Brief: Tencent pays around $2b for stake in struggling Snapchat

Image credit: Tech in Asia.

The news (extracted from CNBC):

• Snapchat, the messaging app struggling to lure in new users as its features get copied by Facebook, has received a vote of confidence from Chinese tech giant Tencent.
• Tencent, maker of WeChat, has acquired a 10 percent stake in Snapchat parent Snap, according to a filing with the US Securities and Exchange Commission.
• Tencent purchased 145.8 million non-voting shares on the open market over the last quarter. At an average US$14.50 per share over that period, Tencent paid an estimated US$2.1 billion.

Why it matters:

• Snap has an office in Shenzhen, China, focused on hardware development. That’s also Tencent’s hometown.
• This isn’t the first investment. Tencent made an undisclosed injection into Snapchat back in 2013.
• “We have long been inspired by the creativity and entrepreneurial spirit of Tencent and we are grateful to continue our longstanding and productive relationship that began over four years ago,” said Snap in its filing. “For its part, Martin Lau, Tencent’s president, informed us that Tencent is excited to deepen its shareholding relationship with us, and that it looks forward to sharing ideas and experiences.”
• The renewed partnership between Tencent and Snapchat suggests possible collaboration for both messaging apps.

Updated 16 hours after publishing: Tencent has been a bit more specific, saying it could work with Snap to publish games and improve ad sales – specifically to create “newsfeed ads” within Snapchat, reports Reuters. Snapchat does not have a newsfeed, suggesting the millennial-oriented messaging app could become more like Facebook – or like the Moments stream inside Tencent’s WeChat.