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WeChat to QQ, Tencent is taking over the world

Tencent has become one of China's four technology giants, founded by Pony Ma in November 1998. It’s overtaken Facebook, bought stakes in Snapchat, Tesla and Hollywood films, and has quietly risen to rival Google and Netflix.

Tencent is China’s web giant and has a string of high-profile investments spanning Snapchat, Spotify, Tesla and Hollywood film and TV. It is a sprawling corporate giant that has recently overtaken Facebook to become the world’s fifth most valuable listed company – but few, in the west at least, will have heard of Tencent, even though it is worth half a trillion dollars and rising.

China is the world’s most populous digital market and the protection afforded by state censorship through the so-called great firewall – which has meant no competition from Facebook, Google, Twitter and Netflix – has helped Tencent flourish since it launched nearly two decades ago in Shenzhen. But in the last year the shares have been supercharged – climbing from less than HK$200 (£18) at the beginning of 2017 to HK$442 now – and the value of the company has soared.

The company’s Netflix-style Tencent Video service – the biggest in China with exclusive content including NFL games and HBO series such as Game of Thrones – more than doubled in size in the last year, attracting more than 40 million paying subscribers.

“They have a relationship of mutual benefit with the Chinese state,” says Jamie McEwan, an analyst at Enders. “They have been allowed to grow and massively diversify their businesses without the level of scrutiny or competition you might see in western countries.”

In 2017, Tencent became the first Chinese firm to pass the $500bn stock market valuation mark, supplanting Facebook as the world’s fifth biggest firm, a bittersweet moment for company co-founder Ma Huateng, 46, also known as “Pony” Ma.

In 2014, Tencent had been on the brink of buying What’sApp, which would have made it a global power player overnight. The company was close to a deal when talks had to be delayed so that Ma could undergo back surgery. A panicked Mark Zuckerberg got wind of the move and swooped, tabling an enormous $19bn rival bid – by far Facebook’s biggest deal and more than twice the offer made by Tencent – to see off the threat.

Thwarted but undeterred, late last year Ma took a 12% holding in Snapchat (he had made a small investment in 2013) in a busy year that also included buying 5% of Elon Musk’s electric car firm Tesla and swapping minority stakes in its music streaming business with Spotify.

Tencent Music, which dwarfs efforts by Apple and Spotify in China, is expected to make a $10bn stock market listing this year.

Tencent also cranked up its domination of mobile gaming, handing over $8.6bn for the Finnish company Supercell, maker of two of the biggest games in the world, Clash of Clans and Clash Royale.

It also owns the Los Angeles game-maker Riot, behind the huge League of Legends franchise, and has stakes in Gears of War maker Epic and Activision Blizzard, home to Call of Duty, World of Warcraft and Candy Crush Saga.

Tencent also owns the most profitable game in the world, Honour of Kings, which makes about $1bn a quarter and has 200 million monthly players.

It has proved so addictive in games-mad China that the government warned Tencent in an article in the state-owned People’s Daily last year saying it was “poison” and a “drug” that harms kids.

The risk of a government crackdown on one (or more) of Tencent’s golden geese – the company relies on gaming for more than 40% of total revenues – spurred jittery investors to wipe almost $18bn off its stock market value. Tencent swiftly introduced one-hour time limits for under-12s and two hours for 12- to 18-year-olds.

Analysts estimate that Tencent digital services are used by more than two-thirds of the Chinese population. Chinese users collectively spend 1.7bn hours a day on the company’s apps.

The business started in cramped Shenzhen offices in the late 1990s, swiftly developing a bad reputation for cloning digital products for the Chinese market, but it was the launch of WeChat in 2011 that supercharged the company’s strategy.

The WeChat eco-system is so broad it is almost like rolling most of the apps on a typical western user’s mobile phone into one.

“It is compared to What’s App or Facebook messenger but it is not really,” says Xiaofeng Wang, a Singapore-based analyst with Forrester. “It has payment systems, smart city offerings such as the ability to schedule appointments at a bank, a doctor, pay traffic fines or make visa applications and e-commerce.”

Tencent’s ambition to be an essential part of digital daily life means it holds a dizzyingly diverse range of interests including in Didi, China’s answer to Uber, the nation’s second biggest e-tailer and Hike, a messaging service popular in India. In December, it even did an Amazon, which has gone real-world buying retailer Whole Foods, taking a stake in one of China’s largest supermarket chains, Yonghui Superstores.

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