Tencent and why it matters
Ask almost everyone young and old in the western world whether they are familiar with Amazon (NASDAQ :), Google (NASDAQ 🙂 or Facebook (NASDAQ 🙂 and you will probably get a resounding “yes”. if I asked those same people if they were familiar with Tencent (HK :), the answer would probably be “Ten who?” are
So, who exactly Tencent and why have you never heard of it?
Tencent is a Chinese digital media and telecom conglomerate with more than 30,000 employees. It is the largest and most valuable technology company in China, currently worth $ 460 billion, making it the sixth largest company in the world and currently about the same size as Facebook. Companies such as Facebook and Google are banned in China, so this helps local players to dominate the country without the same threat from global competitors, while also expanding to the Western world.
Let’s learn more about this fascinating company …
Social media
You may be familiar with WhatsApp and maybe you use it on your phone as your primary messaging tool, but are you aware that in Asia the dominant message application WeChat is by far? WeChat is owned by Tencent and has nearly a billion monthly active users. Unlike WhatsApp, which is primarily a messaging app, WeChat is a & # 39; all-in-one & # 39; super portal that ensures that users stay on the platform and do not have to visit other sites – not Tencent. Currently, WeChat allows mobile payments (eg, instead of PayPal) and can assist in picking up taxis (for example, instead of using Uber), watching videos (for example instead of using YouTube), dating or “connecting” (for example, instead of using Tinder)) and ordering food (for example, instead of using UberEats or Deliveroo). This is in addition to the more than 900 million users who use QQ, which is also owned by Tencent and which has many of the same functions as WeChat (and more!), But is considered a desktop messenger, while WeChat is very popular. a lot of a mobile application.
Gaming and eSports
Gaming enthusiasts around the world play games made by companies owned by Tencent. Gaming companies such as Riot Games (maker of League of Legends), Activision Blizzard (NASDAQ 🙂 (maker of Overwatch and Destiny), Supercell (maker of Clash of Clans) and a 40% stake in Epic Games (maker of Fortnite who is currently the most popular video game), Tencent is the leader in the ever-growing sector of mobile gaming and eSports.
Plans to expand to the US and the rest of the world
Tencent continues to find ways to grow internationally. For example, the company recently acquired a 12% interest in Snap Inc (NYSE 🙂 (the parent company of SnapChat) and also holds a 5% stake in Tesla (NASDAQ :). It has also announced plans to implement a US initial public offering (IPO) for its Tencent Music Entertainment (TME) streaming music suite, with reports suggesting that it could raise $ 1 billion and the company would rate it at US $ 30 billion, which could exceed the value of Spotify (which at the time of writing is US $ 31 billion). Interestingly, Tencent holds a 7.5% stake in Spotify, making it the third largest shareholder behind the founders. Spotify and TME exchanged shares in December last year, so Spotify also has a 9% stake in TME. This is considered advantageous for both companies because it offers them the opportunity to invest in the long-term potential of the music market outside their current regions & # 39; s.
Tencent & # 39; s X-Factor
Companies such as Google, Facebook and Amazon generate a disproportionate amount of income through advertisements or physical goods. Tencent, however, only generates 17% of its revenue through online advertising sales compared to Facebook’s 97%. Instead, the main source of revenue for Tencent is online gaming – selling everything from the game itself to virtual goods such as online gaming avatars and even clothing for those avatars. Tencent is also looking at expanding into other technological areas, announcing plans to open artificial intelligence laboratories in Shenzhen and Seattle and looking for a smart top-of-the-line speaker such as Amazon’s Amazon or Google Home. Should at least one of these ideas get off the ground, this could improve Tencent’s brand awareness worldwide
How do you achieve exposure to Tencent?
Tencent is listed on the Hong Kong stock exchange and trades on the Nasdaq OTC market. So, unless you buy directly on those foreign markets, it can be difficult and expensive to access.
It goes without saying that technology must remain a long-term theme and stimulate the growth of the world economy. The significant underweight of technology on the Australian market may negatively affect the relative performance of the market in the future, making Asian technology a potential addition to the portfolios of many Australian investors without the big technical names you might already have through a Nasdaq or American sharemarket to double exposure.
