1/14/2024 0 Comments Tencent daus wechat china![]() ![]() In a nutshell, Tencent leveraged their dominance of social media and gaming (via first QQ and then WeChat) in creating a platform from which people can – among other things – shop online, pay for goods at physical stores, settle utility bills, split dinner tabs with friends, hail taxis, order food delivery, and book theatre tickets, hospital appointments and foreign holidays (Figure 5).įigure 5: WeChat vs Facebook, Instagram, WhatsApp and Tiktok (2021, Vineyard Holdings) Figure 4: Tencent’s historical revenue, major acquisitions, and product development (1998-2020, Vineyard Holdings) Figure 3: Tencent timeline, you’ll need to zoom in for this (1998-2020, Vineyard Holdings). At a market cap of roughly $738bn, Tencent is the world’s 9 th most valuable company and competes fiercely with #10, Alibaba, in Asian fintech, ecommerce, advertising, and venture capital.įor those unfamiliar, Figure 3 has a quick timeline with Figure 4 below it tracking revenue over time to some of their more key acquisition and product developments. Most are fairly familiar with entertainment-social-networking giant. Without further ado, let’s dive into Tencent. Tencent’s core business, their capital allocation prowess, and their future Metaverse prospects all layer into the investment case. Think Ready Player One.Įach of these themes will be unpacked as we go on. Currently an incredibly speculative space, the Metaverse is the term given to the idea that the next evolutionary phase of the Internet will be an “always-on, real-time world in which an unlimited number of people can participate at the same time”, spanning the physical and digital worlds. This places them amongst Sequoia Capital and SoftBank as the most successful venture capitalists out there.īy leveraging WeChat data, domain expertise (most of their investments are in gaming, media, and ecommerce), and the cash generation from their core business, Tencent has put themselves in an ideal position to be one of the leading Asian investment houses, attracting both deal flow and talent.Īdditionally, Tencent offers investors a margin-of-safety way of betting on the Metaverse. Per Chief Investment Officer, Martin Lau, as of last year, they’d invested in roughly 800 companies, of which 160 have grown from start-up to a market value of >$1 billion USD. The real key to Tencent’s investment thesis lies in their capital allocation. ![]() With over 1.2 billion people spending an average of 90 minutes on their app, Tencent is in the enviable position of being able to direct traffic across their infrastructure, towards their other offerings and various holdings.įigure 2: A brief overview of WeChat Pay ( Visual Capitalist) The WeChat network – cheekily called “the operating system of China” – spans work, home, retail, transport, and social life within the country. Theirs is a great business, with high margins, strong cash generation, recurrent revenue, and minimal capex requirements, plus they are founder-operator led with a strong executive team who’ve shown themselves to be focussed on sustainable, long-term value creation. While leading their markets, they still have large, growing, under-monetized and under-penetrated markets in mobile advertising, ecommerce, payments, media, and gaming. Tencent sits at the nexus of several growth hubs currently: the Chinese consumer, the mobile/virtual world, and broader Asian B2B tech. The company’s mission is to “improve the quality of life through internet value-added services” and, more recently, to enhance the connectivity between the “consumer internet” and the “industrial internet”. It carries swathes of optionality in its existing platform, and is developing into one of the most formidable global venture capital firms with holdings in over 350 companies, including: Uber, NIO, Nvidia, Sea Limited, Ubtech, Go-Jek, Snap, and Flipkart. I believe this company is one of the most high-quality and resilient assets an investor could have in her portfolio. With Bridgewater punting Chinese equity, Munger buying Alibaba and many Western investors taking increasing notice of the company, now seems like an opportune time to write about the media-shy Tencent. Currently, their top holding is Tencent, at roughly 6% of their flagship portfolio. One investment fund I admire greatly is Baillie Gifford. ![]()
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