The Tencent Penguin

20 Things You Should Know About Tencent

Most Americans don’t care about Tencent. It’s big and complicated and made in China for China. But it’s one of the top Internet companies in the world and ushering us into the next era of mobile. A lot of what Tencent is doing today — Facebook will be doing tomorrow. I try to tell friends and colleagues about Tencent, and why I’ve been buying the stock. They tell me to send them an article, but there aren’t any that provide a comprehensive overview. So, here ya go, friends.

  1. With a $160 billion market cap, Tencent is the third largest internet company in the world, behind only Facebook ($190 billion) and Google ($395B).
  2. Tencent dominates mobile in China. Across its apps, it has over 1 billion active mobile app users.
  3. In second place, Alibaba has 188 million MAUs. Said Alibaba founder Jack Ma: “We also invested heavily, but we are not that lucky and not creative, so creative like Tencent, which has WeChat, such a powerful thing.”
  4. With 438 million monthly active users, Tencent’s WeChat is the most popular mobile app in China and the third largest mobile app in the world, after Facebook and WhatsApp. Its active users have grown 57 percent YOY.
  5. For the first seven months of 2014, Tencent drove the most downloads and revenue in China’s iOS App store.
  6. Tencent currently generates 56 percent of its revenue from online gaming. Last quarter, gaming revenue totaled $1.8 billion, with mobile accounting for 25 percent.
  7. Unlike Google and Facebook, online advertising is only ~10 percent of Tencent’s revenue ($335 million). However, this business segment is growing quickly – up 75 percent last quarter – as Tencent expands in-app and video offerings.
  8. This year, Tencent will surpass Google China to become the third largest ad platform in China, behind Baidu (China’s primary search engine) and Taobao (Alibaba’s online marketplace).
  9. While it began as a slick messaging app with awesome stickers, WeChat is now integrating commerce, banking, stock trading, and even hailing/paying for cabs and buying movie tickets. Forget unbundling. Tencent puts everything in WeChat.
  10. Using WeChat, Xiaomi sold 150,000 smartphones in ten minutes.
  11. After receiving regulatory approval in July, Tencent is in the process of opening an online banking service called Webank. It beat Alibaba to this much sought-after license.
  12. Tencent Video is among China’s top three streaming sites, with five billion broadcasts each month.
  13. Around half of Tencent Video’s traffic comes from mobile.
  14. Tencent Video competes with Yokou Todou and Sohu, and is taking the Netflix route of licensing and creating premium content. Tencent Video has acquired 140 domestic dramas, 2,500+ hours of Western drama and 200 domestic/Hollywood blockbusters. It is creating 500 original dramas and 30 in-house programs.
  15. Tencent has a Vine-like app called Weishi, which generated 160 million video views in a single day during Chinese Lantern Festival earlier this year.
  16. Tencent invests in companies with which it can form mutually beneficial partnerships by integrating them into its platforms. The most recent example of this is Tencent’s $215 million investment for a 15 percent stake in JD.com, which IPO’d in May and is the second largest e-commerce platform in China.
  17. JD.com accounts for ~20 percent of China’s b2c e-commerce market, trailing only Alibaba’s Tmall (~50%). Tencent is now beginning to funnel WeChat commerce through JD.
  18. JD.com’s marketplace combined with Tencent’s mobile scale is a promising partnership, and will give Alibaba a run for its money in the mobile commerce space.
  19. This year, Tencent has made several other large strategic investments. In June, it paid $736 million for 20 percent of 58.com, which is considered the Craigslist of China and IPO’d in October. In late March, it paid $500 million for 28% of Korean mobile games firm CJ Games Corp. In early March, it paid $180 million for 15% of online real-estate services firm Leju Holdings, which is listed on NYSE.
  20. Tencent just announced enhanced search functionality in WeChat, with the intention of going head-to-head with Baudi on mobile.

Sooooo. Tencent has become a leader by fusing messaging, social media, gaming, video, advertising, and commerce. It has a massive user base. It invests intelligently and strategically. And, similar to Facebook, it’s poised for growth because it’s dominating mobile.

Love to know your thoughts. Hit me @jasonwstein. And like I said above, I own shares of Tencent.

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