While there are unverified rumors that Chinese mega-giant Tencent is interested in joining a fresh, large round for Snapchat, mainland China’s biggest social networking platform actually already secretly invested in the ephemeral messaging app.
Tencent was an undisclosed minority participant in the company’s last $60 million round led by Institutional Venture Partners, according to sources familiar with the deal in both China and the U.S.
Such a relationship is a win-win for both parties. Snapchat gets an powerful strategic partner if it wants to expand into Asia — especially mainland China, where other Western consumer Internet and mobile companies have stumbled like Google or are blocked like Facebook.
Snapchat also gets to learn from the most successful social networking platform in the world aside from Facebook. Tencent, which is valued at $99.3 billion on public markets, has 815.6 million monthly active users on its messaging platform. Its upstart messaging app, Weixin or WeChat, has racked up 272 million monthly active users in the last two years or so. Tencent also said it sees 400 million photos uploaded per day according to a presentation the company gave at MIT over the weekend, more than the 350 million per day Facebook sees, according to a whitepaper published in September.
In turn, Tencent absolutely has ambitions of being a global company, not one that’s limited to mainland China. CEO Pony Ma said back in May that internationalizing China’s consumer Internet companies, in the same way that the country’s manufacturing industry serves a global market, would be a “revolution.”
Right now, WeChat is the company’s most visible shot of building a truly global product. The messaging app — which, by the way, is a fantastic product that’s ubiquitously used throughout China’s coastal cities — is growing internationally with help from the Chinese diaspora. But, like other powerful Asian messaging apps, it will have trouble expanding in the super-competitive U.S. market.
Having a U.S. subsidiary, joint venture or large-scale strategic investment might make a lot more sense. This is a route Tencent has taken in the neighboring South Korean market after it acquired a 13.84% percent stake in Kakao Talk, the maker of South Korea’s leading mobile messaging app. It also successfully pulled off a strategy like this when it acquired a majority stake in Los Angeles-based, League of Legends-maker Riot Games in 2011 for $400 million. Notably, that was another deal where Snapchat board member Mitch Lasky helped broker the negotiations.