Industry Insider: An Overview of Tencent, China’s Internet Giant

With a market capitalization of 3,341.5 billion Hong Kong Dollars (43 million USD), Tencent Holdings Ltd (HKEx:0700) is one of the world's leading investment holding companies in technology and internet, providing more than one billion people globally with communication services and internet access. The company is divided into four main segments: the FinTech and Business Services, the Online Advertising segment, and the VAS (Value-Added Services) segment, which provides online gaming, live broadcast and video platforms, as well as other social network services. Lastly, a fourth “Others” segment consists of film production and distribution, third-party licensing of intellectual property, as well as engaging in other ancillary markets.

Tencent was founded in 1998 in Shenzhen, China. Its name comes from the fusion of the Chinese characters Teng and Xun, thus forming what translates to “fast information”. Its current CEO is co-founder Ma Huateng (also known by the nickname “Pony”), who owns 9.7% of Tencent’s shares, and is one of the richest men in China (as well as one of the most secretive multi-billionaires). He started the company with some college friends as an instant messaging platform called OICQ. It was later renamed QQ after the American web portal AOL bought the first internet instant messaging service ICQ from Israeli company Mirabilis and filed for arbitration against Tencent, stating that OICQ’s domain names were violating their trademark. After renaming the messaging software to QQ, Tencent expanded its reach into gaming. About his company, Ma says:

“At Tencent, we may be businessmen, but we are still chasing our IT, our science. We are still striving to create something really cool, trying to create things we couldn't even imagine without our new technologies. I am still clinging to this enthusiasm.”

Tencent’s services spread through various media. In 2004, they started their gaming division, which rapidly expanded to licensing games in 2008. In 2011, the company acquired more than 90% of Riot Games for $230 million, and completely acquired the game developer in 2015. Tencent also has minority stakes in Epic Games, Activision Blizzard, and Korean CJ Games. One of the most important services owned by Tencent is WeChat, the most commonly used mobile messaging platform in China, launched in 2011 after Ma put two engineering teams up against each other to create a mobile IM (Instant Messaging) platform from scratch. In fact, WeChat differs from QQ as it is entirely designed for mobile devices, as Ma insisted on creating it entirely rather than adapting the already existing desktop IM software QQ. In addition to gaming and communication services, Tencent also has investments in e-commerce facilities (logistics and warehouses) as well as websites (JD.com, 58.com), in an effort to directly compete with e-commerce giant Alibaba.

Tencent went public on June 16, 2004, on the Hong Kong Stock Exchange. In 2008, Tencent’s stock became part of the Hang Seng Index Constituent Stock (HSI), a market capitalization-weighted index of the sixty largest companies that trade on the Hong Kong Exchange (HKEx), which is considered the benchmark equity market index for Hong Kong. Tencent, alongside e-commerce company Alibaba and search engine Baidu, forms the so-called “BAT”, the three leading companies on Chinese Internet.

Tencent’s platforms are strictly regulated and controlled with censorship against anti-government propaganda and the use of banned words. In 2011, the top 39 Chinese tech companies were reunited by the government to sign a joint statement, stating that “Internet companies must strengthen their self-management, self-restraint, and strict self-discipline.” In 2013, Ma became part of the Twelfth National People’s Congress (the legislative body of the People’s Republic of China) and later stated that:

“There should be order if the development of the cyberworld is to be sustainable.”

Both Covid and the Chinese government’s strict tech regulations caused a significant drop in the stock’s price in September 2022 after peaking in December 2020. In March 2023, BAT companies emphasized their future investments in generative AI - which has not been banned by the Chinese government, but only strictly regulated:  the tech sector is considered by China’s government the country’s winning card for growth and innovation. In a statement, Tencent said:

“We believe AI has tremendous potential to improve productivity, increase business agility, enhance customer engagement and accelerate product innovation. We aim to help enterprises achieve digital upgrade by applying advanced technology, a deep understanding of connections and user behavior, and our ecosystem to create AI breakthroughs that can solve business challenges.”