Tencent ()
Most U.S.-based investors know about the prowess of Alibaba (BABA) and Baidu (BIDU), often compared to Amazon (AMZN) and Alphabet (GOOG). While these companies have their own merits, it could be Tencent (TCEHY), the third part of Chna's triumvirate that winds up being the most valuable down the line.
Tencent, which trades as an ADR and is available in iShares FTSE/Xinhua China 25 Index ETF (FXI), Global X Social Media Index ETF (SOCL) and Guggenheim China Technology ETF (CQQQ), is a Chinese conglomerate with many different units, most notably its WeChat messaging app, which had 889.3 million monthly active users at the end of 2016, making it one of the most used social networks in the world.
WeChat has effectively become an operating system for Tencent, as most Chinese internet users conduct a myriad of transactions and spend ample amounts of time on the platform, doing everything from messaging to booking taxis to conducting work.
Silicon Valley stalwarts such as Facebook (FB) and Apple (AAPL) have what I'll dub "WeChat envy." Tencent has been able to get its users to do these types of tasks all on WeChat without leaving the app. By contrast, Apple and Facebook keep adding features to iMessage and Facebook Messenger, such as the ability to book an Uber or send payments, but both platforms have had limited success with these endeavors as they try to boost revenue outside of traditional sources.
The latest rumors surrounding the company is that it's looking to buy Rovio, the maker of Angry Birds games, merchandise, and the hit 2016 movie. Angry Birds is one of the few major independent intellectual property brands. Bringing Rovio under the Tencent umbrella would be smart, as it would not only continue to add to Tencent's gaming strength, but it helps diversify its other content offerings, of which Tencent is looking like the next great content powerhouse.
In 2016, Tencent bought Supercell, which makes Clash of Titans, among other games, for $8.6 billion.
The company is also an entertainment juggernaut, stretching its enormous tentacles into everything from online music, literature, online comics and animation, all of which are China's biggest in their respective areas. The company has also been aggressively expanding into the film business via Tencent Pictures. It owns stakes in Wonder Woman, which has become a global phenomenon at the box office, as well as Kong: Skull Island. One of the producers on Skull Island is Legendary Pictures, which itself was bought by a Chinese entertainment giant, Wana Pictures.
Tencent has also done deals with Time Warner-owned HBO, to distribute certain HBO content in China. This shows the company isn't afraid to partner with the world's best companies in an effort to keep its users happy and engaged on their platforms.
The world's biggest companies by market cap are all platform companies -- Apple, Facebook, Amazon, and Alphabet. Tencent too has that allure, thanks to WeChat and to a lesser extent, QQ, another popular Chinese messaging service.
As more users come to its platforms and the company expands into other countries (something it's currently having trouble doing), Tencent may become as common in investors' minds as any of the big Silicon Valley companies.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
