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Tencent apps campaign underscores ad ambitions

By Adam Skuse (Global Times)

08:34, March 13, 2013

Chinese Internet behemoth Tencent recently announced it is launching a campaign to boost the revenues of third-party developers who publish apps on its open platform.

While this is good news for developers, it is by no means a purely altruistic move on Tencent's part. Rather, it is the latest in a long line of initiatives by the firm to capitalize on its vast user base and wide range of services to provide marketers with a broad audience that can be spliced and diced for more precise ad targeting. If Tencent's strategy works, it will be second only to Baidu in its attractiveness as an online marketing platform.

Tencent's open platform allows developers to create games and other services that can be accessed by users through its Q-zone, Pengyou and Weibo social networks. Its newly announced Tengfei campaign asks developers to leave spaces in their apps for advertising, which Tencent will fill from its network of advertisers. To encourage uptake, it will not charge a revenue sharing fee for the first half of this year.

This benefits Tencent as it allows it to oversee the quality of adverts carried by app developers, increases the size of its advert placement inventory and increases its information on user interaction with adverts.

This is all part of Tencent's efforts to make use of the "big data" it has available regarding the activities of its over 700 million users across a range of services that include social networks, video, e-commerce, search, gaming and mobile. The ultimate aim is an intelligent ad delivery system that will be able to present users with relevant adverts based on their usage of all Tencent's different services.

Offering the better return on investment (ROI) and feedback on effectiveness to advertisers that a smarter, more integrated ad system will provide would put Tencent way ahead of most of the field. This includes Sina, whose progress in monetizing its microblogging service has been disappointing. Meanwhile, Sina's core web portal business is flagging as marketers demand a more sophisticated ad platform.

The advantage of being ahead in this respect is particularly large in China, where the more sophisticated marketers and ad buyers have long bemoaned the lack of transparency and finesse surrounding ROI and ad placement.

Other moves Tencent has made recently toward its goal include hiring Peter Cheng, former head of Internet advertising platform AdChina, to lead its online media group advertising platform; plans to integrate its payment service TenPay and fast-growing mobile messaging system WeChat; and the opening of its AdExchange system to allow advertisers to bid for placements.

This is all on top of an overall company reshuffle last year aimed at streamlining its operations.

However, success is not guaranteed. First, effective integration is a huge technical and managerial challenge. Tencent must also nurture a marketing team that can really sell the system to clients who, due to their relative lack of sophistication - particularly in second-tier and below cities where the potential for growth is significant - may be unaware of its benefits.

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