Who Are China's Big Tech Companies & What Do They Do?29 May 2020
Updated: December 2020
Did you know that the number of people on the Internet in China is more than double the population of the US?
As China’s role in the global economy accelerates, established US technology firms are beginning to feel the heat. With a population of almost 1.4 billion, China is home to over 17% of the world’s population and some of the hottest technology businesses on the planet.
If you’re looking to forge a career in Big Tech, getting a foot in the door and riding the wave of Chinese tech companies could open doors to a world of exciting opportunities.
So, are you ready to explore what makes China so competitive in global markets, who owns TikTok, and why you might want to work for a Chinese company to kickstart a career in tech? Join us as we take a deep dive into four of the best Chinese companies to work for and investigate what’s driving their astronomical success.
Tencent: The World’s Largest Video Game Company
While the likes of Nintendo and Sony have graced our screens with everything from Super Mario to Gran Turismo, you’ve probably never heard of the Shenzhen-based conglomerate, Tencent.
Tencent holds the crown as the largest video game company in the world. As the first Asian technology company to break the $500 billion mark, the tech giant is one of the largest Chinese companies by market capitalisation — surpassing Facebook.
With major stakes in the likes of Call of Duty, Fortnight, and creator of WeChat (China’s most popular messaging app with over a billion monthly users), Tencent is also one of China’s fastest-growing companies.
The History of Tencent
So, how did Tencent manage to establish itself as such a huge force in the global technology market?
Tencent was founded in 1998 by four of the greatest entrepreneurial minds in China: Ma Huateng, Xu Chenye, Chen Yidan and Zeng Liqing. Initially establishing itself as an internet service provider, the company raised its first chunk of venture capital through the release of a messaging platform called OICQ in 1999.
After dodging fears of a lawsuit from American competitor, AOL, who ran a similar product under the name ‘ICQ’, the plucky Chinese startup rebranded as ‘Tencent QQ’.
A few years down the line, Tencent leveraged a simple business model of advertising and a premium subscription service to turn its first profit in 2001. Following its release onto the Hong Kong Stock Exchange in 2004, the company grew arms and legs with the release of mobile messaging platforms and an increased focus on character licensing.
Character licensing involves using fictional characters to sell merchandise. Whether it’s selling breakfast cereal with the help of Teenage Mutant Hero Turtles or 007 promoting the latest Aston Martin, retailers will pay brands to help them target a specific audience.
Tencent really started to take shape in 2008 when it doubled down on equity investments and acquisitions of smaller entertainment companies. After claiming majority equity ownership of Riot Games in 2011 and spending $215 million for a 15% stake in a Chinese eCommerce store, Jingdong, Tencent’s valuation surpassed the $200 million mark in 2015.
The Tencent Business Model
The secret to understanding Tencent’s wild success is its sprawling business model.
While Nintendo has taken a single-track approach to become a dominant force in the video games industry, Tencent’s business model stretches in all directions. Instead of simply investing in gaming franchises and acquiring smaller video game smaller developers, Tencent is on a mission to dominate the entire entertainment sector.
From social networking to music streaming, Tencent’s business model rivals the likes of Google and Facebook as it continues to hook users into a growing ecosystem of online services.
Tencent has two core revenue streams:
- Value-added services. Tencent uses a ‘freemium’ payment plan across most of its platforms. Customers can enjoy a basic version of each service and choose to upgrade with paid add-on services. In 2018 alone, the viral success of the mobile game, ‘Honour of Kings’ grossed over $2 billion from players using real money to buy virtual items.
- Online advertisement services. Much like Facebook and Google, a big part of the Tencent business model revolves around online advertisements. Specifically, WeChat provides Tencent with a huge amount of customer data which they can harness to deliver hyper-targeted ads.
Crucially, Tencent’s business model relies on the power network effects to generate a virtuous cycle of enhanced relevancy (just like Google’s business model ). More data brings improved relevance; improved relevance brings more adverts; more adverts bring more revenue, more revenue means more R&D; more R&D brings enhanced services for customers, and so on.
If you’d like to learn more about the Chinese conglomerate’s ingenious business model, check out this short video from entrepreneurial coach, Denis Oakley.
Bytedance: The Home of TikTok
Unless you’ve been hiding under a rock for the last year, you will have heard about the global internet sensation — TikTok.
In 2020, the short-form video platform had more downloads on the app store than both Facebook and Instagram. As TikTok continues to take centre stage in the US market, Bytedance, the brains behind the craze, is beginning to raise eyebrows across the world.
In fact, Bytedance has recently toppled Uber to hold the title of the world’s most valuable tech startup.
The History of Bytedance
The story of Bytedance begins in 2012 with the launch of a Chinese news aggregation app called Jinri Toutiao. The company’s Founder, Zhang Yiming, leveraged the power of machine learning and Big Data to provide users with relevant news and entertainment content.
The flurry of ad revenue from Yiming’s first venture gave him the capital to commence what would become a five-year shopping spree of epic proportions.
In 2016, Bytedance invested $25 million into Indian news app, Dailyhun, and claimed majority equity ownership of BABE BABE, an Indonesian news aggregation platform that specialised in delivering hyper-relevant content. Yiming and his team also acquired the multi-lingual video-based storytelling platform, Flipagram — opening doors to a growing archive of music copyright licences and User Generated Content (UGC) .
These strategic investments placed Bytedance in the perfect position to launch Douyin — a short video editing and sharing application for the Chinese market that would soon grow into a viral sensation.
In 2017, the colossal success of Douyin prompted the company’s decision to launch an international version of the app under a new name, Tik Tok. While it took Instagram almost eight years to reach a billion downloads, Tik Tok was an instant hit — topping the one-billion mark in less than three years.
Later that year, the prospering social media giant also acquired Musical.ly to integrate their advanced licencing and lip-syncing technology into both TikTok and Douyin.
While TikTok remains extremely popular in global markets, Bytedance is focusing on Douyin as the pioneering testbed for future innovations. From video-based facial recognition technology to purchasing products in just a few clicks, TikTok is set to radicalise the future of social media. Additionally, Bytedance’s recent launch of the video-based social messaging application, Duoshan, marks the beginning of a much-anticipated battle with Snapchat and Instagram.
What is Bytedance’s Business Model?
So, how has Zhang Yiming turned a video editing app into one of China’s fastest-growing companies?
As we’ve already explored with Tencent, Bytedance’s business model revolves around a ‘flywheel effect’ of using data to feed innovations, improve customer experiences and pull more customers onto its social networks.
Bytedance uses an attention-based business model to generate advertising revenue across it’s growing fleet of entertainment apps. In 2020, reports suggest the Chinese giant recorded over $37 billion in annual revenue. With over 1.5 billion monthly active users , Bytedance‘s ability to combine a captive audience with customer data presents advertisers with a golden opportunity.
Alibaba: The Largest Retailer & E-Commerce Company on the Planet
Did you know that for every ten online sales in China, eight of them are made through Alibaba? While Amazon dominates the US market, Alibaba steals the show as the largest retailer in the world with a market cap exceeding $400 billion.
When Was Alibaba Founded?
Since its humble beginnings as a bootstrapped dream by an ex-school teacher in Eastern China, Alibaba has completely revolutionised the eCommerce market. What was once a startup employing only 18 people now has over 22,000 employees.
Founded in 1999 by Jack Ma, the plucky entrepreneur started by spearheading a crack team of eighteen tech pioneers who were interested in streamlining global wholesales through a dedicated online platform. After testing the waters with his first business, China Pages, Ma and his team successfully attracted $35 million worth of venture capital.
While the aftereffects of the Dotcom Bubble left financial scars across much of the world, China’s unique political position meant its blossoming economy was largely unaffected.
After launching a consumer e-commerce site, Taobao.com, and optimising online payments with the birth of Alipay in 2003, Alibaba continued to dominate. Additionally, intervention from the Chinese government meant Alibaba was protected from US competition and handed somewhat of a monopoly . A few years on, the decision to go public in 2014 saw the company shock Wall Street with a mesmerising initial public offering of $25 billion.
Following a series of scandals and controversies over counterfeit allegations from the US, Jack Ma stepped down from CEO in 2019 and the brains behind China’s biggest shopping holiday , Daniel Zhang took the top seat.
What Is Alibaba’s Business Model?
While Amazon’s business model stretches from futuristic grocery retail to creating cutting-edge smart cities , Alibaba is strictly retail-orientated. The Chinese eCommerce giant has three core revenue streams:
- Alibaba.com — B2B Wholesaler.Much like Google’s search-orientated business model , Alibaba.com generates ad revenue from merchants who are willing to pay to boost the exposure and searchability of their products. While it’s free to list products on the platform, Alibaba sells a series of bolt-on features to help merchants increase sales.
- Taobao — B2C eCommerce.Similarly, Taobao is a fee-free marketplace that receives advertising revenue in return for pushing listings to the top of the results page. With over seven million active sellers, standing out from the crowd is extremely competitive.
- Tmall — Connecting Multinational Brands. Tmall is an online gateway to connect established brands with international markets through a single web platform. Tmall’s online physical goods GMV increased by 19% year-over-year — supported by the lightning success of the company’s consumer electronics, fast-moving consumer goods (FMCG) and home furnishing categories.
Baidu: China’s Equivalent to Google
When Google pulled the plug on its Chinese dream in 2010, Baidu was left with free roam to become China’s leading search engine platform. Much like Google, Baidu generates Pay-Per-Click (PPC) ad revenue from businesses who wish to push their site up the Search Engine Results Page (SERP).
That said, recent years have been far from plane sailing for the $37 billion technology titan. The rise of Chinese social media apps and search-enabled commerce platforms are chipping away at Baidu’s ad-centric business model. Between January 2018 and January 2019, Baidu’s stock prices fell by a massive 36% and recent reports show a 19% drop in ad revenues for Q1 of 2020 compared to the previous year.
While the Chinese people used to rely on Baidu to filter the web and pinpoint specific results, businesses like Alibaba and Bytedance enable users to jump straight to the source, without using Baidu as an in-between.
Ping An: China’s Data-Savvy Fintech Conglomerate
Another of China’s big tech companies is an insurance conglomerate called Ping An , the world’s largest insurer by market capitalisation. Although Ping An is a holding company for several subsidiaries, its main business is insurance, banking and financial services.
It has a very innovative and digitally-savvy operating model built around its core life and health insurance business which in 2020 Q4 accounted for 67% of net profit . Surrounding the insurance company are a set of apps, like Good Doctor (a digital medicine platform) and Lufax (a wealth advisory arm). Customers can also buy a car, get a loan or get educated through other Ping An owned applications. The “users” of the adjacent apps are profiled through a super smart data analysis and then targeted when the timing is right with relevant insurance products to become insurance “customers”. In this way, their approach to “users” and “customers” is similar to how social media sites view the people who use their services.
To highlight how tech savvy Ping An is, interviews to become agents at the insurance group, first get profiled by an intelligent machine which grades their voice, choice of words and bodily gestures. If you fail to please the robot, you don’t get passed to a human for the second round of interviews!
Explore New Horizons
While Silicon Valley has dominated the world of Big Tech over the last decade, the viral growth of the Chinese technology sector sparks exciting international career opportunities.
Whether it’s landing a place on the Tencent MBA Graduates Programme or developing the next big thing at Bytedance’s London offices , the Chinese market offers a world of new horizons to kickstart a prosperous career in Big Tech.
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