Today, in China, Tencent functions as a door to the Internet: it often is the very first app people download when they get a smartphone. It connects them to banking services, games, e-commerce sites, taxis/ride-sharing services, hotel and flight booking services, and much more. This metaphorical door manifests itself in real life in the form of a messaging app with more than 1.2 billion active users (2014 numbers).
For the longest time, VCs and industry observers have wondered why no one has attempted to build the Tencent for the West — a single platform (preferably messaging) that opens up to an enormous, money and attention sucking ecosystem. Facebook comes the closest to this vision, but even they have fallen short of what Tencent has achieved.
There are a few reasons that come to mind: infrastructure, socioeconomic and radical demographic differences. But the biggest reason of all, for better or worse, has got to do with something that cannot be quantitatively measured or easily changed: culture.
China, governed by the Communist Party, never had the opportunity to build a robust advertising and media infrastructure. Out of fear that these technological mediums could accelerate the propagation of ideas that threatens the Communist Party’s ideology and rule, the government in China has, for the longest time (and they still do) kept innovation in these mediums to the bare minimum — even if the opportunity cost is huge to their citizens.
The priority for the Party is the ability to maintain a stronghold over its citizens, not ensure that they have access to the latest technological innovations. So from day one, if a business decided to go digital, they had to find a revenue stream that was not subsidized by advertising. Realistically, there’s only one other alternative: to get money directly from the consumers, either through e-commerce sales or commissions from sales to third-party partners.
From day one, businesses in China have internalized the mindset that in order for them to survive, much less thrive, they would have to rely on their customers opening up their wallets.
Now, contrast this with how consumer mindset is in the United States. We expect anything and everything online to be completely free of charge, unless we’re making a purchase for a physical good. We expect songs, movies, apps, services and news to be available to us without any charge. If there’s a charge, we find a way around it either by torrenting, circumventing paywalls or gaming the system. Hell, we don’t even want to pay a comparatively small charge in exchange for gaining free information: viewing ads. Previously, the mentality goes something like this: if you don’t want to pay for (nonphysical) goods and services on the Internet, there’s a little trade you can make… you can watch/click on an ad that takes up a small fraction of your time, and you’d get the product without cost. But since the advent of ad-blockers, we don’t even feel the need to view ads. It’s not like the New York Times or the Wall Street Journal is going to shut down tomorrow if I turn my ad-blockers on.
So in the West, because of how robust, complex and intelligently we’ve build our advertising networks to be, we expect to be able to receive (nonphysical) goods and services online without having to open our wallets, ever.
If Tencent were to replicate the way it operates in China and offer their services to customers in the United States tomorrow, there’s a huge chance that they will fail. As it turns out, building a messaging or gaming app alone is simply not enough to create the necessary inroads to build that proverbial door.
Not without a radical change in culture, at the very least.
Source: KPCB’s Internet Trends 2015 Report