Date
15 December 2017

All hail the Internet Republic of Tencent!

Tencent’s (00700.HK) recent deal with e-commerce firm JD.com is more proof that the Chinese internet giant is looking to partner with the best rather than go solo in each and every business.

The Shenzhen-based company has undoubtedly scored many successes such as social and instant messaging platforms QQ and Weixin, but it realizes that it cannot be good at everything.

Investments in e-commerce site Yixun.com, group-buying site Gaopeng.com and search engine business Soso, for instance, have been anything but remarkable.

Now, in the latest initiative, Tencent is selling some weak e-commerce assets to JD.com in return for a 15 percent stake in the latter, becoming the third biggest shareholder of the nation’s second largest e-tailing platform. 

Specifically, Tencent is offloading online retail businesses Yixun.com {易迅網}, Paipai.com {拍拍網} and Wangou.com {QQ網購}. And, it has the option to increase its holding to as high as 20 percent once JD.com goes public.

For JD.com, Tencent’s e-tail websites may not be the real kick, but gaining access to the huge traffic and user base on Tencent’s QQ and Weixin platforms, as well Weixin Payment cooperation opportunities, might be the truly irresistible attractions of the transaction.

Tencent has done this sort of thing before. Last September, it chose to let go of its search business, whose performance has been less than satisfactory, and swap that for a stake in a stronger rival. Tencent invested US$448 million in Sogou and injected its Soso search-related businesses and some other assets into the search engine, in return for 36.5 percent stake in Sogou.

What will be the next business to go? Some observers are speculating that Tencent may unload its online video business soon. In fact, rumor has it that the company is in talks with Sohu TV for cooperation opportunities.

Tencent wants a piece of everything. Having almost dominated the social networking arena, the company can certainly keep leaning on its billion-user base to replicate this investment strategy and turn more enemies into partners.

Compared with the popular microblog service Weibo, which is striving to wring advertising dollars from the platform, Tencent’s way to monetize its social networking assets seem a lot smarter and effortless.

Picture Tencent as the great holding company at the top with stakes in a large group of internet firms in different niches — this is how the company will look in the future.

– Contact the writer at [email protected]

RC

EJ Insight writer

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