Brief:
- Tencent, the Chinese internet giant, may help Snapchat become more competitive with Facebook and Facebook's Instagram after buying a 12% stake in parent company Snap Inc., TechCrunch reported. Tencent's WeChat messaging app has 800 million users globally and is well positioned to help Snapchat tap into areas such as mobile messaging and gaming.
- Snapchat, which reported disappointing growth to 178 million users for Q3 2017, is undergoing a major redesign to make its image-messaging app easier to use, CEO Evan Spiegel told investors this week.
- Tencent first invested in Snap in 2013, but its increased stake in the company wasn't publicly announced until this week. As Snap said in a regulatory filing, the company isn't required to disclose significant ownership changes in its Class A common shares that have no voting rights.
Insight:
As Snap's user growth continues to stall, the company recognizes that it needs to address usability issues that limit Snapchat from gaining greater acceptance among a more diverse audience. Tencent has been enormously successful in popularizing WeChat, the messaging app that also acts as a gateway to other services like payment, e-commerce, local services, investments and banking, among others. The Chinese tech company, which is valued at $470 billion, brings significant experience in the messaging and social networking space. It's now forking over about $2 billion to help Snap grow its user base and unique mobile capabilities, signaling that Snapchat may soon offer more services that resemble those of WeChat as it undergoes a UX revamp.
In recent years, Snapchat has seen many of its key innovations quickly copied by rival app Instagram and its parent company Facebook, but it does have an advantage in being popular among a younger demographic that's generally hard to reach through other media. Instagram soared passed Snapchat's user base after adding 200 million users within a year of introducing its Stories feature that mimicked Snapchat Stories. Instagram now has 800 million users worldwide, compared to Snapchat's 178 million. Recently, Snap's made efforts to up its mobile game by adding link-sharing and Snap Maps to attract more users, and pixel tracking to measure cross-platform ads in a move to appeal to mobile marketers.
Meanwhile, Tencent has invested in 41 tech startups in the U.S. since 2011, according to The Wall Street Journal. It acquired Epic Games and bought minority stakes in publicly traded companies such as electric-vehicle maker Tesla and video game company Activision. Adding Snap to its portfolio is another way for Tencent to diversify its holdings and keep a pulse on and influence the latest technological trends around the world.
