Core points:

• In terms of going out to sea, Tencent had staked all his hopes on Wechat. Due to the disobedience of soil and water, fierce competition and other reasons, WeChat has not become the mainstream social application overseas, but it has a great influence among the Chinese community.

• Capital going out to sea is Tencent's more powerful overseas layout form, and his overseas investment is all over the world, in which the whole industry chain of layout game is the key component of Tencent's investment.

• Although the play of social flow has not been replicated overseas, the success of capital going out to sea has still opened up a channel for Tencent. The layout of the game industry all over the world has helped Tencent become the leader of the game industry and open up overseas growth space.

In 2020, the sword of Damocles from overseas hangs over the heads of big Internet companies.

Since June this year, the overseas business of large domestic Internet companies has suffered continuous setbacks, after the Indian government banned a number of APP, including UC browsers, TikTok, Wechat and Weibo Corp, for "national security reasons." Soon after, there were even greater twists and turns in the US market.

In the past few weeks, the future of TikTok in the United States has become the focus of media attention at home and abroad. As the storm intensified, the flames of war spread from bytes to Tencent, and Wechat's overseas version of WeChat became another Chinese Internet product targeted by the US government. Tencent's shares tumbled 10 per cent in intraday trading after the news.

In an earnings call on Aug. 12, Tencent executives said the US market accounted for less than 2 per cent of Tencent's global revenue. Some domestic securities firms also said that the "WeChat ban" had little impact on Tencent, but judging from the ups and downs of Tencent's share price, the market still seems to be worried.

The worry comes from the uncertainty faced by Tencent's overseas layout, and most of the doubts in the outside world are focused on:Apart from WeChat, what other business does Tencent have overseas, and how important is it to Tencent himself?

The answer is: Tencent has already become a big player in the global market, and its overseas layout has also had a profound impact on Tencent's own business development.

In recent years, Internet companies represented by Tencent, BABA and byte beating have set their sights on a broader overseas market, but compared with businesses like TikTok, capital going out to sea is Tencent's more powerful overseas layout.

By combing Tencent's overseas investment, Shenxiang finds that Tencent is an important player overseas and has a layout all over the world, while reviewing Tencent's efforts in internationalization, we will find that strong capital going out to sea is not only related to the development of WeChat, but also reflects Tencent's consideration of trying to rely on capital to go out to sea to feed his own business development.

Wechat has a long way to go to sea

In terms of business going out to sea, Ma Huateng once placed all his hopes on Wechat and made no secret of his expectations for the internationalization of Wechat. He said in 2013, "for Tencent, I only see Wechat as a product that can go international in my life." "

As Tencent's blockbuster product, it is reasonable for Wechat to be taken seriously. in 2013, the two-year-old Wechat already had 400 million domestic users and 100 million overseas users, which not only helped Tencent get a "boat ticket" on the mobile Internet. it also opens up the imagination from overseas.

In order to open up overseas markets for Wechat's overseas version of WeChat, Tencent asked Messi to endorse WeChat. TV commercials were once broadcast simultaneously in 15 countries and regions, and mobile and offline ads were also intensive.

Tencent's 2013 annual report shows how much the group attaches importance to Wechat going out to sea. The financial report shows that Tencent's sales and marketing expenditure nearly doubled that year compared with the previous year due to the large amount of money invested in the international market to promote WeChat.

Behind the push of WeChat, Tencent's intention is to copy his tried-and-tested style of social traffic at home to overseas.

In the PC Internet era, Tencent developed various value-added services and services based on QQ social traffic, so that many peers complained that they "do everything". In the era of mobile Internet, Wechat is carrying the huge possibility of mobile payment, games, e-commerce and other services. Standing in the window of changing times, Tencent has no reason not to touch the cake of the global market.

Although there is a lot of money and the blessing of the ball king, but WeChat's going out to sea is not smooth. On the one hand, WeChat needs to solve the old problem that the popular domestic features may not necessarily make foreign users pay the bill, and each country has its own unique national conditions to adapt to; on the other hand, overseas counterparts such as Facebook Inc, Line and WhatsApp already have a place in the market, so it is difficult to break through.

Tencent tried to buy WhatsApp in 2014, but near the final stage of the negotiations, Ma Huateng had to postpone his trip to Silicon Valley due to medical reasons, when Zuckerberg offered nearly twice as much as Tencent's offer to win WhatsApp, Bloomberg reported.

Despite missing out on WhatsApp, Wechat and WeChat, which have a huge influence among the Chinese community, are still the most important digital bridges for China to connect with the rest of the world. The contacts of foreign students with their families, the transnational business of enterprises, and the information exchange of Chinese around the world are all closely related to WeChat, and their importance is actually a reflection of China's global status.

Compared with the momentum in 2013, the internationalization of Wechat is no longer the focus of the group's disclosure, but Tencent's going out to sea is actually in progress, only in a relatively low-key dimension.

All over the world

Although WeChat failed to fulfill Ma Huateng's wishes, and Tencent did not seem to have really created a product similar to TikTok's influence in overseas markets, Tencent is an important player overseas, which is related to his layout strategy in overseas markets-capital going out to sea rather than products going out to sea.

According to data compiled by IT Orange, as of mid-August this year, Tencent had invested in as many as 143 overseas targets in 22 countries, including 71 companies in the United States. India and South Korea ranked behind the United States with 17 and 13 investment respectively.

Similar to the "pinching" investment style in China, Tencent's overseas investment is mainly aimed at the head players of subdivided tracks, and star enterprises can be found everywhere in his investment list, such as Epic Games, Riot Games, Snapchat, Reddit, Lyft, Tesla, Inc. in the United States, Supercell in Finland, Farfetch in the United Kingdom, "Southeast Asia Little Tencent" Sea in Singapore, "DiDi Global Inc." Go-Jek in Indonesia, and so on.

Although the distribution of investment targets is wide, Tencent's capital going out to sea has a clear logic.

Different from pure investment institutions, Tencent himself, as an industry giant, not only considers the financial returns, but also focuses on the significance of the invested enterprises in the competition and the coordination with their own business.

Due to the remarkable population advantage and the development path of mobile Internet similar to China, Tencent and BABA have tried to radiate their influence to the Southeast Asian market in recent years, and competition is inevitable.In the e-commerce track, BABA acquired a controlling stake in Lazada through investment, Tencent added to Sea's e-commerce platform Shopee; in the payment track, BABA invested in the electronic payment brand Mynt, and Tencent acquired the Philippine electronic payment company Voyager.

In addition to competition-driven, Tencent's capital going out to sea also has obvious business synergy characteristics, and its common practice is to acquire a small amount of equity in exchange for cooperation with the invested company, which is most obvious in Tencent's game business development.

According to "Deep Sound" statistics, games account for the largest proportion of Tencent's overseas investment industry. 42 of the 143 investment targets belong to the game industry, and most famous game companies are among them, such as "League of Legends" developer Riot, "PUBG" developer Bluehole, "Fortnite" developer Epic, "Royal War" developer Supercell and so on.

The idea of investing in well-known game companies is not difficult to understand, Tencent is trying to win the popular game IP and R & D rights, to make up for their own shortcomings in the upper reaches of the game industry.At the same time, Tencent also invests in the underlying technology, distribution, channels and other links in the game industry chain. Garena under Sea is Tencent's agent for mobile games in Southeast Asia. Tencent's investment in US game publisher Outspark, Vietnamese game publisher VNG, South Korean game operator KaKao and so on is also the embodiment of the same train of thought.

The reason for the layout of the game industry chain, Tencent in the overseas face of the different environment is the key. In China, Tencent is sitting on the huge traffic brought by "Tencent" applications such as Wechat and QQ, which in itself is the largest distribution channel, but the play of social flow has not been copied overseas, coupled with the policy restrictions of various countries and regions, Tencent through investment in exchange for cooperation, "borrow" local players is a more convenient choice.

Li Zhaohui, managing partner of Tencent Investment and vice president of Tencent Group, once described Tencent's investment in the game field as follows: "through investment, we have established a long-term strategic relationship with our core partners to ensure that we can get the best games in the world; on the other hand, there is a very strong synergy and mutually reinforcing relationship between investment and Tencent's business. "

After more than a decade of investment layout, Tencent has formed a significant influence overseas. In the overseas layout of travel, social communication, film and television, finance and so on, the game is undoubtedly the most successful one for Tencent to go to sea. It is worth noting that in addition to capital influence, the global influence of Tencent's own game business is growing day by day.

The Penguin Empire under the Capital going to Sea

The successful going out of the sea of capital has opened up a channel for Tencent. From the breadth and depth of the layout, as well as the control of various links, Tencent is already a veritable world-class game empire, and investment is the key to the development of Tencent's game business:

• Investment and acquisition of Riot, Tencent won the exclusive agency of "League of Legends" in China, but also laid the groundwork for the future cash cow product "Arena of Valor". Ma Huateng once described the acquisition of Riot as Tencent's "most successful overseas investment".

• Tencent has obtained the R & D and agency right of "PUBG" by investing in Bluehole, and the mobile game "PUBG Mobile" jointly developed with Bluehole remains highly popular all over the world.

• While investing in Epic, Tencent won the illusory game development engine as well as the agency of "Fortnite"

• With the acquisition of Supercell, Tencent won the agency of popular mobile games such as "Tribal conflict" and "Royal War" and became the most profitable mobile game company in the world.

• With a stake in Activision Blizzard, Tencent won the agency for call of Duty and cooperated with Activision Blizzard to develop Call of Duty Mobile.

It can be seen that the significance of capital going out to sea for Tencent's game business development is to first win the high-quality game IP through investment, and then transport popular mobile games overseas by virtue of its R & D capability in "end-to-end change of hands" and its global channel layout. In this path, "PUBG Mobile" became the first Chinese mobile game to open the global market.

Tencent's "PUBG Mobile" and "Game for Peace" earned $208 million in global revenue in July 2020, up 10.8% from July 2019, ranking first among mobile games in the world, according to data from Sensor Tower, a mobile application data company. Among them, Chinese players contributed 56.6% of their income, while those in the United States and Saudi Arabia contributed 10% and 5.6%, respectively.

The popularity of games overseas has provided Tencent with a new revenue "engine". According to Tencent's annual report last year, his overseas game revenue more than doubled in the fourth quarter of last year compared with the same period last year, accounting for 23% of online game revenue. The growth comes from the new models of "PUBG Mobile", "Call of Duty Mobile" and "League of Legends". By the end of 2019, five of the world's top 10 most popular mobile games (calculated by DAU) were developed by Tencent.

It is worth noting that Tencent's overseas game layout has also affected the going out of other products. Take Tencent Cloud as an example, its experience of giving priority to domestic games, live streaming, video and other customers has also been taken overseas. In the first quarter of this year, Tencent Cloud officially entered the South Korean market, and half of the top 20 game publishers in South Korea have reached a cooperation with Tencent Cloud. In the Japanese market, Tencent Cloud has also won a number of head customers.

Today, Tencent in the game content, research and development, channels and other aspects have built a moat, strategy also gradually from investment for cooperation to enhance control, independent distribution trend. It can be foreseen that the sea path of "PUBG Mobile" will be reused, and Tencent's income space from overseas games will also be further opened.

On the earnings call a few days ago, Ma Huateng stressed that Wechat and WeChat are "two different products". In this logic, compared with the stormy WeChat, capital and games are the protagonists of Tencent going to sea. On the one hand, Tencent is often seen behind the "unicorns" of various countries; on the other hand, Tencent's game business is setting off a new wave around the world.

As a world-class giant, Tencent's road to sea will also pry more space.