Tencent aims to help Snapchat improve ad sales

SAN FRANCISCO/HONG KONG: Chinese Internet giant Tencent Holdings Ltd said yestersday it could help Snapchat owner Snap Inc publish video games and improve ad sales after acquiring a 12 per cent stake in the United States social media network.

Snap’s disclosure in a US regulatory filing that Tencent had recently bought 145.8 million of its shares on the open market set off a wave of speculation among investors about the relationship between the firms.

Shares in Snap closed at US$12.91 (RM54.60) on Wednesday, down 14.6 per cent, as investors pummelled the company for slow user growth and treated Tencent’s move as an investment rather than the precursor to an acquisition.

Tencent’s shares did not have voting power and it would not have a board seat, but the two companies broadly believed in cooperation that would go beyond passive investing, according to Snap’s filing on Wednesday.

Tencent yesterday described a potentially close relationship.

“The investment enables Tencent to explore cooperation opportunities with the company on mobile games publishing and newsfeed, as well as to share its financial returns from the growth of its businesses and monetisation in the future,” it said in a statement. It also referred to the potential for “newsfeed ads”.

Games and a newsfeed have not been a part of Snapchat, although the company on Tuesday said it was planning a redesign.

Analysts said Tencent, the world’s largest gaming company by revenue, had benefited from its social media apps for the phenomenal popularity of its smartphone games such as Honour of Kings, and would need the help of local social networks in promoting its games in overseas markets.

Tencent said it expected Snapchat to continue to grow, particularly in “affluent Western markets” such as the US and Europe. Reuters