China’s Tencent Buys 12% Stake in Snap | Hacker News Reader

China’s Tencent Buys 12% Stake in Snap

wsj.com

142 pointsjakarta47 comments

With TenCent having the pull that they do in China, I wonder if this could mean Snapchat possibly being unblocked in China soon.

The cynical part of me thinks that when a big purchase like this happens, the buyer knows something we don’t.

Then again, they bought 5% of Tesla as well this year.

I don't think that's cynical at all. If you're going to spend a ton of money on something, you'd better have analyzed it more closely than has the general public.

I'm surprised it's banned there... how could Snapchat possibly be threatening to the Chinese government? Are selfy videos really danger to the party? Were the keyword filters not effective?

There are two things about Snapchat that rub Chinese authorities the wrong way:

1) Ephemeral messaging. They want to keep records of what people are saying.

2) Reputation for sexting. Pornography is a major target for censorship in China.

Has it been proven that snap does not record messages?

Has it been disputed that Snap, a publicly traded company who will fall under GDPR, with thousands (?) of employees, are not recording messages?

It's running on Google infra, of course it's banned.

there's an "open source" Google App Engine called AppScale that can run outside Google Cloud.

Managing the software used to run a cloud platform isn't the hardest part of running a cloud platform. It would be a significantly larger effort for Snap to run and manage their own physical infrastructure. It's a big reason why Google Cloud is a service that makes money.

They also seem to run on AWS, so not necessarily a problem. http://fortune.com/2017/02/09/snap-inc-signs-big-aws-deal/

> how could Snapchat possibly be threatening to the Chinese government?

Any messaging system that the Chinese government isn't able to assert control over and have access to gets banned.

Or this is just a way to cheaply buy into the US messaging market, where Wechat is still weak.

I'd also personally rather just keep my domestic messaging monopoly than let in another competitor.

I believe Tencent also invested something like $50M in Kik.

They don't need another IM, they have WeChat and QQ, both have close to 1 billion users in China. I didn't see how SnapChat has something that Tencent can't offer in WeChat much so they would want release a standalone app.

Despite the poor sales of the spectacles, the hardware itself is actually really well designed and functional, If it wasn't bogged down by being bound to the snapchat app. I assume this is the source of the value tencent is investing in, a hardware design company.

I'd agree there are parts of the Spectacles user experience that were nicely done, but I'd draw the line at "really well designed and functional" as you describe it. Each press of the button only recorded 10 seconds of video up to a max length of just 30 seconds, it could only store about 30 minutes total, the battery could only manage ~15 minutes of recording before dying, transferring HD clips via wifi was pretty awful...

The design, while about as good as we've seen for glasses with a camera strapped to them, still left a lot to be desired. Not everyone is going to want such a giant plastic pair of sunglasses on their face either, and the yellow camera ring wasn't exactly subtle.

Some interesting ideas in there for sure, and I'd genuinely be interested to see what future revisions may/might have looked like, but as it is today it has a long ways to go before I'd call it both "well designed and functional". I'm not surprised in the least this fizzled out once the pretty nicely done viral marketing campaign with the vending machines ended.

The 'circular' recording/playback format for the video that meant every recording worked in either landscape or portrait was really nice though. It was especially neat how one could alter the viewing format while the video played by rotating the phone, almost as if exposing a rectangular portion of the underlying circle. The charging case was also a nice touch.

Snapchat people are mainly interested in selfies. It was always going to be a stretch to sell them a product that was about other people. That suggests a bigger issue: that Snapchat's management doesn't understand its user base, and will therefore struggle to develop new products for them.

Good point. Also, failure of the product in the US doesn't necessarily preclude it from being successful in China or other Asian markets where the cultural norms around wearables might be different.

I use WeChat and Snapchat, they are not at all interchangeable.

Nah, they just want to do something with all that money they have. Leaving it in China might be an issue if the market in China changes.

So why not just buy something safe, like a US bond?

Diversification. The Chinese Govt. already holds trillions of dollars in US bonds.

I think if Snap goes south and wants to get acquired, Tencent would get first dibs. It would be in a better position to gobble up the company and get all those engineers who already have a ton of messaging app experience for cheap.

Side note: Tencent means "soaring information" [1] and not "10 cents"

[1] https://en.wikipedia.org/wiki/Tencent

> not "10 cents"

It does imply 10 cents. See

https://www.zhihu.com/question/55269732/answer/145118163

(This site is basically China's quota, the answerer is Tencent official org account.)

Basically, Tencent was a startup that charges 10 cents for each message delivered to pager devices via its OICQ software (网络寻呼机), and later 10 cents for each SMS message.

Interesting though, Tencent(腾讯) was named after Lucent (朗讯), back in the time there was like hundreds of messaging companies in ShenZhen named *cent. e.g. 润讯，中讯，捷讯, etc.

Honest question, is Tencent a holding company or a technology company?

Technology.

Sort of both, but probably you'd classify it as a holding company. They definitely have a lot of stuff they just sit on holding style (e.g. riot games and dozens of others), and their name is literally tencent holding or something like that. But on the other hand they've got a lot of stuff built up like qq and wechat.

I would compare it to Google/Alphabet. They have acquired enough companies and have a tight relationship with enough autonomous projects to need the structure of a holding, but the place remains at its core a technology company.

Google decided to brand the holding differently, which probably makes good marketing sense.

Imo it's closer to what Softbank is doing, since so few of the arms are home grown.

But what're the core tech products SoftBank produces?

I'd say mobile search and mobile web services, since Yahoo Japan was/is a legitimate joint venture by Softbank and Yahoo where they started it from the ground up, and the services being pre installed on Softbank phones made a huge strategic impact on user adoption.

They are the low cost leader in mobile telephony, have a vast solar operation (heavy govt subsidies), and have a powerful contract software Salesforce.

can't help but wonder if alphabet would be allowed to buy 12% of wechat if it wanted to.

WeChat is not an independent company; the comparison doesn't really apply.

But to your point, the biggest single share holder of Tencent is Naspers -- a South African company -- which at it's hight owned 45% of the company but currently owns about 35%. Their orignal investment of US$18M is now worth over US$115B. Foreign companies have a long long history of taking major stakes in Chinese tech companies. Softbank and Yahoo both had major stakes in Alibaba. The large American VCs tend to be fairly active in China.

Also anyone can go buy shares in Tencent themselves. They are a major part of my portfolio. And if you don't want to buy them directly then KWEB is a great ETF that focuses on the China tech industry. BAT (Baidu, Alibaba, Tencent) makes up the majority of KWEB.

Edit: Maybe you meant Alphabet specifically. Yes, that could be more difficult because of Google's long history of operating more as an extension of the US State Department than a private company.

Tencent is pretty good to companies they take in so this is probably great for Snap.

For instance in gaming, Tencent bought majority stakes in Riot Game, minority stakes in Epic games who are doing amazing things for the Unreal Engine, Rovio a top mobile publisher (Angry Birds) and a bit of Activision/Blizzard. So far all of those companies benefitted from the partnership.

100% related to the Facebook having an algorithm to blacklist photos based on naked photos of ppl. Snapchat has those already for like 35% of its users or something I'd bet.

Pornography is easy to find on the Chinese internet, it actually comes up on innocuous searches there (no safe search, because all searches are supposed to be safe when in reality none of them are). They don’t really care about porn, quite the contrary, it drives their business as long as they don’t cross invisible lines. Just don’t get into politics...

I can’t imagine identifying naked people or pornography to be computationally hard (the difference include hippies on holidays or medical images, typically dermatology, and you want that even less) at least not for a search engine with image previews.

Not that its computationally hard to say is this a naked person (#notahotdog from silicon valley). It's more along the lines of show me all naked pictures of ME on the internet, is probably more computationally hard.

showing me all the naked pictures of ME on the internet is just a null function

Calling what Facebook has an "algorithm", while true, probably misleads here - this comment implies that the Facebook algorithm is somehow smart and does this automatically, and that Snapchat's user data would make a great training database.

My understanding is that Facebook are generating hashes from images their users choose to send them of themselves, then blocking any images that match those hashes on their network. You don't need to be a huge player to build something that works the same way really quickly - there's no smarts trying to identify the images to block here, the humans have already done so.

That Facebook system is a hard sell to me - you are choosing ahead of time to share your most intimate photos with Facebook. To implement that feature in such a way as to destroy all traces of the original file and keep only the hashes? That's a big amount of trust to place in Facebook, especially when you have no insight into how this is being performed server side.

At any rate, investing in a business like Snap primarily to get naked pictures of people strikes me as an unlikely reason. There's no shortage of such "content" out there...

Timing with Trump visit seems to suggest that it's one of those deals that make it during the negotiations of economic relations - who infuses who with more cash - yet at the same time make the invetsment as strategic as possible

I wonder if this has anything to do with snap's real estate.

Twelvecent

I'd bet this 12% stake is actually a behind the scenes loan in the form of buying stock. No way would any smart investment company have genuine long term interest in Snapchat at this point. Older people are not using snapchat, and younger people will grow out of it within the next 5-7 years. Snap is still a major short imo, will be under $10 a share in next 6-8 months

That's an awful lot of bold claims without any supporting evidence or logical analysis.

Why do you think the 12% stake is a loan?

Why are you so sure no smart investment company would have a genuine long term interest in Snap?

Why will younger people grow out of it in the next 5-7 years? And if it's going to take 5-7 years, why would the stock be under $10 (keeping in mind it's $12.64 right now) in the next 6-8 months?

I'm not a fan of Snapchat either, but to support your claim because "Older people are not using snapchat" could have been applied to Facebook 8 years ago, and look where they are now.

This is a really positive development for Snap -- one of their biggest challenges is that while Facebook, WeChat, WhatsApp, LINE, and other social networking apps have been gobbling the newly international user-base, Snap has really stalled, with user growth of only about 10% in the last year in "Rest of world" (non-Asia/Europe). [1] Hopefully Tencent can help them get back on track

[1] http://www.businessinsider.com/one-chart-shows-snapchats-use...

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