Chat battle


China`s largest listed internet company Tencent posted its slowest quarterly profit growth in two years. They have spent a lot of money to promote its mobile messaging app called WeChat and other e-commerce sites in competition with Alibaba Group. Marketing expenses is up 39% from the third quarter.


Tencent is a third owned by South African e-commerce and media company Naspers and they plan a 5 for 1 split share on the company. This will take place from May 15. Tencent`s share price has more than doubled in the past years and their market cap is $138,7 billion.

Tencent gave an indication of WeChat revenue figures for the first time as it transforms from a massaging service to fully fledged mobile platform. WeChat is more than a chat platform. It`s everything from social networking and gaming to personal finance and booking taxis.

WeChat Q4 revenues is between 200-300 mln yuan ($32 – 49 million). Tencent`s President Martin Lau said last week that the WeChat and Mobile QQ together generated gaming sales of more than 600 million yuan in three months to Dec 31. The groups revenue is 16,97 billion yuan in total revenue for the quarter.

Line Corp from Japan is another competitor and they announced 2013 revenues of 34,3 billion yen ($338,38 million), making it last year`s top-earning non-gaming smart phone app. WeChat is worth about $64 billion.

The multiple uses of this app called WeChat offer far greater earnings potential than Facebook`s WhatsApp, which is «worth» $19 billion. 70% of the WeChat`s revenue comes from gaming and subscriptions and online ad sales rose 58% to RMB 1,5B. E-commerce transaction revenue nearly doubled to RMB 3,3B.

Tencent is fighting against the e-commerce giant Alibaba in mobile-based retail services and both groups recently announced plans to launch virtual credit cards using QR codes that function in a similar way to bar codes scanned by smartphones to process payments.

Those two groups has attacked China`s traditional banking sector and the central bank is considering regulations to limit the use of third-party payment systems offered by Tencent and Alibaba Group.

Tencent`s mobile massaging platform is dominant in China (totaled 355M, +6% Q/Q and 12% Y/Y. ). globally MAU`s for WeChat rose 5,7% in the fourth quarter to 355 million with a net income of 3,91 billion yuan ($631M) on revenues. Up 40% at 16,97 billion yuan ($2,74B).

WeChat`s MAU is nearly 3 times that of Sina`s Weibo, and 24% smaller than WhatsApp`s 465M (as of February). MAU`s for Qzone social networking platform rose 4% Y/Y to 625M. Instant messaging MAU`s rose only 1% to 808M.

A month after Facebook spent $19B on WhatsApp, Alibaba (ABABA) is investing $215M into messaging/VoIP app Tango at a $1,1B valuation. Tango and BBM are close to each other in scale. WhatsApp claims a market-leading MAU of 465M. Tango claims 70M.

BlackBerry`s John Sims disclosed BBM`s base had grown to 85M MAU`s since the launch last fall. The Tango deal is only one of many investments made by Alibaba which is trying to grow their Web/mobile empire.

To compare: Renren (RENN) is declining and is headed for a fall of 40 – 45% drop. Online game revenue fell 39,6% in Q4 to $15,6M after dropping 17% in Q3. Ad revenue pressured by share losses to social media rivals such as Tencent and Sina, fell 17,9% to $10,2M after falling 11% in Q3. Monthly unique logins fell to 45M in December from 50M in September.

Sina surges on Weibo IPO news and Alibaba is spending $805M to buy a 60% stake in ChinaVision Media. A Hong Kong based producer of films and TV dramas. Youku (YOKU) remains the market`s biggest player on the fragmented online/mobile video market.

Strong competition is provided by Baidu, Sohu and Tencent. Alibaba, Baidu and Tencent have been constantly finding ways to encroach on each others turf. Tencent bought a 15% stake in #2 Chinese e-commerce firm What a battle!

Yelp has been a hot stock and some investors say these stocks are «momentum monsters», and now you have the chance to get into a new IPO of the Facebooks game developer called Candy Crush. Wall Street is planning on selling 22 million shares. A valuation of $7,6 billion! Candy Crush made $159 million in 2013! Wow!

Reports today:

09:00 AM ET S&P/CS Composite 20 HPI y/y
10:00 AM ET CB Consumer Confidence
10:00 AM ET New Home Sales
07:00 PM ET FOMC Member Plosser Speaks

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.


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