This is the first installment of a two-part series that will explore the growing presence in media by China's three largest digital giants.
There has been a lot of coverage recently of investments in the media industry by Internet giants in China.
Public interest reached a new high after the Alibaba Group acquired South China Morning Post, and Ant Financial — also owned by Jack Ma, head of Alibaba — invested in the Caixin Media Company Limited, a group known for its coverage of financial and business news. It would appear that Jack Ma is rapidly developing a media empire.
Of course, Alibaba is not the only giant looking to capitalize on China’s media landscape.
Another Internet giant from China, Tencent Holdings Limited, is also deeply interested in media. Tencent and Alibaba are the only two primarily Internet-based companies in China that occupy spots in the “$100 billion club” — a term referring to companies worth more than $100 billion.
Baidu is China’s third most well-known digital giant. The company’s market capital has decreased from $80 billion to around $60 billion in recent years, but it still occupies one of the largest shares in China’s online advertising industry. According to iResearch, a market research and consulting agency with a focus on Internet media, Baidu and Alibaba divide up more than 50 percent of this market.
Baidu, Alibaba, and Tencent are collectively referred to as “BAT.” The reasons we should care about BAT’s investments into media are twofold. First, through these investments, we can see the economy of traditional government-dominated media collapsing. Second, there is speculation about a secret purpose to these investments. The Communist Part of China has in recent years been pushing for the heightened integration of traditional and new media, and through investment in new media, BAT can be seen to be forging closer ties with the government. Furthermore, the investments serve an important public relations purpose. A strong grip on the media allows BAT to regulate negative publicity.
Because much of the press is tightly regulated in China, news agencies require special licenses. Individuals working for these agencies are offered journalist permits which are non-transferable and are cancelled immediately if the journalist leaves their job.
Online media in China is divided into three classes that are differentiated by the types of press licenses they are assigned.
The first class — “class A” — make up what we normally consider to be traditional media. Thousands of newspapers, journals, television stations, and radio stations exist in China, most of which have a strong online presence. Except for several magazines, most of these are state-owned. Their websites are assigned first-class press licenses, which allows them to issue permits to their journalists and to publish original content.
In the past, class A media could only accept capital from state-owned entities and were barred from being listed on the stock market. Because certain sections of the media is censored in China, the government had to be careful what was traded on the market, lest news agencies fall into the private sector and out of government control. Thus, many companies split their agencies into two parts. The coverage department — the department in charge of reporting the news — remained state-controlled, while the operations department was put on the stock market. In this way, media was able to take advantage of free-flowing capital without the government losing its grip on news coverage.
“Class B” media is not state-owned, but instead composed of large private businesses, such as Sina — the company behind Weibo, one of China’s most popular microblogging platform. They hold second-class press licenses, which allows them to republish original news from class A groups. They don’t technically have the right to conduct interviews since they aren’t allowed to issue journalist permits for their employees, but this is often overlooked in certain areas which are considered non-sensitive, such as in sports, entertainment, and technology.
Class B media may invest in class A, but are not allowed to make full acquisitions of the latter, although a couple of exceptions have been made with magazines. The reason that Alibaba was able to do so in the case of the South China Morning Post is because Hong Kong does not fall under the same legal constrictions as mainland China. However, class B may fully acquire another class B or class C media group.
The third group — “class C” — is the largest. They are agencies or bloggers without any news qualifications, but are considered media since they actively publish on their websites, microblogs, and WeChat public accounts. WeChat is China’s most popular mobile text messaging app which includes a news feed where users can publish or share articles.
This is the main breakdown of the media landscape in China and the battleground in which BAT is waging its campaigns.
To better understand the campaigns of BAT, it is worthwhile looking at each company individually.
One of Tencent’s most well-known holdings is the web portal Tencent QQ, which is a website that brings information together from a variety of sources. The QQ franchise is perhaps most well-known for its messaging platform, but the company has also set up multiple news aggregator apps and websites.
Over the past decade, Tencent has been launching web portals in different provinces and cities, in an attempt to dominate local news and services across China. This campaign was launched through a partnership with the Chongqing Daily News Group in 2006 — since which time Tencent has been launching at least one portal per year. It now has 13 local portals which cover vast swaths of mainland China.
These portals are unique in that they are not independent news aggregates. Instead, they operate under subdomain names, meaning they keep the QQ domain name and add a subdomain, such as with Shanghai’s portal, sh.qq.com. This is worth noting because it means that the portals don’t need to individually apply for press qualifications since they fall under the operating scope of QQ.
Tencent has not listed how much capital it has invested in these portals, but the Shanghai and the Guangdong portal have been reporting profits. Some are operated by Tencent itself and some are operated jointly with the local traditional media groups.
Before Tencent launched WeChat in 2012, Weibo dominated China’s social media industry. WeChat has since become most frequently used mobile app in China. Although only one entity — Tencent — owns WeChat, it is really a huge collection of news aggregators, since users can register public accounts, and create and share content. Not only do private businesses have accounts, but almost every state-owned media group also uses WeChat.
In addition to its own projects, Tencent has also been heavily investing in the media industry. In 2012, Tencent invested an unknown amount in the Caixin media group; in 2015, it invested in China’s largest question-and-answer website, Zhihu. In 2016, Tencent spent $100 million on an investment in the video-streaming platform, Douyu — an extremely popular platform with those born in the 1990s.
Tencent investments in the media industry closely relate to its business goals— in short, to go local and to connect people.
To “go local,” Tencent focuses on local business and prefers development in one province after another, as opposed to launching a nationwide campaign.
To “connect people,” Tencent invests heavily in social networking, even though it already owns two of the world’s largest messaging apps, WeChat and QQ Messenger. As with foreign social networking giants, such as Facebook or Twitter, there is a strong focus on connecting with the younger generations.
Ma Huateng, the founder of Tencent, said at an Internet summit meeting in 2015 that his company focuses on two things: content and connection. Although Tencent was not developed as a media platform, it is inevitable that this is the direction the company is leaning. Media produces content, and content connects people.
To Be Continued
(Header image: Tencent’s headquarters in Shenzhen, Guangdong province, Nov. 8, 2010. Qiang Zi/VCG)