As one of the oldest and the largest internet companies in China, Tencent has been increasing in value, and benefited its shareholders for a long time. Starting from the creation of QQ Chat (it’s own instant messaging platform – precursor to WeChat), Tencent has continued innovating – developing numerous games and applications. One of the main factors that contributed to the early success of the Tencent is their early entry to the online gaming industry (such as chess games), before online gaming became popular in China. Early entry into gaming, plus successful runs in a few hit games and products helped them become one of the top players in the industry.
In recent years, the growth of internet companies in China has hit a plateau, resulting in most of them seeking growth overseas, and particularly in Southeast Asia. A region with 600 million potential consumers, similar cultural practices (in many ways), makes is very attractive overseas market for Chinese companies and in this case, for Tencent’s overseas ambition.
However, ask many people (even in startups and tech) in Southeast Asia, they may know Alibaba but stumble when asked about Tencent.
Tencent’s footprint in Southeast Asia
When Tencent developed an interest in the Southeast Asian market, they ultimately chose a company in Singapore, then known as Garena (today it’s known as SEA) to invest in. Today, it seems like a brilliant move, having successfully profited from SEA’s massive IPO, and its success in the B2C and C2C space – through the online e-commerce platform, Shopee.
Tencent’s entry into Southeast Asia also resulted in it purchasing a company based out of Bangkok, Thailand – Sanook. In 2010, Tencent bought and owned 49.92% of Sanook. By 2016, Tencent had decided to buy out the whole company.
Sanook started in 1998, and was first launched to provide a web directory. It quickly became the biggest online platform in Thailand. After acquisition by Tencent, Sanook developed into a social media site that offers various forms of entertainment – such as music (JOOX), and online shopping (Sabuy).
Sanook.com claims to have at least 30 million active users, and as such is considered to be a very successful venture in Thailand, thanks in part to Tencent’s investment and expertise.
Transportation and Payments
One of the most recent, and sizable investments Tencent made was in an Indonesian ride-hailing company: Go-Jek. Launched in 2010, Go-Jek was just another company offering bike-hailing services, but it quickly found success in other ventures as well, more specifically in payments.
Gojek’s payments venture (Gopay) has made it very easy for users to top-up their wallet, via the bike-riders who are already serving their transportation network. In Indonesia, with more than 200 million users to boot, we don’t see why this is not a winning proposition, especially with Uber leaving the market (via merger with competitor, Grab).
Based on Tencent’s investment strategies in Southeast Asia, it can be viewed that they prefer to to invest in companies that are already winners in their home market. That said, Tencent’s dreams to build an enormous digital network, comprising of payments, online shopping, logistics, transportation and entertainment – is quite evident. Whether or not it will turn out well – will depend on a few factors, namely the competitors.
For starters, Tencent’s chief rival in China – Alibaba has its tentacles spread wide in Southeast Asia, in similar industries that Tencent is targeting (namely ecommerce and payments).
Alibaba may be taking the backseat in China (due to Tencent’s Wechat Pay), but it will not do the same in Southeast Asia. It too has set its dreams to conquer the massively lucrative markets of Southeast Asia. Their purchase of online marketplace, Lazada speaks volumes. It was calculated move, because the purchase also netted them Lazada’s payment business (HelloPay). Hellopay has since been rebranded, and it now seats on coveted payment licenses issued by the countries Lazada is currently operating in.
In addition, Alibaba also recently moved its chief of Ant Financial, Lucy Peng to helm Lazada – signalling that it is not prepared to lose the Southeast Asian market to anyone (including Tencent). While there are other competitors out there, no one else has the amount of firepower Tencent or Alibaba has. The way we see it, it’s down to Alibaba versus Tencent.
While it would be good to see more competition in this market, sufficient to say that Amazon has not really entered the fight, just yet. It is definitely testing out the Southeast Asian market, and their strategy remains to be seen.
Momentum Works believes that as Alibaba and Tencent (and perhaps Amazon) battles it out, they will continue to open more doors to more opportunities, jobs and investments to the Southeast Asian market. We definitely have no doubt that Southeast Asia is a very lucrative market (although fragmented), that’s too good to give a pass.
However, one thing’s for sure, we have not yet fully witnessed the all-out fight between these tech giants. If anything, it has only just begun.
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