creation."

During this period, Tencent gained a reputation as a "public enemy". Many Chinese entrepreneurs worry that if they invent or create cool products, Tencent may copy them soon. At that time, many western media also questioned Tencent's innovation and did not value their business model. In addition to being pressured by the media, Tencent and 360 also launched a "3Q war" that attracted countless abuses.

In 2011, Ma Huateng and Liu Chiping felt it was time to reflect on themselves. Tencent invited 72 industry experts and held 10 closed door meetings, which were also considered as "conference of the gods" by employees. These experts were asked to give criticism and suggestions to the company's executives, who were asked to listen only to their opinions. These feedbacks made the executives understand that the public relations faced by the company were worse than expected. "We began to realize that the company did encounter some problems," Liu said. In fact, the company really needs to make some innovations to change the reputation of "ferocious plagiarists" left to the outside world.

Tencent was lucky that they found the answer soon. Late one night at the end of 2010, Zhang Xiaolong, the founder of an email company acquired by Tencent, asked Ma Huateng whether to develop a social network suitable for smart phones. Ma Huateng agreed. Later, Zhang Xiaolong and his 10 colleagues developed WeChat together.

With the booming sales of smart phones in China, WeChat was officially launched in 2011. In 2012, WeChat users reached 100 million; One year later, the number of users tripled. Using the experience of QQ's growth for reference, Tencent allows enterprises to set up "official accounts" to spread information and interact with users. In this way, the network effect is further developed.

At the same time, Tencent is also learning how to develop its strengths and circumvent its weaknesses. In 2013, Tencent gave up its struggling search business, transferred it to its competitor Sogou, and invested $448 million in Sogou. In 2014, Tencent sold its equally unsuccessful e-commerce business to JD and invested $214 million in JD, obtaining 15% of the latter's shares.

In addition to these transactions, Tencent "participated in all things," said Zhang Lei, founder and CEO of Hillhouse Capital Group and an early investor of JD and Tencent. After completing these transactions, "Tencent only focuses on the best things that can be done, and authorizes other businesses to partners." Zhang Lei credits Liu Chiping for these initiatives. "Liu Chiping is a great business analyst. He knows what war to fight."

"If you don't accept investment and they invest in your competitors, it will be fatal."

WeChat now has 938 million monthly active users, and more than 1/3 of them spend as much as 4 hours on the product every day. It is worth mentioning that each user in the world spends an average of one hour on Facebook, Instagram, Snapchat and Twitter every day.

In China, Tencent's services are so common that it is difficult for start-ups to refuse alliances or accept investment. Andy Mok, the founder and president of Red Pagoda Resources LLC, a Beijing consulting company, said: "This is a bit like a line in the movie Godfather: I will give you a condition you can't refuse. If you don't accept the investment and they invest in your competitors, it will be fatal."

With the development of WeChat, Tencent began to try to play the role of a global technology leader. Like Apple, Amazon and Facebook, Tencent is about to move into its expensive new headquarters. Ma Huateng mainly focuses on the development of products and technologies, and presides over the company's biweekly management meeting, which can last 10 hours or more. In addition, he is also responsible for handling government relations.

For a long time, Liu Chiping has been seeking suitable international M&A targets. In China, Tencent's development is approaching saturation. If we want to maintain the same growth rate, we need to explore more international markets. He revealed that Tencent wanted to make a major strategic investment in Snapchat in 2013, but it only invested a small part in the end. He declined to reveal the number of investments he wanted to make at that time. "At that time, Evan Spiegel was not sure whether this was a good thing for the company's development. At the last moment, he rejected Tencent's strategic investment."

At the beginning of 2014, Tencent was interested in acquiring WhatsApp, an information service product. This acquisition may shock the world, and can quickly make Tencent have an impact worldwide. However, when approaching the final stage of the agreement, Ma Huateng, who was very interested in the transaction, had to undergo a back operation. This delayed the negotiation between Silicon Valley and founder Jan Koum. Later, Mark Zuckerberg bought WhatsApp at a price of 19 billion US dollars, which is more than twice the price Tencent intended to offer before.

In 2016, Liu Chiping found the investment target again. Softbank, a Japanese technology giant, is considering selling its stake in Finnish mobile game company Supercell. "When Softbank told us that they were looking for buyers, we took a deep breath and said we would consider carefully," Liu said. Later, Tencent began to negotiate to acquire the company and developed the very famous game Royal War.

Despite his high fever, Liu Chiping took a 10 hour flight to Helsinki to meet the top management of Supercell. During the preparation period, Liu Chiping's due diligence was to play "Royal War", and achieved high scores. In Finland, he also won over the employees of Supercell. After several twists and turns, Tencent finally successfully acquired Supercell.

In order to expand globally, Tencent also tried to introduce WeChat to different countries. But some of the services that have been very successful in China have run into trouble abroad. For example, design: Chinese users have become accustomed to super large apps, which usually contain many complex functions. In the United States, there are different streamlined design apps for booking movie tickets, ordering meals, watching news, etc.

Besides WeChat, Tencent also wants to bring WeChat payment abroad. In China, the number of WeChat payment users has reached 600 million, and even competitor 360 is using it. This service takes advantage of the low transaction cost provided by the Bank of China to allow users to send bonus packets to each other. In the West, bank fees are quite high, which makes such small transactions impractical.

Tencent's overseas expansion will also encounter strong competitors Facebook and WhatsApp. These two applications have great market advantages outside China. Liu Chiping said: "Going to sea is a challenge that every Chinese company will face. We are trying to make WeChat international. The reality is that there are other products in the market."

To be continued