In China, Tencent and ByteDance are fighting hard, and even “Tencent and Laoganma’s advertising door” both sides have a war of words.
But when it comes to the United States, competitors have become difficult brothers.
On August 7, Beijing time (the evening of August 6, local time), US President Trump signed an executive order that would prohibit Tencent from conducting any WeChat-related transactions between Tencent and any individuals and entities subject to US jurisdiction. The executive order will take effect 45 days later (September 20, local time) .
Another executive order signed by Trump on the same day also required that from September 20th, American individuals and entities are prohibited from conducting any related transactions with TikTok’s parent company Bytedance.
The executive order published on the White House official website shows that Trump regards the two applications of WeChat and TikTok as a “threat to the national security of the United States” and conducts “response to a national emergency in the information and communication technology and service supply chain”. response.
TikTok’s parent company ByteDance, which was caught up in public opinion for the “sale to Microsoft”, made it clear that it would file a lawsuit with unfair treatment, reversing the previous image of “kneeling too early”. Tencent has yet to take any action.
Although WeChat has not yet reached such a desperate situation in the United States compared to TikTok, which is forcibly sold, the ban also has a great impact on Tencent.
Tencent’s globalization may be affected
Unlike ByteDance and Huawei, Tencent’s global layout is not so interesting. In the United States, Tencent is seeking to enhance its presence.
According to a report by the US commercial real estate data website Costar on August 3, Tencent signed a contract with the real estate company Irvine to lease a building located at 15201 Laguna Canyon Road, Irvine, California, with a total area of approximately 2430 square meters. Office building. Currently, this contract is the highest-value office lease contract on the market in the second quarter of this year.
However, compared with the impact of the ban, the rent of this office building is not worth mentioning.
On the trading day when the ban was announced, Tencent Holdings once fell by more than 10%; it eventually closed down 5.04%, and its market value evaporated by more than 260 billion Hong Kong dollars, barely holding the 5 trillion Hong Kong dollar market value.
The capital market panic is not that WeChat is banned in the United States, because the proportion of US users to the total WeChat users is almost negligible. However, if this black swan event expands its impact, Tencent’s other businesses in the United States will also be affected, and even its global layout will be affected.
WeChat began its internationalization in 2012 and entered the Indian and Southeast Asian markets successively. In the US market, the number of users of WeChat ushered in a small growth peak in the early days. According to statistics from GlobalWebIndex, from the beginning of 2013 to the end of 2014, the number of WeChat users in the United States has increased by 11 times, reaching 3 million.
At that time, according to Tencent’s official data, the total number of WeChat monthly active users at the end of 2014 had reached 468 million.
According to App Annie statistics, among the 10 most popular apps of the year in 2019, WeChat is not even visible, but WhatsApp Messenger, Snapchat, Facebook (Messenger), and Instagram are among them. China is on the list by TikTok of Bytedance and Likee of Huanju Group.
Although the number of WeChat users in the United States is not large, Tencent will also suffer losses due to administrative orders. If successfully implemented, WeChat will not be able to appear on Apple’s App Store and Google’s Play Store, and related transactions will not proceed. Not only is WeChat unable to achieve user growth, it can no longer generate revenue from the United States.
Apple and Google will also be affected by the administrative order and lose part of their WeChat revenue.
Tencent is in uncertainty in the long run
WeChat’s presence in the United States is very weak, so the administrative order’s restrictions on WeChat will not have a substantial impact on Tencent in the short term, but in the long run, the negative effects and long-term uncertainty brought about by this incident , Will affect Tencent’s global layout.
Although some White House officials have stated that the presidential order is limited to WeChat and WeChat-related companies, and does not involve gaming companies held by Tencent. Therefore, Riot’s “League of Legends” and Epic’s “Fortnite” are currently unaffected.
But the future is still fuzzy. Most of Tencent’s cash flow businesses have overseas operations, especially gaming businesses and cloud services.
Tencent’s financial report for the fourth quarter of 2019 showed that Tencent’s overseas game revenue in the quarter more than doubled year-on-year, accounting for 23% of online game revenue, with revenue of approximately 6.97 billion yuan. As of the end of 2019, five of the world’s top ten most popular smartphone games (calculated by the number of daily active users) were developed by Tencent.
In the first quarter of 2020, Tencent’s online game revenue increased by 31% to RMB 37.298 billion, of which overseas games (including “PUBG Mobile” and “Clash of Clans”) became the source of revenue growth. In terms of an increase of 19% from the previous quarter, Tencent’s online game revenue from overseas has exceeded RMB 8 billion.
Sensor Tower’s data shows that in January 2020, the overseas revenue of “PUBG Mobile” is nearly 83 million U.S. dollars, and the United States is the market with the most revenue contribution, accounting for 29.1%.
Huatai Securities predicts that Tencent’s game business revenue from the United States accounts for about 20% of overseas game revenue, and the proportion of Tencent’s game business revenue will fall to 5%, and it will account for less than 1% of Tencent’s overall revenue. If Tencent games are also banned in the United States, Tencent will have to bear the pain, but in the long run, it will have little impact on revenue.
Tencent Cloud also has a business layout in the United States. According to Tencent Cloud’s official website, Tencent Cloud has four available zones in the United States, including two in Silicon Valley, two in Virginia, and a cooperation infrastructure in Dallas. However, compared with Amazon’s AWS and Microsoft Cloud, Tencent Cloud is still a small overseas presence, and its main business and revenue come from China. Therefore, the ban has also limited impact on Tencent Cloud’s US business.
In comparison, Tencent has a dazzling presence in the U.S. capital market. Tencent and many Chinese concept stock companies that have investment relationships with Tencent are all listed in the U.S., such as Tencent Music, JD.com, Pinduoduo, Sogou, Douyu , Huya, etc. Tencent has also made many acquisitions in the United States, mainly in the game field.
“League of Legends” developer Riot Games is a wholly-owned holding of Tencent, with a 48.4% stake in “Fortnite” developer Epic Games, and a 5% stake in “Call of Duty” developer Activision Blizzard.
In addition, Tencent also holds 5% of the electric car manufacturer Tesla, 10% of the social software Snapchat, and 10% of the music software Spotify. Tencent has also invested in entertainment social networking sites Reddit and Universal Music. Wait.
“For Tencent, the short-term impact (in terms of revenue) is not obvious, but in the long run, the unstable political environment in the United States and the global restrictions that it brings may have a negative impact on its business layout, especially if Tencent owns in the United States. Many investments, especially gaming investments.” A lawyer who did not want to be named told Sina Technology that a situation similar to the United States’ influence on the United Kingdom’s restrictions on the use of Huawei is unlikely to happen to Tencent, but it does not rule out the United States and its allies to follow up and adopt Other measures restrict Chinese technology companies including Tencent.
“Tencent’s best choice is litigation. It uses the checks and balances of the separation of powers in the US political system. As long as the lawsuit is won, Trump’s executive order will be revoked because it is unconstitutional.” Dong Yizhi, a lawyer at Shanghai Zhengce Law Firm, told Sina Technology In the short term, the executive order will not be escalated and spread to other businesses. The executive order against the President of the United States is the best choice.
Trump’s executive order has been overturned. On February 3, 2017, Judge James Robart of the U.S. District Court for the Western District of Washington issued a ruling to suspend the implementation of Trump’s administrative order restricting the entry of refugees and other groups across the United States. Immediately, the U.S. State Department withdrew its previous decision to revoke visas for persons from relevant countries under Trump’s executive order.
On the afternoon of August 7, ByteDance issued a statement in response to the presidential executive order signed by Trump, stating that TikTok will continue to exist for a long time, and if it encounters unfair treatment by the US government, it will initiate a lawsuit against this presidential executive order.
One of the biggest competitors has already stated that it will counter “unfair treatment.” If Tencent joins, this will be one of the few that will fight side by side. And if Tencent silently accepts it, Tencent will inevitably lose some points when you come and go.
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