Approaches 1 Billion WeChat Users and Facebook’s Valuation
This week, Tencent reached a market capitalisation of $500 billion, becoming the first Chinese technology company to join an elite group currently dominated by US giants. Tencent is now approaching Facebook’s $522 billion valuation and is becoming a member of the half-a-trillion-dollar club that includes Apple, Alphabet, Amazon and Microsoft.
Tencent’s core product is its messaging service WeChat, which has almost 1 billion monthly active users and more than 900 million daily active users. Started in 2011, WeChat began as a straightforward messaging app, but has since expanded to integrate a series of e-commerce services including banking, stock trading, taxi bookings and movie ticketing.
Since its founding in 1998, Tencent has grown to become one of the most influential companies in China, offering services that touch nearly every aspect of citizens’ lives almost on a daily basis. Although the Tencent brand is little known internationally beyond investor communities, the company dominates its home market, partly thanks to the Chinese government’s decision to ban Facebook.
Tencent’s services have limited usage outside China, but the company has been expanding abroad mainly through investments in large US technology companies including Snap, owner of messaging company Snapchat, electric car-maker Tesla, as well as a range of start-ups. It’s now one of the largest global investors, even outpacing venture capital firms such as Sequoia. It’s estimated to have backed close to 500 companies during the past decade.
Services such as WeChat and gaming have become Tencent’s cash cow, but the company’s longer-term strategy is to develop a range of technologies that increasingly drive users’ time and money to its services. Its ability to regularly add new features is an impressive feat given its size. Many companies slow down as they grow massive, allowing their scale to gum up the system. However, Tencent’s management has remained streamlined enough to successfully build out its services into new areas. For example, its entry into mobile payment services, despite coming late, allowed it to quickly expand to take 37 percent of the market, challenging Alibaba’s Alipay platform.
Tencent is big, now $500 billion big, but by all accounts it’s still a nimble company able to quickly stay on top of the latest trends. This shows through in its rate of growth: revenue grew 61 percent year-on-year in its most recent results, and has only dipped below 50 percent once in the last six quarters.
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