It was born as an imitation of ICQ, a classic online messaging service from the pre-social media era, even before the now vintage Messenger, but soon someone realized that the business was in cell phones.
The Chinese state control over the giants of the field, such as Google and Facebook, was fertile land for the emergence of multipurpose tools that hid a thousand and one uses inside, which made it almost impossible to leave them, since there users could from play and pay for services until you order a taxi or call a delivery.
In that context, Tencent was developed, one of the most important holding companies in the world, whose core is difficult to define, although if it had to be positioned according to its income, it definitely found a niche in the video game industry. The brain behind the company is Ma Huateng, better known by his nickname '"Pony".
Cultivator of the low profile and little friend of the declarations in public, has maintained several years a silent and undeclared war with Jack Ma, founder of Alibaba, regarding who is the richest man in China. Both, together with the Baidu search engine, make up the "BAT" innovation troika, whose correlation in the United States is made up of Google, Amazon and Facebook.
Currently, Pony amasses a fortune of $ 40.9 billion, according to the ranking prepared by Bloomberg.
Although its beginnings were anchored in the bíper, one of the virtues of Tencent was to understand where the business was going to adapt in time and form. From paying to mobile phones, and from there to entertainment. First with video games, then through cinema and, finally, investing in music.
But growing out of Chinese territory was one of its main obstacles, which it was able to overcome through acquisitions and disbursements in several technology companies, including some in Argentina.
Inspired by a classic
At the end of his studies in computer science and applied engineering at the University of Shenzhen, Pony began working at China Motion Telecom, also called CMMobile.
He joined as a programmer and later promoted the department of Research and Development of the area dedicated to locators (bíper or pager). In the same area, Zhang "Tony" Zhidong, a classmate of the businessman and today the second largest shareholder of Tencent.
However, movements in the telecommunications industry made him reflect on the idea of starting his own venture. At 27, he brought together four friends from the university and proposed to found a company dedicated to instant messaging. In November 1998 Tencent was officially created.
With $ 200,000 captured from angel investors, they launched their ICOQ service the following year, although they then had to switch it to QQ in the face of a threat of judgment by the Israeli ICQ, which had served as inspiration.
The platform gained in popularity, but could not be profitable because it worked exclusively on computers. The business turned around when in 2001 they presented their mobile version: MobileQQ.
Along with MobileQQ came the South African Naspers. The holding company injected $ 32 million into the Chinese company in exchange for a majority stake of more than one third of its capital.
It still maintains its share, although it sold US $ 10 billion in shares in 2018 to invest in other fintech.
The platforms continued to grow and the firm understood that to continue to broaden its influence it was best to cover more. In this way they created more niches: QQ Show, QQ Mail and QQ Games, among others.
The latter would become key, since one year after its launch it was named as the main gaming portal in China with peaks of 1 million users simultaneously.
In June 2004, Ma, CEO of the company, made its stock market debut on the Hong Kong Stock Exchange and with the nearly $ 200 million it raised, it was proposed to start fighting in the videogame industry.
Cradle of billionaires
The key product for the company to go from being successful to billing billions was WeChat. It emerged in 2010 as a multipurpose app to play, interact with brands, pay bills and more.
The firm sought that users did not have to leave the platform to do other activities, but could perform all in one place. That version was used by foreign cell phones, while local numbers used Weixin, also from Tencent.
In both WeChat and QQ, the company found its main ally in video games. First he developed some on his own and then opted to buy shares in major players in the sector.
In 2008 he invested in Riot Games, creators of the League of Legends. He then disbursed US $ 330 million for 40% of Epic Games, the label behind Fortnite, the best-selling video game in 2018 with US $ 2,400 M, and in 2016 obtained a majority stake in Supercell, owner of Clash Royale.
He did the same with the South Korean CJ Games, the Swiss Miniclip, the Japanese Aiming and the American Glu Mobile and Pocket Gems. As the business grew, the board was modified: of the five founders, only two still hold positions: Pony occupies the main chair in Tencent and Xu "Daniel" Chenye works as a IT manager.
"Gamification" of the business
Despite managing China's most important social networks, unlike Facebook, the bulk of Tencent's turnover comes not from advertising but from value-added services (VAS).
For example, in the third quarter of 2019, this unit registered revenues of US $ 7,000 million, about US $ 4,000 million of online games and other social networks. Meanwhile, the digital advertising leg billed US $ 2.5 billion.
During the first half of 2019, Tencent reported revenues of US $ 24.4 billion, 18% more than in the same period of 2018. 55% of that total corresponded to value-added services, 25% to businesses related to fintech and services to companies and 17% for online advertising. In those six months he had a profit of more than US $ 7,300 M.
Over the years, QQ lost the position in front of WeChat as the most successful unit. According to the July-September 2019 results report, the first has 731 million active users per month, while the other has 1,151 million.
A decade earlier, the instant messaging service had 376 million active users and QQ Games took sheet metal with 4.7 million concurrent peaks.
From joystick to microphone
Like its Japanese SoftBank pair, Tencent put on the investor suit in recent years. He bought a stake in the JD.com e-commerce platform to compete with Alibaba and 5% of Tesla for $ 1.7 billion.
At the beginning of 2014, he tried to incorporate WhatsApp into his portfolio, but a medical problem freed the operation. Ma had to go through the operating room, which postponed his trip to San Francisco, and it became an opportunity for Facebook to accelerate its offer of US $ 19,000 million (double what was proposed by the Chinese businessman).
In the Argentine market he also left his seed. In April of last year he made the first injection of capital in the fintech Ualá, of Pierpaolo Barbieri, and in November he led the C series of US $ 150 M thus adding a place in his directory. In turn, he participated in the last round of investment by Satellogic to expand its satellite constellation.
The company's new commitment continues in the entertainment industry, although now on the side of music and cinema.
On this last item he founded Tencent Pictures and with this subsidiary he has already produced more than a dozen titles in the US. Some are Warcraft, Venom, Bumblebee, Wonder Woman, MIB: International and the sequel to Top Gun that will be released this year.
On the musical side, he closed 2019 with a news of weight. A consortium led by the company founded by Pony acquired 10% of Universal Music Group.
His flagship in the industry, Tencent Music Entertainment, had already made a stock swap with Spotify and signed an agreement with Sony Music.
It offers its music streaming service through four applications: QQ Music, WeSing, KuGou and Kuwo Music. The latter two incorporated them in 2016 when it merged with China Music Corporation, a deal valued at US $ 2.7 billion.
According to the financial statements of the first nine months of 2019 (TME debuted on the New York Stock Exchange in December 2018), the subsidiary billed $ 701 million for online music services and $ 1,837 million for social entertainment with a result in blue of US $ 411 million.
Apparently, a new star is born in the Tencent firmament: will it unseat video games?
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