Profile: Tencent president SY Lau to capitalise on Google's departure from China

As the newly promoted president of online media at Chinese internet giant Tencent, SY Lau has been quick to immerse himself in the launch of the company’s first corporate branding campaign.

After more than a decade in the China market, Tencent is using the campaign as a platform to engage with its enormous user base and, perhaps more importantly for a brand specialist such as Lau, to project itself as more than just another online media owner.

“We felt that as a product we are wonderful, but people don’t buy products - they like to have an emotional affinity with a brand,” says Lau. “It was about time for us to share with our loyal users, to let them have a stronger brand affinity with us. And to assure them that they belong to a great, huge community whereby the internet actually empowers life.”

The last point is crucial for Lau. The ethnically Chinese Malaysian is keen to highlight Tencent’s role not only in helping shape the booming online market in China, but also, as a major provider of content, in contributing to the development of Chinese society.

Lau has been pursuing this digital mission since joining Tencent as EVP of corporate branding and media services in 2006. This followed over 10 years working agency side in China, including stints as country head at BBDO and Publicis. “You could say I was in search of a second life,” he says.

The new beginning took Lau into the heart of one of China’s most recognisable digital brand icons: QQ. Tencent’s instant message brand is the biggest player in China’s online media world - last month Tencent announced QQ had hit the 100 million mark in terms of simultaneous users. Instant messaging aside, the QQ brand is also a clear market leader in a number of other online categories - particularly successful are gaming and social networking.

While Lau likes to talk up the social implications of QQ’s popularity in terms of providing a place where online users can create their own content, he is also clear about the impact on the bottom line. “From a commercial standpoint, such little conversations are no longer little,” says Lau. “They have become mighty.”

Tencent’s financials certainly support this assertion. In its 2009 results, the company boasted gross profits of US$1.25 billion, up over 70 per cent from the previous year. Market capitalisaton for the Hong Kong listed firm is estimated at $38 billion.

But while QQ to a large extent defines Tencent, the company is much more than this alone. Its portfolio - and income - includes various other digital offerings such as a C2C auction site (Paipai.com), a number of popular portals and a growing search engine business, Soso.

It is the last venture in particular that many tech watchers are keeping an eye on. Following the much-hyped departure of Google from China, the country’s biggest search player Baidu was identified as the most obvious recipient. Slowly, however, many in the industry began to take a closer look at Tencent’s search proposition.

Until late 2009, Soso was powered by Google and was estimated to be providing up to 30 per cent of Google’s traffic in China. And although Soso’s share of the Chinese search market is still less than six per cent, leveraging the huge reach of QQ could fire its potential.

Lau himself remains characteristically diplomatic on the potential benefits to be had from Google’s exit. “It basically means we have bigger responsibility to serve the needs of our users better.”

Where he is more open, however, is on the importance of search as a driver for Tencent’s continued growth. “Tencent views the opportunity to provide a one-stop user internet user experience as a crucial part of our platform strategy. Search is an important internet usage and we have always placed appropriate company resources behind this, and will continue to do so in the future.”

While search will be one of many points of investment for Tencent in China, the company’s domestic dominance and financial strength also begs the question of whether its business model can be replicated overseas. Tentatively, the company launched an international version of QQ at the end of 2009 and has also made small investments in the US, Vietnam and India.

“Tencent is a very cautious company,” he says. “We take our steps in a very calculated manner. Inevitably any company that becomes the kind of size that we are has to look beyond the local market. We always have the idea of going abroad. Recently we have become more proactive in this area.”

This proactive stance came to the fore earlier this month when Tencent invested an estimated $300 million investment in Russian internet firm Digital Sky Technologies. It is thought the deal will open the way for Tencent in Russia and beyond.

“The investment allows us to benefit from the fast-growing internet market in Russia, as well as to leverage our technical and operational know-how to strengthen the leadership position of DST and explore new business opportunities in the Russian-speaking internet markets,” says Lau.

With no signs of slowing, the obvious question for Lau is just how big Tencent can grow. Turning his attention back to China, he is still as enthusiastic about the domestic market as he was when he joined Tencent four years ago.

“By 2014, you will see half of the nation covered by internet and this will impact our numbers for instant messaging as a day-to-day tool. More than 90 per cent of computer users in China are active users of QQ, so by 2014 if the country has 600 to 700 million internet users, our influence will go beyond our imagination.”

SY Lau CV

2010 President, online media, Tencent
2006 Executive vice-president, corporate branding and media services, Tencent
2005 CEO/managing partner, Publicis China
2000 CEO, BBDO China
1998 MD, Dentsu Young & Rubicam, Shanghai

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This article was originally published in the 22 April 2010 issue of Media.