INTERNET: Tencent, Lenovo Pile Into New Platforms
Bottom line: New online service platforms from Lenovo and Tencent could both do reasonably well, but will face challenges due to inexperience and product limitations, respectively.
The “platform” concept is becoming a hot area in China’s overcharged Internet world, as companies look for newer and better ways to deliver their products and services over a growing number of devices and online channels. That rush is behind 2 of the latest big moves in the space, one from PC giant Lenovo (HKEx: 992) and the other from Internet titan Tencent (HKEx: 700).
Lenovo’s new foray into online products and services has been in the headlines for the last few months, but I’ve finally received some clarification on what exactly is behind its plans for an online platform with the new name of ShenQi. Meantime, Tencent is aiming to boost its leading position in the online gaming space through a new tie-up with household electronics giant Hisense (Shanghai: 600060). That tie-up looks set to produce a new gaming TV that could compete with more traditional consoles from Microsoft (Nasdaq: MSFT) and Sony (Tokyo: 6753).
The Chinese companies are hardly alone in this kind of rush into new platforms, which has seen Internet firms develop an interest in device makers and vice versa. Just this week, e-commerce leader Alibaba (NYSE: BABA) announced one such move with its $590 million investment in smartphone maker Meizu. (previous post) Major western companies kicked off the trend, with software titan Microsoft now producing both gaming consoles and smartphones, and Internet giant Google (Nasdaq: GOOG) experimenting with smartphones, smart cars, and wearable devices.
Against that backdrop, this move by Lenovo into more Internet-focused products and services seems like a logical step and is similar to what rival device maker Apple (Nasdaq: AAPL) has done with its app store and other products and services delivered over the Internet. Lenovo’s new initiative was in headlines last week when reports emerged that leading search engine Baidu (Nasdaq: BIDU) was preparing to invest $100 million in the project. (previous post)
Those earlier reports called the venture Fancy Maker, and didn’t give much description of the project beyond to say it was centered on e-commerce and would launch in April. Lenovo’s PR has now informed me the platform will simply use its Chinese name, ShenQi, as its official English title, since it will initially be targeted at a domestic audience. A spokeswoman confirmed the earlier reports that the platform is set for a launch on April 1, though she declined to confirm the Baidu investment.
Lenovo began talking about this initiative as early as last fall, but only recently announced the Chinese name and leadership for the venture. The foray is centered on Lenovo’s desire to develop products and services centered on the “Internet of Things”, a reference to a world where devices can talk to each other to perform various tasks. Such tasks could run a wide range, from a person using his cellphone to turn on the air conditioner before arriving home each day, to allowing a person to track his pet or child at home while he’s at work during the day.
We’ll have to wait and see what ShenQi looks like when it hits the market in April before making any major predictions on its chances for success. Lenovo’s limited past record at such efforts is certainly quite checkered, including a failed Internet tie-up with Time Warner (NYSE: TWX) at the height of the Internet bubble more than a decade ago. But much has changed since then, including Lenovo’s globalization, so perhaps it will be more successful this time.
Next let’s look at Tencent, which wants to extend its dominance in PC and smartphone-based gaming to the TV world with its new tie-up with Hisense. (Chinese article) The companies are officially calling their project a “TV gaming platform” with the Chinese name of Juhaowan, saying it will integrate hardware with other services. The product made its debut in a Hisense smart TV model this week.
The new platform is different from traditional consoles in that it’s actually built into TVs rather than a separate device like Microsoft’s Xbox or Sony’s PlayStation. That seems smart in some ways, as such an integrated device could be easier for consumers to use. But it will also sharply limit the number of users for the platform, since Hisense isn’t one of China’s leading TV makers.
We saw a similar initiative in the gaming space last year, when telecoms gadget maker ZTE (HKEx: 763; Shenzhen; 000063) launched a more traditional console product with faded online game operator The9 (Nasdaq: NCTY). (previous post) I haven’t heard anything about that initiative recently, probably because it’s destined to perform poorly. Tencent’s tie-up could do better, though its choice of Hisense and an integrated TV product could ultimately limit the product’s chances for success.
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