Today is a big day in Asia’s Internet industry. Earlier today, Korea’s NHN said it will buy major Japanese portal Livedoor, and now Tencent, China’s largest Internet company, has announced [PDF] it plans to invest $300 million in cash into Russian investment firm Digital Sky Technologies (DST).
DST itself has been in the news repeatedly over the last few months, especially after investing $200 million in Facebook and $180 million in Zynga last year. On its homepage, the firm claims its portfolio companies command 70% of all page views on the Russian speaking web.
Tencent racked up $1.8 billion in revenues last year [PDF], with operating profit reaching a staggering $882 million. The Shenzhen-based company’s key service is instant messaging platform QQ, which boasted no less than 523 million active users at the end of last year. Tencent also operates a web portal (QQ.com), a social network (Qzone) with nearly 400 million active users (self-reported), a gaming portal (QQ Games), a search engine (SOSO), and a number of other services.
Tencent will get a 10.26% stake in DST, 0.51% of total voting power and the right to nominate “one observer” to DST’s board of directors. Both companies also said they’ll be entering a strategic partnership, without providing details.
The tie-up with DST is by far the biggest international commitment Tencent made to date. The motivation is obvious: the company may be the biggest in China’s huge web market (and even one of the biggest worldwide) but internationally speaking, it’s a nobody. In the US, Tencent (unsuccessfully) launched QQ Games in 2007, followed by an international version of the QQ messenger and a smaller investment in India one year later.
But I have a feeling Tencent will do a lot more to boost its presence outside China in the months to come.
Per the company’s claims as of March 2008, Tencent is China’s largest and most utilized internet services portal. The company powers popular products like instant messaging and gaming service QQ and e-commerce and online trading platform PaiPai, amongst others.
Digital Sky Technologies is a growth focused investment company specializing in late-stage, high-growth, private companies in the global Internet industry. The company has pioneered a model to provide liquidity to founders, employees and early investors through mixed primary and secondary transactions. These transactions are often referred to as DST type deals in the Internet world. The company was founded by Yuri Milner, and after building Mail.ru Group, DST gained international prominence through its investments in Facebook, Zynga and Groupon.
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