Tencent Criticized by China State Media as Some Accounts Limited

Tencent Holdings Ltd. (2988)’s WeChat instant message application, which has 396 million monthly active users, has been criticized by state media and had some accounts limited by the government in northwest China.

WeChat’s Moments social networking function isn’t as “pure” as before, according to a commentary in the People’s Daily today, which cited increased advertising and promotions. China will take temporary control measures of some instant messaging tools in the city of Hotan in the province of Xinjiang, Caixin reported, citing a government notice.

Tencent has become Asia’s largest Internet company on the back of growth in WeChat, known as Weixin in China, as well as its QQ app that has 848 million users. WeChat has been valued at $64 billion by analysts who are counting on the company’s ability to monetize the service, partly with advertising.

“The backlash could potentially reduce how much advertising they want to have,” said Mark Tanner, the founder of China Skinny, a Shanghai-based research and marketing agency. “Obviously it has an effect on their revenue.”

Tencent said on May 21 it would limit the number of WeChat contacts users can have if they use the app for marketing.

Services such as WeChat and Sina Corp. (SINA)’s Weibo have grown in China as a way for people to communicate and share information in a country where most media is controlled by the government and the Internet is censored.

Instant message apps have come under increased scrutiny, with the government planning a campaign against “bad or harmful” information spread through such services, the Beijing News reported, citing a government work meeting. The crackdown is part of efforts to maintain state security and social stability, it said.

Rising Tensions

The regulations and criticism come amid increased ethnic tensions and rising discontent about corruption, inequality and pollution, especially in the lead up to the 25th anniversary of the Tiananmen incident on June 4.

China has cut Internet access during previous terrorist attacks in Xinjiang province. In July 2009, authorities suspended Web access and short message services and international direct dialing after people were killed during a knife attack in the region, according to Xinhua news agency.

“This is repeating a mistake made five years ago when they cut the Internet in Xinjiang which partly caused the chaos in the region due to information blockage,” said Isaac Mao, an advisory board member to censorship monitoring website Greatfire.org. “This seems to be an old trick that breaches civil rights with one exaggerated excuse.”

Control Measures

The Chinese government began a one-year anti-terror campaign in Xinjiang last week after assailants attacked an open-air market on May 22, killing people. It has blamed past attacks on the East Turkestan Islamic Movement, a group that seeks an independent state for ethnic Uighurs and has been labeled a terror group by the U.S.

The control measures in Hotan affect WeChat and QQ accounts in the region and include limits on keyword searches and filters, Caixin said.

“Even though WeChat doesn’t have the one person to millions broadcast abilities, it is still a very powerful platform for transmitting information and rumors,” said Bill Bishop, a Beijing-based independent media consultant. “It makes perfect sense that the government is going to start spending a lot more time and putting a lot more pressure on Tencent to start to clean it up.”

Jerry Huang, a director of investor relations at Tencent declined to comment on the People’s Daily commentary and also about the situation in Hotan.

Zhang Jialong, a 26-year-old blogger, said he was fired by Tencent this month for meeting with Secretary of State John Kerry in February.

To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net; Aaron Clark at aclark27@bloomberg.net Robert Fenner, Aaron Clark

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