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China’s Tencent Buys 12% Stake in Snap

142 points by jakarta 9y ago

blue_bells 9y ago
This is a really positive development for Snap -- one of their biggest challenges is that while Facebook, WeChat, WhatsApp, LINE, and other social networking apps have been gobbling the newly international user-base, Snap has really stalled, with user growth of only about 10% in the last year in "Rest of world" (non-Asia/Europe). [1] Hopefully Tencent can help them get back on track [1] http://www.businessinsider.com/one-chart-shows-snapchats-user-growth-2017-8 http://www.businessinsider.com/one-chart-shows-snapchats-use...
ProAm 9y ago
Honest question, is Tencent a holding company or a technology company?
- vicngtor 9y ago
  Technology.
- dmoy 9y ago
  Sort of both, but probably you'd classify it as a holding company. They definitely have a lot of stuff they just sit on holding style (e.g. riot games and dozens of others), and their name is literally tencent holding or something like that. But on the other hand they've got a lot of stuff built up like qq and wechat.
- bertil 9y ago
  I would compare it to Google/Alphabet. They have acquired enough companies and have a tight relationship with enough autonomous projects to need the structure of a holding, but the place remains at its core a technology company. Google decided to brand the holding differently, which probably makes good marketing sense.
  - hkmurakami 9y ago
    Imo it's closer to what Softbank is doing, since so few of the arms are home grown.
    - umeshunni 9y ago
      But what're the core tech products SoftBank produces?
      - hkmurakami 9y ago
        I'd say mobile search and mobile web services, since Yahoo Japan was/is a legitimate joint venture by Softbank and Yahoo where they started it from the ground up, and the services being pre installed on Softbank phones made a huge strategic impact on user adoption. They are the low cost leader in mobile telephony, have a vast solar operation (heavy govt subsidies), and have a powerful contract software Salesforce.
  - baq 9y ago
    can't help but wonder if alphabet would be allowed to buy 12% of wechat if it wanted to.
    - sdm 9y ago
      WeChat is not an independent company; the comparison doesn't really apply. But to your point, the biggest single share holder of Tencent is Naspers -- a South African company -- which at it's hight owned 45% of the company but currently owns about 35%. Their orignal investment of US$18M is now worth over US$115B. Foreign companies have a long long history of taking major stakes in Chinese tech companies. Softbank and Yahoo both had major stakes in Alibaba. The large American VCs tend to be fairly active in China. Also anyone can go buy shares in Tencent themselves. They are a major part of my portfolio. And if you don't want to buy them directly then KWEB is a great ETF that focuses on the China tech industry. BAT (Baidu, Alibaba, Tencent) makes up the majority of KWEB. Edit: Maybe you meant Alphabet specifically. Yes, that could be more difficult because of Google's long history of operating more as an extension of the US State Department than a private company.
fergyfresh 9y ago
100% related to the Facebook having an algorithm to blacklist photos based on naked photos of ppl. Snapchat has those already for like 35% of its users or something I'd bet.
- seanmcdirmid 9y ago
  Pornography is easy to find on the Chinese internet, it actually comes up on innocuous searches there (no safe search, because all searches are supposed to be safe when in reality none of them are). They don’t really care about porn, quite the contrary, it drives their business as long as they don’t cross invisible lines. Just don’t get into politics...
- bertil 9y ago
  I can’t imagine identifying naked people or pornography to be computationally hard (the difference include hippies on holidays or medical images, typically dermatology, and you want that even less) at least not for a search engine with image previews.
  - fergyfresh 9y ago
    Not that its computationally hard to say is this a naked person (#notahotdog from silicon valley). It's more along the lines of show me all naked pictures of ME on the internet, is probably more computationally hard.
    - dwighttk 9y ago
      showing me all the naked pictures of ME on the internet is just a null function
- giobox 9y ago
  Calling what Facebook has an "algorithm", while true, probably misleads here - this comment implies that the Facebook algorithm is somehow smart and does this automatically, and that Snapchat's user data would make a great training database. My understanding is that Facebook are generating hashes from images their users choose to send them of themselves, then blocking any images that match those hashes on their network. You don't need to be a huge player to build something that works the same way really quickly - there's no smarts trying to identify the images to block here, the humans have already done so. That Facebook system is a hard sell to me - you are choosing ahead of time to share your most intimate photos with Facebook. To implement that feature in such a way as to destroy all traces of the original file and keep only the hashes? That's a big amount of trust to place in Facebook, especially when you have no insight into how this is being performed server side. At any rate, investing in a business like Snap primarily to get naked pictures of people strikes me as an unlikely reason. There's no shortage of such "content" out there...
randartie 9y ago
With TenCent having the pull that they do in China, I wonder if this could mean Snapchat possibly being unblocked in China soon. The cynical part of me thinks that when a big purchase like this happens, the buyer knows something we don’t. Then again, they bought 5% of Tesla as well this year.
- Naritai 9y ago
  I don't think that's cynical at all. If you're going to spend a ton of money on something, you'd better have analyzed it more closely than has the general public.
  - whipoodle 9y ago
    Sure. But as they say, the problem isn’t what you don’t know; it’s what you know that just ain’t so.
- dmix 9y ago
  I'm surprised it's banned there... how could Snapchat possibly be threatening to the Chinese government? Are selfy videos really danger to the party? Were the keyword filters not effective?
  - pavlov 9y ago
    There are two things about Snapchat that rub Chinese authorities the wrong way: 1) Ephemeral messaging. They want to keep records of what people are saying. 2) Reputation for sexting. Pornography is a major target for censorship in China.
    - balls187 9y ago
      Has it been proven that snap does not record messages?
      - dannyw 9y ago
        Has it been disputed that Snap, a publicly traded company who will fall under GDPR, with thousands (?) of employees, are not recording messages?
PatientTrades 9y ago
I'd bet this 12% stake is actually a behind the scenes loan in the form of buying stock. No way would any smart investment company have genuine long term interest in Snapchat at this point. Older people are not using snapchat, and younger people will grow out of it within the next 5-7 years. Snap is still a major short imo, will be under $10 a share in next 6-8 months
- finkin1 9y ago
  That's an awful lot of bold claims without any supporting evidence or logical analysis. Why do you think the 12% stake is a loan? Why are you so sure no smart investment company would have a genuine long term interest in Snap? Why will younger people grow out of it in the next 5-7 years? And if it's going to take 5-7 years, why would the stock be under $10 (keeping in mind it's $12.64 right now) in the next 6-8 months?
- giarc 9y ago
  I'm not a fan of Snapchat either, but to support your claim because "Older people are not using snapchat" could have been applied to Facebook 8 years ago, and look where they are now.
abpavel 9y ago
Timing with Trump visit seems to suggest that it's one of those deals that make it during the negotiations of economic relations - who infuses who with more cash - yet at the same time make the invetsment as strategic as possible
tarr11 9y ago
Side note: Tencent means "soaring information" [1] and not "10 cents" [1] https://en.wikipedia.org/wiki/Tencent https://en.wikipedia.org/wiki/Tencent
- est 9y ago
  > not "10 cents" It does imply 10 cents. See https://www.zhihu.com/question/55269732/answer/145118163 https://www.zhihu.com/question/55269732/answer/145118163 (This site is basically China's quota, the answerer is Tencent official org account.) Basically, Tencent was a startup that charges 10 cents for each message delivered to pager devices via its OICQ software (网络寻呼机), and later 10 cents for each SMS message. Interesting though, Tencent(腾讯) was named after Lucent (朗讯), back in the time there was like hundreds of messaging companies in ShenZhen named *cent. e.g. 润讯，中讯，捷讯, etc.
teen 9y ago
I wonder if this has anything to do with snap's real estate.
Kyragem 9y ago
Twelvecent
drawkbox 9y ago
Tencent is pretty good to companies they take in so this is probably great for Snap. For instance in gaming, Tencent bought majority stakes in Riot Game, minority stakes in Epic games who are doing amazing things for the Unreal Engine, Rovio a top mobile publisher (Angry Birds) and a bit of Activision/Blizzard. So far all of those companies benefitted from the partnership.

142 points by jakarta 9y ago

This is a really positive development for Snap -- one of their biggest challenges is that while Facebook, WeChat, WhatsApp, LINE, and other social networking apps have been gobbling the newly international user-base, Snap has really stalled, with user growth of only about 10% in the last year in "Rest of world" (non-Asia/Europe). [1] Hopefully Tencent can help them get back on track [1] http://www.businessinsider.com/one-chart-shows-snapchats-user-growth-2017-8 http://www.businessinsider.com/one-chart-shows-snapchats-use...

ProAm 9y ago

Honest question, is Tencent a holding company or a technology company?

vicngtor 9y ago
Technology.
dmoy 9y ago
Sort of both, but probably you'd classify it as a holding company. They definitely have a lot of stuff they just sit on holding style (e.g. riot games and dozens of others), and their name is literally tencent holding or something like that. But on the other hand they've got a lot of stuff built up like qq and wechat.
bertil 9y ago
I would compare it to Google/Alphabet. They have acquired enough companies and have a tight relationship with enough autonomous projects to need the structure of a holding, but the place remains at its core a technology company. Google decided to brand the holding differently, which probably makes good marketing sense.
- hkmurakami 9y ago
  Imo it's closer to what Softbank is doing, since so few of the arms are home grown.
  - umeshunni 9y ago
    But what're the core tech products SoftBank produces?
    - hkmurakami 9y ago
      I'd say mobile search and mobile web services, since Yahoo Japan was/is a legitimate joint venture by Softbank and Yahoo where they started it from the ground up, and the services being pre installed on Softbank phones made a huge strategic impact on user adoption. They are the low cost leader in mobile telephony, have a vast solar operation (heavy govt subsidies), and have a powerful contract software Salesforce.
- baq 9y ago
  can't help but wonder if alphabet would be allowed to buy 12% of wechat if it wanted to.
  - sdm 9y ago
    WeChat is not an independent company; the comparison doesn't really apply. But to your point, the biggest single share holder of Tencent is Naspers -- a South African company -- which at it's hight owned 45% of the company but currently owns about 35%. Their orignal investment of US$18M is now worth over US$115B. Foreign companies have a long long history of taking major stakes in Chinese tech companies. Softbank and Yahoo both had major stakes in Alibaba. The large American VCs tend to be fairly active in China. Also anyone can go buy shares in Tencent themselves. They are a major part of my portfolio. And if you don't want to buy them directly then KWEB is a great ETF that focuses on the China tech industry. BAT (Baidu, Alibaba, Tencent) makes up the majority of KWEB. Edit: Maybe you meant Alphabet specifically. Yes, that could be more difficult because of Google's long history of operating more as an extension of the US State Department than a private company.

fergyfresh 9y ago

100% related to the Facebook having an algorithm to blacklist photos based on naked photos of ppl. Snapchat has those already for like 35% of its users or something I'd bet.

seanmcdirmid 9y ago
Pornography is easy to find on the Chinese internet, it actually comes up on innocuous searches there (no safe search, because all searches are supposed to be safe when in reality none of them are). They don’t really care about porn, quite the contrary, it drives their business as long as they don’t cross invisible lines. Just don’t get into politics...
bertil 9y ago
I can’t imagine identifying naked people or pornography to be computationally hard (the difference include hippies on holidays or medical images, typically dermatology, and you want that even less) at least not for a search engine with image previews.
- fergyfresh 9y ago
  Not that its computationally hard to say is this a naked person (#notahotdog from silicon valley). It's more along the lines of show me all naked pictures of ME on the internet, is probably more computationally hard.
  - dwighttk 9y ago
    showing me all the naked pictures of ME on the internet is just a null function
giobox 9y ago
Calling what Facebook has an "algorithm", while true, probably misleads here - this comment implies that the Facebook algorithm is somehow smart and does this automatically, and that Snapchat's user data would make a great training database. My understanding is that Facebook are generating hashes from images their users choose to send them of themselves, then blocking any images that match those hashes on their network. You don't need to be a huge player to build something that works the same way really quickly - there's no smarts trying to identify the images to block here, the humans have already done so. That Facebook system is a hard sell to me - you are choosing ahead of time to share your most intimate photos with Facebook. To implement that feature in such a way as to destroy all traces of the original file and keep only the hashes? That's a big amount of trust to place in Facebook, especially when you have no insight into how this is being performed server side. At any rate, investing in a business like Snap primarily to get naked pictures of people strikes me as an unlikely reason. There's no shortage of such "content" out there...

randartie 9y ago

With TenCent having the pull that they do in China, I wonder if this could mean Snapchat possibly being unblocked in China soon. The cynical part of me thinks that when a big purchase like this happens, the buyer knows something we don’t. Then again, they bought 5% of Tesla as well this year.

Naritai 9y ago
I don't think that's cynical at all. If you're going to spend a ton of money on something, you'd better have analyzed it more closely than has the general public.
- whipoodle 9y ago
  Sure. But as they say, the problem isn’t what you don’t know; it’s what you know that just ain’t so.
dmix 9y ago
I'm surprised it's banned there... how could Snapchat possibly be threatening to the Chinese government? Are selfy videos really danger to the party? Were the keyword filters not effective?
- pavlov 9y ago
  There are two things about Snapchat that rub Chinese authorities the wrong way: 1) Ephemeral messaging. They want to keep records of what people are saying. 2) Reputation for sexting. Pornography is a major target for censorship in China.
  - balls187 9y ago
    Has it been proven that snap does not record messages?
    - dannyw 9y ago
      Has it been disputed that Snap, a publicly traded company who will fall under GDPR, with thousands (?) of employees, are not recording messages?

PatientTrades 9y ago

I'd bet this 12% stake is actually a behind the scenes loan in the form of buying stock. No way would any smart investment company have genuine long term interest in Snapchat at this point. Older people are not using snapchat, and younger people will grow out of it within the next 5-7 years. Snap is still a major short imo, will be under $10 a share in next 6-8 months

finkin1 9y ago
That's an awful lot of bold claims without any supporting evidence or logical analysis. Why do you think the 12% stake is a loan? Why are you so sure no smart investment company would have a genuine long term interest in Snap? Why will younger people grow out of it in the next 5-7 years? And if it's going to take 5-7 years, why would the stock be under $10 (keeping in mind it's $12.64 right now) in the next 6-8 months?
giarc 9y ago
I'm not a fan of Snapchat either, but to support your claim because "Older people are not using snapchat" could have been applied to Facebook 8 years ago, and look where they are now.

abpavel 9y ago

Timing with Trump visit seems to suggest that it's one of those deals that make it during the negotiations of economic relations - who infuses who with more cash - yet at the same time make the invetsment as strategic as possible

tarr11 9y ago

Side note: Tencent means "soaring information" [1] and not "10 cents" [1] https://en.wikipedia.org/wiki/Tencent https://en.wikipedia.org/wiki/Tencent

est 9y ago
> not "10 cents" It does imply 10 cents. See https://www.zhihu.com/question/55269732/answer/145118163 https://www.zhihu.com/question/55269732/answer/145118163 (This site is basically China's quota, the answerer is Tencent official org account.) Basically, Tencent was a startup that charges 10 cents for each message delivered to pager devices via its OICQ software (网络寻呼机), and later 10 cents for each SMS message. Interesting though, Tencent(腾讯) was named after Lucent (朗讯), back in the time there was like hundreds of messaging companies in ShenZhen named *cent. e.g. 润讯，中讯，捷讯, etc.

teen 9y ago

I wonder if this has anything to do with snap's real estate.

Kyragem 9y ago

Twelvecent

drawkbox 9y ago

Tencent is pretty good to companies they take in so this is probably great for Snap. For instance in gaming, Tencent bought majority stakes in Riot Game, minority stakes in Epic games who are doing amazing things for the Unreal Engine, Rovio a top mobile publisher (Angry Birds) and a bit of Activision/Blizzard. So far all of those companies benefitted from the partnership.