Although it's worth more than Netflix, Instagram and Disney combined, you probably don't even know that you're using its services. And no wonder, because the Chinese tech giant Tencent wants it to stay that way.
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When you look at the ranking of the hundred most valuable brands in the world published by Kantar agency, you will easily spot the most well-known companies. Apple, Google, Microsoft and Amazon appear on the podium annually, but the real surprise may be the current position number seven.
It belongs to the company Tencent, a Chinese giant, which is worth more than Netflix, Disney and Instagram combined and leaves far behind Mastercard, Facebook, Nike and Starbucks. Despite this, it remains relatively anonymous in general awareness. In this article, we will shed more light on it.
Let's start with China, because that's where the current power of Tencent was born. The giant currently almost completely dominates the most important aspects of digital life in the Middle Kingdom - from banking, through games and online shopping, to social media. This was possible thanks to the WeChat application, without which life in China is in a sense impossible. Not without reason, WeChat gained the title of Everything App, an app for everything. Data shows that almost the entire population of the country (1.4 billion people) uses it for an average of 4 hours a day!
It's hard to be surprised. WeChat is Facebook, PayPal, Netflix, Google, Spotify, Uber, Tinder, Zoom, YouTube and Amazon in one. Through it, the Chinese call their friends, pay bills, order taxis, listen to music, meet people, watch movies. And it is this dominance in China that is strongly linked to Tencent's activities in the West and is likely to translate into the company's presence in the ranking mentioned at the beginning. It has its dark sides.
Editorial team
The ubiquity and omnipotence of WeChat means that Tencent has access to almost all data about its users. Starting from their exact location and history of routes traveled, through their weight and entire history of banking operations, to all messages, calls, and searches. Tencent was practically allowed to monopolize entire branches of industry in China without any interference from regulatory bodies, which simultaneously suggests that state dignitaries must sit on the company's board and influence its business decisions.
Naturally, the success of most Chinese companies is to a lesser or greater extent associated with the Communist Party of China (CPC), but in this particular case the benefits for its members are too high. Thanks to Tencent and its super-app, the government gains not only one of the most powerful surveillance tools in human history, but also access to huge amounts of money. The banking application WeChat Pay registers over a billion payment transactions a day, which is more than the services of Visa and Mastercard operators combined. Thanks to this, in 2021 alone, Tencent generated 86 billion dollars in revenue and 35 billion dollars in net profit, making it one of the most profitable companies on our globe.
But that's not all, because Tencent also encourages companies to launch their own mini-programs via WeChat. It then invests millions in those that perform best, then artificially increases their visibility, multiplying further profits and investing them further. Take DiDi as an example, the Chinese equivalent of Uber. Through WeChat, Tencent promotes the company's services, thus giving it an unfair advantage and artificially increasing the value of its own investment. Of course, not only that, because DiDi, using WeChat Pay, gives a part of transaction fees from each payment made.
However, huge money usually follows huge problems. Paradoxically, the biggest of them is... the Communist Party of China. By basing the entire business empire on the Middle Kingdom, Tencent is completely at the mercy of the local government. Hence the expansion to the West, which provides the giant with partial diversification of operations. And it is becoming an increasingly bigger problem, as Tencent's exit beyond China has started one of the biggest shopping frenzies in history, which continues to this day.
Jakub Rusak
Tencent is building its market position primarily through games - the department dealing with them is larger than entire popular companies such as Nintendo or Electronic Arts. However, most of Tencent's original titles, based on Western ideas, were overly adapted to the Chinese market and often contained propaganda content. It quickly became clear that instead of trying to promote their own games abroad, a better solution would be to find promising productions or development teams. And then invest in them.
In this way, Tencent became the owner of, among others, Riot Games and forty percent of Epic Games studio; it also has stakes in Ubisoft, Activision Blizzard and many other companies producing the most popular titles in the world. Thanks to this, the Chinese giant decisively and financially participates in the creation of such games as League of Legends, Fortnite, World of Warcraft, Clash Royale, Honor of Kings, PlayerUnknown's and even Roblox. It also manages Grinding Gear Games, invests in J.J. Abrams' development studio and creates multiplayer titles for LEGO.
Poland has also been targeted. Tencent is the majority owner of Techland (it owns 67% of the share capital) and bought 1C Entertainment, which includes Cenega, QLOC and the online store with digital games Muve.pl. The Chinese giant also invested in the Krakow studio The Parasight and bought over 20% of Bloober Team.
The gaming industry is only part of the investment. Tencent has become one of the largest shareholders of Tesla and bought shares of Reddit and Discord. This has raised considerable concerns that if the company has access to data from users registered on these platforms, so does the CCP. However, to give the company its due, it seems to largely stay away from the activities it invests in. It simply participates in the capital and does not get too involved.
Tencent's investments in international game studios have been extremely profitable, but they have also had unintended consequences in the form of excessive attention. And the company's CEO Ma Huateng (also known as Pony Ma) does not like that. In recent years, the administration of Donald Trump has been closely watching Tencent. The former US president began scrutinizing WeChat and other Chinese apps for fear that the CCP could use them to steal private data from American users or censor any materials critical of China and assist in spreading disinformation.
But did this harm Tencent? No. The strategy of acquiring minority stakes in international companies provided appropriate protection. After all, even if the United States took action against Tencent, it would not likely block Reddit or Discord just because the Chinese company invested a lot of money in them.
The real blow was dealt by the Chinese government, which was terrified of the great power and technological monopoly Tencent holds. In 2021, the company was among the entities that received huge financial penalties reaching billions of dollars. The party had allowed large tech companies to rule almost freely for years, but in practice was very concerned about how powerful some of them were becoming.
Therefore, in addition to financial penalties and forcing some of the management to resign, new regulations were also introduced to limit the power of some of the Big Tech sector companies. As a result, the share prices of Chinese companies began to fall, antitrust investigations were launched, and new takeover or buyout agreements were blocked or temporarily suspended. Tencent then lost over 500 billion dollars from its market capitalization, which is more than half of its value.
And although the mentioned problems significantly slowed down the company's growth, they ultimately did not cause a collapse that would threaten its dominance. Over the past few years, indeed, there have been several reductions and personnel changes in positions, but this did not affect the ultimate goal of international dominance. The problems also did not have a major impact on Tencent's image. Recently, Visa expanded its cooperation with it - thanks to the partnership, WeChat application users will be able to receive money transfers in their digital wallets. This is to happen quickly thanks to the use of Visa Direct solution.
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