China’s Tencent Buys A Tenth Of Snapchat

Janina Lim – Fourth Estate Contributor

New York, NY, United States NY – Tencent Holdings Ltd. has acquired a 10 percent stake in Snap Inc., which recently reported a decline in its third quarter profit as growing competition in the market poses a challenge to the firm in expanding its network.

China’s biggest instant messaging company, famously known for its WeChat messaging app, purchased 145.8 million non-voting shares of Snap Inc. the parent company of camera app Snapchat.

The acquisition of a minority stake is seen to put Snapat an advantage in having an ally in China, where its message app does not work amid government restrictions

Snap shares soared by as much as 34 percent in pre-market trading on the news in New York but retreated at the close.

The buyout follows Snap’s Tuesday report on losses more than tripling year-on-year to $443.2 million during the July to September period, putting the firm behind several tech companies that met and even breached Wall Street expectations.

As such, the firm said it is revamping its mobile application, its primary business, to reach a broader audience and generate more income from advertisements.

Snap CEO Evan Spiegel said the application needs to expand its user base beyond 13 to 34 year olds in the U.S., France the U.K. and Australia.

Snapchat’s daily users boosted by 4.5 million in the third quarter, bringing its total subscribers to 178 million.

As for Tencent, it runs two separate instant messaging services namely WeChat and QQ — with each registering close to a billion users — as well as online payment platforms and games,

The Shenzhen-based firm, which has a market value of about $470 billion, has turned these applications into full social networks and made money by adding games, newsfeeds and advertising.

Tencent President Martin Lau said the company, which has been diversifying its business portfolio into advertising and finance, plans to share “ideas and experiences” with Snap.

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