Sarah Lacy has a nice profile on the Chinese internet giant Tencent (third largest internet company in the world).
Quick quiz: Who are the three largest Internet companies in the world by market capitalization?
If you guessed Google and Amazon you got two right, but I’m betting few of our American readers guessed the third. I certainly wouldn’t have a year ago. It’s not eBay or Yahoo; it’s Tencent. If you are in the Web space and haven’t heard of them, read this post, because Tencent’s cutesy penguin mascot is only going to cast a larger shadow in the global Web world in coming years.
Low-key Tencent is the largest, most profitable Internet company in China and it has just under 400 million active users–comfortably bigger than the population of the United States. Tencent recently bought 10% of Digital Sky Technology, which in turn owns huge chunks of Zynga and Facebook.
In the past, Tencent has held joint venture talks with Google and Facebook and made acquisition offers to a few smaller Valley companies that haven’t resulted in deals. But if investor pressure on the Hong Kong Stock Exchange is anything like investor pressure on Wall Street, some deal will happen soon.
Tencent’s stock has more than doubled in the last year, and it has a P/E ratio more than six times Google’s, according to Yahoo Finance. You think Apple’s stock has appreciated in recent years? Check this out. Tencent has had more than double the stock appreciation of Apple over the last five years, according to Yahoo Finance. Investors itch for a company like that to go do something with that rich of a stock currency.
Even if you don’t know the name Tencent, you’ve probably heard of its core IM product QQ. Tencent started in instant messaging in 1999 and unlike nearly everyone else, figured out a way to make money from it by selling virtual goods and services to enhance your avatar. Today, the bulk of its revenue comes from online games, with meaningful amounts also coming from virtual goods sold over its social network QZone and ads over its QQ.com portal and search property.
I read a quote from Om Malik saying that Zynga is the Dreamworks of the social web. That’s exactly right.
Think of social networks as malls with movie theaters. Social gaming companies such as Zynga, Playdom, Playfish etc. are like movie studios. How does the Hollywood of social gaming look like? Movie industry is not winner take all. There is room for many studios. This is the same for social gaming. These are early years of building out the new Hollywood of the social web. These are exciting times.
Economist has a feature on the thriving tech startup scene in Europe.
MENTION the name of a big European technology firm in Silicon Valley and chances are the reaction will be a mixture of pity and disparagement. SAP, the German software heavyweight? Past its prime. Finland’s Nokia, the world’s biggest maker of handsets? Missed the boat on smart-phones. Ericsson, of Sweden, the leading vendor of gear for mobile networks? Clobbered by the Chinese.
Turn the conversation to start-ups, though, and ears prick up. When will Spotify, a popular London-based online music service, be available in America? Why did Playfish, whose online games attract tens of millions, sell out to Electronic Arts, an American giant? And what will happen to Skype, whose software handles nearly 10% of international telephone calls, after its divorce from eBay, an online auctioneer?
Californians’ interest is most piqued by a French company, vente-privee.com, the pioneer of “private flash sales”: members—and members only—can pounce when told they have a few days to buy this Prada bag or that Dior perfume at a discount of up to 70%. This year the firm’s revenues are expected to reach €850m ($1 billion), a quarter more than the previous year. It already has dozens of imitators. Even Silicon Valley entrepreneurs have been heard saying they would like to do something “like vente-privee”. In the tech heartland, this is the ultimate compliment.
Here are some of the main points Libin covered during his talk:
Sometimes people say “The best product doesn’t always win”, and are implying that you should focus on other areas, like marketing. In the Internet age, a good product can get the rest of that stuff (marketing, etc.) for free. So focus on that. And then charge for it.
A year ago Evernote was making most of its money from licensing its technology, but it focused on its premium plans ($5/month or $45/year) because that was more scalable. Now, premium subscriptions bring in around $300-400k a month, and licensing represents around $45k.
Evernote has 3.1 million cumulative users, and adds around 10k a day. Around 68k paying customers.
Users have grown more valuable over time. New users convert to premium at a rate of .5%. But of the users that signed up two years ago and are still active, 20% have become paid customers.
This trend is important — most users quit quickly. But the ones that stay become much more likely to pay over time.
Evernote’s cost per user is around 9 cents per active user per month. It makes around 25 cents per user per month. The site reached break even a year and a half ago.
Entrepreneurs should aim to be making money on each new active user as soon as possible. Otherwise scaling just means you’re losing money faster, rather than earning it
Fred Wilson wrote a very nice blog post on the hard work that takes to turn dreams and hopes of a startup to a real business. Truth.
Companies start out as hopes and dreams and stay there for at least a little while. Even after the product has been launched and users are jumping aboard, the company is still in hopes and dreams mode.
But eventually one of three things happens to a company; it goes out of business, it gets sold, or it becomes a real business.
And one of the most interesting things to watch and learn from, as an entrepreneur or investor in entrepreneurs, is what happens when you go from hopes and dreams to the real thing.
There is a big chasm between hopes and dreams and the real thing. Companies need to grow up and go through the ugly adolescent phase. They start to doubt themselves, they start to churn employees, they may even go through a management change or two. Getting across this chasm is hard, it takes tenacity, both from the entrepreneur and team and from the investors. Everyone has to stay the course, buy into the plan, and execute it.
Crossing the chasm to the real thing is not nearly as fun as the hopes and dreams phase. It is hard work and it happens after the gushing media has left your company for the shiny new thing. Your company will take a morale hit and you will have to lead it through this phase.
But getting to the other side is worth all of it. There is nothing as satisfying in entrepreneur land than having a profitable growing sustainable business that doesn’t need another dime of anyone else’s capital. I have watched entrepreneurs stand up in front of their teams and tell them that they’ve reached that point. I get chills every time I see it.
I can really indetify with this as we are putting in this hardwork right now to turn our dreams into reality.
Quick quiz: Who are the three largest Internet companies in the world by market capitalization?
. Tencent has had more than double the stock appreciation of Apple over the last five years, according to Yahoo Finance. Investors itch for a company like that to go do something with that rich of a stock currency.