Bloomberg News

Tencent to Double Investment to Boost Web Services in China

June 15, 2011

(Updates with closing share price in fifth paragraph.)

June 15 (Bloomberg) -- Tencent Holdings Ltd., China’s biggest Internet company, will double the size of a fund that invests in technology developers to search for new content and services and expand its user base.

The company will allocate an additional 5 billion yuan ($772 million) to the fund, set up this year, boosting its size to 10 billion yuan, Chief Executive Officer Ma Huateng said in Beijing today. Shenzhen, southern China-based Tencent has so far used up about 2 billion yuan, he said.

Tencent, China’s biggest online games company, is stepping up acquisitions and adding partners to expand its range of services as competition with Chinese rivals such as Baidu Inc., Sina Corp. and Renren Inc. intensifies. Founder Ma is moving away from a strategy of relying only on in-house content and products, following Facebook Inc. in adopting applications by external developers to attract users and boost revenue.

“We want the developers to be successful,” Ma said. “Our principle is to be open, transparent and fair,” he said at a conference for application developers.

Tencent rose 0.9 percent to HK$203.20 at the 4 p.m. close of trading in Hong Kong, valuing the company at HK$373.5 billion ($48 billion). Baidu, owner of China’s most-popular search engine, has a market capitalization of $43.4 billion based on its closing price yesterday.

Online Games

In January, Tencent set up the fund to invest in companies that develop Web services such as online games, social networking and electronic commerce. Ma said at the time that it’s difficult for any single company to develop all its own applications and services.

Tencent, also the operator of China’s most-popular local instant-messaging service, last month said it bought a 16 percent stake in ELong Inc., the owner of an online travel site in China. The deal followed the purchase of a controlling stake in U.S. online-game company Riot Games Inc. for $231.5 million in cash, in addition to stock options, in February.

In February, Tencent’s venture with Groupon Inc., owner of the world’s biggest coupon website, began service in China. Tencent said a month later that it agreed to team up with Intel Corp. on online games.

Tencent has more than 200 million users for its microblogging website, President Martin Lau said at the conference today. The service is growing “very fast” and provides developers with many opportunities, he said.

There were 674.3 million active user accounts for Tencent’s QQ instant-messaging service at the end of March, compared with 647.6 million three months earlier, the company said in May.

--Edmond Lococo, Mark Lee. Editors: Anand Krishnamoorthy, Lena Lee.

To contact Bloomberg News staff on this story: Edmond Lococo in Beijing at elococo@bloomberg.net; Mark Lee in Hong Kong at wlee37@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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