Tencent

What China searched for in 2018: World Cup, trade war, Apple

Posted by | Android, Apple, artificial intelligence, Asia, Baidu, China, Entertainment, Facebook, Google, huawei, iQiyi, Netflix, oppo, producer, Qualcomm, quantum computing, search engine, shenzhen, smartphone, TC, Tencent, world cup | No Comments

Soon after Google unveiled the top trends in what people searched for in 2018, Baidu published what captivated the Chinese in a parallel online universe, where most of the West’s mainstream tech services, including Google and Facebook, are inaccessible.

China’s top search engine put together the report “based on trillions of trending queries” to present a “social collective memory” of internet users, said Baidu; 802 million people have come online in China as of August, and many of them use Baidu to look things up daily.

Overall, Chinese internet users were transfixed on a mix of sports events, natural disasters, politics and entertainment, a pattern that also prevails in Google’s year-in-search. On Baidu, the most popular queries of the year are:

  1. World Cup: China shares its top search with the rest of the world. Despite China’s lackluster performance in the tournament, World Cup managed to capture a massive Chinese fan base who supported an array of foreign teams. People filled bars in big cities at night to watch the heart-thumping matches, and many even trekked north to Russia to show their support.
  2. U.S.-China trade war: The runner-up comes as no surprise, given the escalating conflict between the world’s two largest economies. A series of events have stoked more fears of the stand-off, including the arrest of Huawei’s financial chief.
  3. Typhoon Mangkhut: The massive tropical cyclone swept across the Pacific Ocean in September, leaving the Philippines and South China in shambles. Shenzhen, the Chinese city dubbed the Silicon Valley for hardware, reportedly submitted more than $20.4 million in damage claims after the storm.
  4. Apple launch: The American smartphone giant is still getting a lot of attention in China even as local Android competitors like Huawei and Oppo chip away at its market share. Apple is also fighting a legal battle with chipmaker Qualcomm, which wanted the former to stop selling certain smartphone models in China.
  5. The story of Yanxi Palace: The historical drama of backstabbing concubines drew record-breaking views for its streamer and producer iQiyi, China’s answer to Netflix that floated in the U.S. in February. The 70-episode show was watched not only in China but also across more than 70 countries around the world.
  6. Produce 101: The talent show in which 101 young women race to be the best performer is one of Tencent Video’s biggest hits of the year, but its reach has gone beyond its targeted young audience as it popularized a meme, which made it to No. 9 on this list.
  7. Skr: A buzzword courtesy of pop idol Kris Wu, who extensively used it on a whim during iQiyi’s rap competition “Rap of China,” prompting his fans and internet users to bestow it with myriad interpretations.
  8. Li Yong passed away: The sudden death of the much-loved television host after he fought a 17-month battle with cancer stirred an outpouring of grief on social media.
  9. Koi: A colored variety of carps, the fish is associated with good luck in Chinese culture. Yang Chaoyue, a Produce 101 contestant whom the audience believed to be below average surprisingly rose to fame and has since been compared to a koi.
  10.  Esports: Professional gaming has emerged from the underground to become a source of national pride recently after a Chinese team championed the League of Legend finals, an event regarded as the Olympics for esports.

In addition to the overall ranking, Baidu also listed popular terms by category, with staple areas like domestic affairs alongside those with a local flavor, such as events that inspire national pride or are tear-jerking.

This was also the first year that Baidu added a category dedicated to AI-related keywords. The search giant, which itself has pivoted to go all in AI and has invested heavily in autonomous driving, said the technology “has not only become a nationwide buzzword but also a key engine in transforming lives across the globe.” In 2018, Chinese people were keen to learn about these AI terms: robots, chips, internet of things, smart speakers, autonomous driving, face recognition, quantum computing, unmanned vehicles, World Artificial Intelligence Conference and quantum mechanics.

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JioSaavn becomes India’s answer to Spotify and Apple Music

Posted by | alibaba, Amazon, Android, apple music, Asia, China, computing, Dhingana, digital audio, digital media, executive, funding, Fundings & Exits, india, Internet, JioSaavn, Media, New York, Pandora, pandora radio, rdio, reliance jio, saavn, Software, Spotify, Tencent, tencent music, tiger global, Times Internet, Walmart | No Comments

India finally has its answer to Spotify after Reliance Jio merged its music service with Saavn, the startup it acquired earlier this year.

The deal itself isn’t new — it was announced back in March — but it has reached its logical conclusion after two apps were merged to create a single entity, JioSaavn, which is valued at $1 billion. For the first time, India has a credible rival to global names like Spotify and Apple Music through the combination of a venture capital-funded business, Saavn, and good old-fashioned telecom, JioMusic from Reliance’s disruptive Jio operator brand.

This merger deal comes days after reports suggested that Spotify is preparing to (finally) enter the Indian market, a move that has been in the planning for more than a year as we have reported.

That would set up an interesting battle between global names Spotify and Apple and local players JioSaavn and Gaana, a project from media firm Times Internet, which is also backed by China’s Tencent.

It isn’t uncommon to see international firms compete in Asia — Walmart and Amazon are the two major e-commerce players, while Chinese firms Alibaba and Tencent have busily snapped up stakes in promising internet companies for the past couple of years — but that competition has finally come to the streaming space.

There have certainly been misses over the years.

Early India-based pioneer Dhingana was scooped by Rdio back in 2014, having initial shut down its service due to financial issues. Ultimately, though, Rdio itself went bankrupt and was sold to Pandora, leaving both Rdio and Dhingana in the startup graveyard.

Saavn, the early competitor to Dhingana, seemed destined to a similar fate, at least from the outside. But it hit the big time in 2015 when it raised $100 million from Tiger Global, the New York hedge fund that made ambitious bets on a number of India’s most promising internet firms. That gave it the fuel to reach this merger deal with JioMusic.

Unlike Dhingana’s fire sale, Saavn’s executive team continues on under the JioSaavn banner.

The coming-together is certainly a far more solid outcome than the Rdio deal. JioSaavn has some 45 million songs — including a slate of originals started by Saavn — and access to the Jio network, which claims more than 250 million subscribers.

JioSaavn is available across iOS, Android, web and Reliance Jio’s own app store

The JioMusic service will be freemium, but Jio subscribers will get a 90-day trial of the ad-free “Pro” service. The company maintains five offices — including outposts in Mountain View and New York — with more than 200 employees, while Reliance has committed to pumping $100 million into the business for “growth and expansion of the platform.”

While it is linked to Reliance and Jio, JioMusic is a private business that counts Reliance as a stakeholder. You’d imagine that remaining private is a major carrot that has kept Saavn founders — Rishi Malhotra, Paramdeep Singh and Vinodh Bhat — part of the business post-merger.

The window certainly seems open for streaming IPOs — Spotify went public this past April through an unconventional listing that valued its business around $30 billion, while China’s Tencent Music is in the process of a listing that could raise $1.2 billion and value it around that $30 billion mark, too. JioSaavn might be the next streamer to test the public markets.

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Tencent returns to profit growth despite concern around games

Posted by | Earnings, Gaming, TC, Tencent | No Comments

Chinese internet giant Tencent bounced back from a disappointing previous quarter, but for once the company didn’t have its gaming business to thank.

Tencent may be best known for conjuring up WeChat, China’s most popular messaging platform, but its revenue is driven by its gaming business, which includes top smartphone titles and a thriving PC unit. Its Q3 results, announced today, however, saw its gaming income slacken and other units, including a booming advertising business, step up.

The firm posted a net profit of RMB 23.3 billion ($3.4 billion) on total revenue of RMB 80.6 billion ($11.7 billion), up 30 percent and 24 percent, respectively. Profit growth was back on track, mainly thanks to increased net gains from investments, including a blockbuster IPO of Meituan in September.

Advertising increased by 47 percent and generated 20 percent of total revenues, marking the first time that the segment has reached that mark. The jump is in part a result of strong ad revenue growth on Tencent’s two main chat apps, WeChat and QQ.

These changes are a sign that Tencent has begun to aggressively monetize its massive network of social networking users. As of September, Tencent had 1.08 billion monthly active users on WeChat worldwide, though the app’s spectacular growth has slowed to 2.3 percent quarter-to-quarter.

Tencent underwent an internal reorganization in October that saw it merge several business groups, which have resulted in a more unified system of advertising sales platforms, the company explained in today’s report.

“Our advertising, digital content, payment and cloud services sustained robust activity and revenue growth, and now account for the majority of our revenue,” chairman and CEO Pony Ma said in a statement.

In contrast, games, which have been Tencent’s major revenue driver for years, slid four percent this quarter due to a prolonged freeze on gaming licenses in China. The firm claims it has 15 games with monetization approval in its pipeline, which means that gaming revenues could rebound when it publishes those titles, although it said the same in the previous quarter, so a lack of progress is fairly ominous.

The firm also pointed out that while mobile games continued to fuel revenue growth, PC games suffered a decline.

When asked about the situation with gaming licenses on a call with investors, Tencent President Martin Lau said the company is “waiting for the government to start the approval process.”

Tencent appears to have found a potential interim solution, which involves allowing third-party publishers who secured a license before the freeze to publish games through its platform, but of course, that has limited use.

While games are the hot topic, Tencent was keen to push the story of its cloud computing business, which it said is a key to widening its focus into IOT and other areas.

Emboldened by the reorganization in October, which seemed aimed at shifting Tencent from a consumer-facing internet company into one that’s increasing serving industries, the firm said its cloud business more than doubled its revenue year-on-year. There was no raw revenue figure released for the quarter, but the company did disclose that the cloud unit has brought in more than RMB 6 billion, $860 million, over the last three quarters.

Furthermore, cloud computing and payment-related services helped its “Others” business increase its revenue 69 percent year-on-year to reach RMB 20.3 billion, $2.92 billion, for the quarter.

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Open sourcing analysis, plus US, China and HQ2

Posted by | Amazon, Asia, Government, hq2, Mobile, new york city, oppo, Tencent, washington DC, WeChat, WhatsApp, Xiaomi | No Comments

The big news today is that — finally — we have Amazon’s selection of cities for its dual second headquarters (Northern Virginia and NYC). Then some notes on China. But first, semiconductors and open sourcing analysis.

We are experimenting with new content forms at TechCrunch. This is a rough draft of something new — provide your feedback directly to the authors: Danny at danny@techcrunch.com or Arman at Arman.Tabatabai@techcrunch.com if you like or hate something here.

Pivot: Future of semiconductors, chips, AI, etc.

Last week, I focused on SoftBank’s debt and Form D filings by startups. On Friday, I asked what I should start to analyze next. There were several feedback hotspots, but the one that popped out to me was around next-generation chips and the battle for dominance at the hardware layer.

As a software engineer, I know almost nothing about silicon (the beauty of abstraction). But it is clear that the future of all kinds of workflows will increasingly be driven by capabilities at the hardware/silicon level, particularly in future applications like artificial intelligence, machine learning, AR/VR, autonomous driving and more. Furthermore, China and other countries are spending billions to go after the leaders in this space, such as Nvidia and Intel. Startups, funding, competition, geopolitics — we’ve got it all here.

Arman and I are now diving deeper into this space. We will start to post once we have some interesting things to share, but if you have ideas, opinions, companies or investments in this space: tell us about them, as we are all ears: danny@techcrunch.com and Arman.tabatabai@techcrunch.com.

Open-source analysis at TechCrunch

Since I launched this daily “column” last week, I have included the text near the top that “We are experimenting with new content forms at TechCrunch.” One of those forms is what might be called open-source journalism. Definitions are fuzzy, but I take it to mean working “in the open” — allowing you, the audience of this column, to engage in not just feedback around finalized and published posts, but to actually affect the entire process of analysis, from sourcing and ideation to data science and writing.

I am thankful to work at a publication like TechCrunch where my readers are often working in the exact sectors that I am writing about. When I wrote about Form Ds last week, a number of startup attorneys reached out with their own thoughts and analysis, and also explained key aspects of how the law is changing around SEC disclosure for startups. That’s really powerful, and I want to apply it to as many fields as possible.

This thesis is ultimately intentional — now I have to operationalize it. There aren’t good tools (yet!) that I know of that allow for easy sharing of data and notes that don’t rely on a hacked-together set of Google Docs and GitHub. But I’m exploring the stack, and will publish more things publicly as we have them.

Amazon HQ2 — the future of corporate relations with cities

Amazon’s long process for selecting an HQ2 is finally over, and the official answer is two: Northern Virginia and NYC. Tons of words have been spilled about the search, and I am sure even more analysis will strike today about what put those two locations over the top.

To me, the key for mayors is to start using these reverse searches (where a company seeks a city and not vice versa) as leverage to actually get resources to fund infrastructure and other critical services.

This is a theme that I discussed about a year ago:

Take Boston’s bid for GE’s new headquarters. Yes, the city offered property tax rebates of about $25 million , but GE’s move also pushed the state to fund a variety of infrastructure improvements, including the Northern Avenue bridge and new bike lanes. That bridge adds a critical path for vehicles and pedestrians in Boston’s central business district, yet has gone unfunded for years.

Ideally, governments could debate, vote, and then fund these sorts of infrastructure projects and community improvements. The reality is that without a time-sensitive forcing function like a reverse RFP process, there is little hope that cities and states will make progress on these sorts of projects. The debates can literally go on forever in American democracy.

So if you are a mayor or economic planning official, use these processes as tools to get stuff done. Use the allure of new jobs and tax revenues to spur infrastructure spending and get a rezoning through a recalcitrant city council. Use that “prosperity bomb” to upgrade old parts of the urban landscape and prepare the city for the future. A healthier, more humane city can be just around the corner.

Take DC. The city has seen one of the best-run Metro systems deteriorate to abysmal levels over the past few years due to a complete dumpster fire of organizational design (the DC transit agency WMATA is funded by inconsistent revenue sources that ensure it will never be sustainable). Here is an opportunity to use Amazon’s announcement to get the tax framework and operations figured out to ensure that real estate, transportation and other critical urban infrastructure are designed effectively.

China’s mobile internationalization

Timothy Allen/Getty Images

Talking about second headquarters, the technology industry clearly has separated into poles, one based around the United States and the other based around China. Two articles I read recently gave good insights of the benefits and challenges for China in this world.

The first is from Sam Byford writing at The Verge, who investigates the native OS options that Chinese consumers receive from companies like Xiaomi, Huawei, Oppo and others. The headline is much more shrill than the text, so don’t let that frighten you.

Byford provides an overview of the lineage of Chinese mobile OSes, and also notes that what might look like design gaffes in Western consumer eyes might be critical needs for Chinese buyers:

But what is true today is that not all Chinese phone software is bad. And when it is bad from a Western perspective, it’s often bad for very different reasons than the bad Android skins of the past. Yes, many of these phones make similar mistakes with overbearing UI decisions — hello, Huawei — and yes, it’s easy to mock some designs for their obvious thrall to iOS. But these are phones created in a very different context to Android devices as we’ve previously understood them.

The article is perhaps a tad long for what it is, but Byford’s key viewpoint should be repeated as a mantra by any person connected to the technology sector today: “The Chinese phone market is a spiraling behemoth of innovation and audacity, unlike anything we’ve ever seen. If you want to be on board with the already exciting hardware, it’s worth trying to understand the software.”

Of course, while China may be a huge country, its leading technology companies do want to globalize and expand their user bases outside of the Middle Kingdom’s borders. That may well be a challenging proposition.

Writing at Factor Daily, Shadma Shaikh dives into the failure of WeChat to break into the Indian market. The product lessons learned by WeChat’s owner Tencent could be applied to any Silicon Valley company — cultural knowledge and appropriate product design are key to entering overseas markets.

Shaikh gives a couple of examples:

Another design feature in the app allowed users to look up and send add-friend requests to WeChat users nearby. During initial onboarding when users were just checking app’s features, many would tap the “people nearby” feature, which would switch on location sharing by default – including with strangers. Once location sharing with strangers was switched on, it wasn’t very intuitive to turn it off.

“Women used to get a lot of unwarranted messages from men, which was a major turn off and many of them left the platform,” Gupta says. “China probably didn’t have this stalking problem.”

And

In China, where the internet was cheaper than in India in 2012, sending video files of, say, 4 MB was not a challenge. WhatsApp compresses a 5 MB photo to 40 kilobytes. WeChat did not compress the files and took many minutes and data to send and receive media files.

Internationalization will never be easy, but the lessons that Silicon Valley has slowly learned over the past two decades will need to be learned again by Chinese companies if they want to export their software to other countries.

Reading Docket

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China’s frenzy over League of Legends championship sheds light on esports growth

Posted by | Asia, China, communist party, esports, Gaming, league of legends, online gaming, Riot Games, social media platforms, Tencent, Weibo | No Comments

When China’s Invictus Gaming defeated European squad Fnatic in the League of Legends 2018 finals this past Saturday, China’s social media platforms became awash in ecstasy and pride.

“It’s like winning an Olympic gold, a teenage dream come true,” writes one thirty-something audience of the competition on his WeChat feed.

Many others share that sentiment. So far, the hashtag #IG冠军, which means “IG the champion,” has generated over one million threads on Weibo, China’s equivalent of Twitter with over four million monthly active users. This is a critical moment for China’s first-generation of players who grew up under parents and teachers who too easily dismissed all kinds of video games.

IG’s victory marks the first time a Chinese team has won the world championship for LoL – fondly called so by fans – the world’s most played PC game according to research firm Newzoo. The role-playing and monster-slaying title is run by Riot Games Inc, a Los Angeles-headquartered studio that WeChat operator Tencent fully bought out in 2015.

It wasn’t just gamers and the youth cheering for IG. Chinese mainstream media also rushed to congratulate. An op-ed from the communist party paper Guangming Daily called IG’s victory “an alternative path to the national sports dream.”

China has a history of obsessing over sports, evident in its generous spending on the Summer Olympics back in 2008 and the upcoming 2022 Winter Olympics. Now esports – or competitive video gaming – as an officially recognized sporting event, is gaining ground among policymakers.

Esports in China has grown from a 53.2 billion yuan ($7.72 billion) industry in 2016 into one that’s estimated to earmark 88.7 billion yuan ($12.87 billion) in revenue in 2018, according to research firm Gamma Data. Local officials across the country want a share of the booming market. In some cases, the governments have shelled out billions of yuan to turn their no-name towns into “esports hub” that would house competitions and gaming companies in hope of stimulating local economies.

lLeague of legends china ig

Private companies have joined in the game, too. Tencent, China’s largest gaming company by revenue, has invested in NYSE-listed Huya and Douyu, two of China’s leading esports livestreaming services. IG itself is an esports organization that Wang Sicong, son of China’s once richest man Wang Jianlin, founded in 2011 and catapulted to today’s stardom.

But China’s relationship with video games overall has always been murky. While the government is rooting for professional gaming, it’s tightening control over leisure ones, condemning game publishers like Tencent for “poisoning” juveniles with blockbuster titles.

“The Chinese government treats esports and leisure games very differently,” a staff in the esports division of a major global gaming studio who asks to remain anonymous told TechCrunch. “I don’t think IG’s victory will cause big changes to the government’s attitude.”

Tencent, which earns two-thirds of its revenue from online gaming, lost $17.5 billion in market valuation when China’s state newspaper slashed its popular Honor of Kings, widely regarded a mobile copycat of LoL. This year, a hiatus in game license approvals again puts pressure on Tencent stock prices and profitability.

For esports and League of Legends alone, however, IG’s glory could mean a brighter future.

“At least now we will see League of Legends’ popularity continue into a couple more years. Esports’ development may also benefit from the event,” suggests the gaming company staff.

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Old media giants turn to VC for their next act

Posted by | 21st century fox, Activision Blizzard, Axel Springer, bertelsmann, Entertainment, epic games, Gaming, Hearst, Media, Naspers, Netflix, Sky, Tencent, Venture Capital, WndrCo | No Comments

The Web 1.0 and Web 2.0 eras weren’t kind to the world’s largest media conglomerates, throwing their business models into question, creating whole new categories of content consumption, and bringing online competition to subscription and ad pricing. Many of the media giants from the 1990s and early 2000s remain market leaders with multi-billion dollar valuations, however, and have become active investors in startups as a tactic to help themselves evolve.

Of the traditional media companies that have committed to corporate venturing, there are two distinct strategies: those whose investing seems to be about replacing the historic classifieds section of newspapers and diversifying into a range of consumer-facing marketplaces, and those whose investing is concentrated on capturing an early glimpse (and early equity stake) in startups reshaping media.

Replacing Classifieds, Investing in Marketplaces

Mathias Doepfner, CEO of Axel Springer. The company’s startup accelerator is one of the most active in Europe. (Photo by Michele Tantussi/Getty Images)

Given the first crisis newspaper groups faced from tech startups in the 1990s and early 2000s was the rise of online classifieds sites (like Craigslist) and transactional marketplaces (like eBay and Amazon), the disruption of their lucrative classified ads revenue stream drove their attention to e-commerce.

Aside from Hearst, the major US newspaper and magazine chains – like Gannett, News Corp, Meredith Corp / Time Inc, and Digital First Media – haven’t made many investments in startups. Perhaps the financial straits of most US newspaper companies have left little cash for VC investments that won’t pay off for years in the future.

But in Northern and Central Europe, where news readership and even print publishing remain healthy by comparison, the leading media groups have been aggressively investing in marketplace and e-commerce startups across the continent over the last decade.

Europe’s leading publisher, Axel Springer has made itself an established player in the European startup scene. Axel Springer’s Digital Ventures team has backed marketplaces from Caroobi (for cars) to Airbnb, and their Berlin-based accelerator (run in partnership with Plug & Play) has invested in over 100 young startups, like digital bank N26, boat rental marketplace Zizoo, and influencer-brand marketplace blogfoster. In a move more strategic to its business, the 15,000-employee group made a large investment in augmented reality unicorn Magic Leap this past February as well, forming a partnership to leverage its content IP in the process.

Meanwhile, Norway’s Schibsted, Sweden’s Bonnier, and Germany’s Hubert Burda Media (best know to many in tech for their annual DLD conference in Munich) and Holtzbrinck Publishing are each globally active, multi-billion dollar publishers who operate active early- or growth-stage VC portfolios composed mainly of e-commerce brands and marketplaces.

The most iconic corporate venture investment by a newspaper conglomerate (or any company for that matter) is without question the $32M check written into 3-year-old Chinese social web startup Tencent in 2001 by the South African publishing group Naspers (founded in 1915). Tencent, now valued around $400B, is Asia’s largest and most powerful digital media company and Naspers’ 31% stake was worth roughly $175B in March 2018 when it sold $10B in shares.

As a result, Naspers has transformed into a holding company that incubates, acquires, and invests in online marketplace businesses around the globe (though it still maintains a relatively small publishing unit).

The challenge for traditional media companies investing in startups beyond the realm of media is that even if wildly successful, those investments neither give them a distinct advantage in media itself nor make their business model like that of a tech company by way of osmosis. These investments can be flashy distractions to make management and shareholders call the company innovative while it fails to actually re-envision its core operations. Investing in Airbnb or BaubleBar doesn’t address the key challenges or opportunities a traditional publishing group faces.

Therefore the best case scenario in this strategy seems to be that these companies find enough financial success that they just transition out of the content game and become holding companies for other types of consumer-facing brands the way Naspers has. But even then the path seems uncertain: despite all its other activities, Naspers’ market cap is less than the value of its Tencent shares…it’s not clear that the best case scenario necessarily transforms the core organization.

Investing in the Next Generation of Media

Thomas Rabe, CEO of German media group Bertelsmann. Bertelsmann is unique in treating startup investments as a dedicated division of the conglomerate. (TOBIAS SCHWARZ/AFP/Getty Images)

The other track for “old media” giants has been to focus on venture capital as a means to uncover the future of the media business so the old guard can learn from the new generation of media entrepreneurs and react to market changes sooner than competitors. Intriguingly, it is consistent that the conglomerates who have taken this strategy are ones whose operations in television, radio, data, and telecom outweigh any involvement in newspapers.

Bertelsmann, Hearst, and 21st Century Fox have been the most aggressive corporate venture investors in startups working to shape the future of media, whether it be through streaming video services, crowdsourced storytelling platforms, or augmented reality.

With annual revenue over €17B, Bertelsmann is one of the largest media companies in the world, spanning television production and broadcasting (RTL Group), book publishing (Penguin Random House), newspapers, magazine publishing (Grüner + Jahr), and education. Unlike of media companies though, it treats venture investments in media startups as a key division of its company rather than as a side project.

The company’s core Bertelsmann Digital Media Investments (BDMI) invests across the US and Europe in companies like Audible, Mic, The Athletic, and Wondery (and in funds like Greycroft and SV Angel) but there are also the 3 regionally-focused funds investing in China, India, and Brazil plus the education-focused University Ventures fund it anchors in NYC. Collectively, Bertelsmann teams made 40 new startup investments in 2017 and generated €141M in venture returns, according to their 2017 Annual Report.

The investment arm of Hearst, one of America’s largest publishers with $10.8B in 2017 revenue, has likewise been a major backer of BuzzFeed, Pandora, Hootesuite, and Roku not to mention Chinese language app LingoChamp, live entertainment brand Drone Racing League, VR capture startup 8i, and dozens of other media-related startups. Hearst’s ownership in these ventures makes strategic sense: they provide market insights relevant to the core businesses, offer immediate partnership opportunities, and would be strategic acquisition targets that evolve the company’s position in a changing market.

21st Century Fox and Sky Plc (in which 21st Century Fox owns a 39% stake and is trying to acquire outright) have both made a whole slate of startup investments across the media sector in the last few years. In addition to its $100M investment in live-streaming platform Caffeine (announced on September 5) and similarly massive investment in WndrCo’s NewTV venture led by Meg Whitman, Fox has invested repeatedly in sports-centric OTT service fuboTV, hit newsletter brand TheSkimm, VR studio WITHIN, and fantasy sports app Draftkings with Sky often co-investing or building meaningful stakes in international startups like iflix (a leading streaming video service in Southeast Asia and the Middle East).

Since traditional media giants own extensive intellectual property of hit shows, films, and often exclusive rights to popular live events – not to mention established distribution channels to tens or hundreds of millions of people – there are immediate partnerships that can be signed to benefit both a startup and the incumbent. The incumbents often re-invest repeatedly to build their ownership and deepen the alignment between the companies, which rarely happens when media companies invest in marketplace startups.

Tencent’s always-be-evolving model

The new crop of digital media giants that includes Netflix, Snap, VICE, and BuzzFeed aren’t doing much if any strategic investing. Instead they’re keeping focused on growth of their core product offering. The notable exception is China’s Tencent.

In addition to dominating China’s booming messaging app sector with WeChat and QQ, owning 75% market share of music streaming in China, and being the world’s leading games publisher through its own studios (Riot Games, Supercell, etc.) and its minority stakes in Activision Blizzard, Epic Games, and others, Tencent has taken a strategy of investing often and early in promising digital media startups…and it has its tentacles in everything.

Based on Crunchbase data, Tencent has done over 300 investments in startups. It is likely the most active venture investor in China, where most of its portfolio is concentrated, but also backs Western media startups like SoundHound, Wattpad, Spotify, Smule, and Wonder Workshop.

Tencent can give distribution to these upstarts through its vast portfolio of digital properties and it can keep tabs on what new content formats or business models are gaining traction. It operates from a mindset of perpetually evolving, and trying to snatch up startups whose products could be key assets in the future of content creation, distribution, or monetization. This approach is one both old media giants and the next gen of unicorn media startups should consider.

The pace of innovation is moving so fast, and so many new doors are opening up – from subscription streaming and esports to voice interfaces and augmented reality – that corporate venture as a core strategy can unlock opportunities for the organization to evolve early, before it ends up being categorized as “old media”.

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Tencent to tighten age verification checks for gamers amid government crackdown

Posted by | Asia, China, Gaming, gaming addiction, privacy, Tencent, Tencent Holdings, WeChat | No Comments

Chinese Internet giant Tencent has announced it’s bringing in a new system of age checks to its video games which will be linked to a national public security database — in an effort to reliably identify minors so it can limit how long children can play its games.

The new real name-based registration system will initially be mandated for new players of its popular Honour of Kings fantasy multiplayer role-playing battle game.

It will be introduced around September 15, according to Reuters.

Tencent said the planned ID verification system — which Bloomberg couches as equivalent to a police ID check — is the first of its kind in the Chinese gaming industry, and claimed it will enable it to accurately identify underaged players and impose existing play time restrictions.

Last July Tencent said it would impose a playtime maximum of one hour per day for children up to aged 12, and a maximum of two hours a day for those between 13 and 18. But if kids can get around age checks such limits are meaningless.

“Through these measures, Tencent hopes to continue to better guide underaged players to game sensibly,” it said in a statement on its official WeChat account about the beefed up checks. It also said it plans to gradually expand the requirement to its other games.

In total Tencent’s gaming portfolio is reported to have more than 500 million players in China.

The move comes amid a crackdown by the Chinese government on video gaming over fears of health problems and addiction among children.

Late last month a statement posted on the Education Ministry website said new curbs were needed to counter worsening myopia among minors.

Ministers have long said they want to limit the amount of time kids can play games — although achieving that outcome is clearly a major challenge, given the popularity of video games and the proliferation of devices from which they can be accessed.

Tencent’s move to link age verification to a public security database does seem to represent a significant new step towards the government achieving its goal of also controlling kids’ digital activity. And investors reacted negatively to the announcement — pushing Tencent’s shares down more than 3%.

Shares in the company also dived around 3% last week when the government announced its latest gaming crackdown.

Reuters notes that shares in two other major Chinese game developers, China Youzu Interactive and Perfect World, also dropped 5.5% and 3.6%, respectively, as investors digested the regulatory risk.

Last year the Chinese government also tightened general Internet regulations, doubling down on its long standing real-name registration rules.

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Chinese tech stocks tumble from more than just trade tensions

Posted by | alibaba group, Android, Asia, Baidu, China, e-commerce, economy, Europe, Google, martin lau, Naspers, pinduoduo, TC, technology, Tencent, United States, world wide web | No Comments

Editor’s note: This post originally appeared on TechNode, an editorial partner of TechCrunch based in China.

Reports of trade tensions between China and the US in the past few months have been hard to ignore. In early July, the US imposed $34 billion on Chinese goods, prompting the Shenzhen Component Index, dominated by technology and consumer product stocks, to fall to its lowest point since 2014, igniting fears among investors.

“The U.S. tariffs, coupled with a falling yuan, will significantly increase the cost for many Chinese technology companies that rely on imported raw materials, such as semiconductors, integrated circuits, and electric components,” Zhang Xia, an analyst for China Merchants Bank Securities, told the South China Morning Post.

Additionally, the U.S. commerce department announced yesterday it will place an embargo on 44 Chinese companies—including the world’s largest surveillance equipment manufacturer Hikvision—for “acting contrary to the national interests or foreign policy of the United States.” The move caused the companies’ share prices to fall by nearly six percent.

However, the focus has shifted to more than just the trade war. And a number of big Chinese tech companies have seen their share prices plummet for other reasons.

Pinduoduo, China’s latest e-commerce giant to list on the Nasdaq, found that an initial public offering (IPO) is not a panacea. Conversely, its listing has drawn attention to the company’s counterfeit products. And investors are not happy.

Tencent’s shares have nosedived by over 25 percent since its peak in January, erasing $143 billion in market value over the past seven months.

Search giant Baidu also hasn’t been immune. The company’s stock price dropped by nearly 8 percent this week following news that Google plans to re-enter the Chinese market.

Government crackdowns

While IPOs are usually a cause for celebration, Pinduoduo has proven this past week they can also be bad for business. The company—which has integrated e-commerce and social media—caters to low-income consumers living outside first and second-tier cities. It has been plagued by accusations of facilitating the sale of counterfeit low-quality goods.

Just days after going public, its share price tumbled by 16 percent, falling below its offer price of $19. The drop was, in part, initiated by requests made by television maker Skyworth to remove counterfeit listings of its products from the e-commerce firm’s marketplace.

The company announced (in Chinese) this week that it had removed 10.7 million listings of problematic goods. However, this did little to assuage concerns from investors and regulators after the latter launched an inquiry into Pinduoduo’s product listings. Its stock price dropped to 30 percent below its closing price on its first day of trading, wiping out over $9 billion in value.

This is unlikely to be helped by the fact that seven U.S. law firms have launched investigations into the company on behalf of its investors. The statement issued by the firms shows that investors suffered financial losses after Chinese regulators began looking into the company’s dealings. The company met today with regulators and agreed to improve its products’ vetting procedures.

However, it’s not only e-commerce platforms that have been affected. Video streaming service Bilibili has seen its stock price drop by almost 21 percent since July 20. The decline comes amid renewed efforts led by the Cyberspace Administration of China (CAC) to crack down on what it deems to be “vulgar” or “inappropriate” content.

The company has subsequently had its app removed from app stores in the country for one month. Nasdaq-listed Bilibili responded by saying it is “in deep self-review and reflection.”

Screenshot of the drop in Bilibili’s stock price. Accessed August 3, 2018

Rumored competition

Baidu, which runs China’s biggest search engine, found that even unconfirmed competition can cause stocks to tumble. In a move which could mark its re-entry into the Chinese market, news broke this week that Google has plans to launch an Android app that could provide filtered results to users in China.

Baidu currently commands nearly 70 percent of China’s search market. Google shut down its search engine in China in 2010 over censorship concerns, giving up access to a vast market. China’s online population now exceeds 770 million, double the entire populace of the U.S. and more than that of Europe.

Baidu’s income is still highly dependant on ad revenue, which increased by 25 percent in the second quarter. Google’s return is clearly seen as a threat, causing Baidu’s stock price to fall from $247.18 on July 31 to $226.83 on August 2. This marks the most significant fall since the company announced the departure of its chief operating officer Lu Qi in May.

Steady decline

Nonetheless, all these losses seem insignificant in comparison to Tencent’s. The company saw its stock price increase by 114 percent in 2017, reaching a record high in January 2018. However, since then, the price has dropped by nearly $130 per share, eviscerating a considerable portion of its market value. In July alone, its stock price fell by 9.9 percent. The company’s devaluation tops Facebook’s $130 billion rout following its earnings call last month.

In April, the company lost over $20 billion in value after South African investment and media firm Naspers — an early and loyal backer — announced it was trimming its stake by two percent. Additionally, Martin Lau, the company’s president, sold one million of his shares in the company. This, added to the Naspers sale and warnings of margin pressure, led to a loss of $51 billion in market value.

“Investors are increasingly pricing in lower expectations for Tencent’s interim results,” Linus Yip, a strategist at First Shanghai Securities in Hong Kong, told Bloomberg.

Yip expects the downward trend to continue, and not just for Tencent. “Overall, tech companies are facing a similar problem. They have been enjoying fast profit growth in the past few years, so it will be difficult for them to maintain similar growth in the future as the competition grows and some segments are saturated,” he said.

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There’s more: Google is also said to be developing a censored news app for China

Posted by | Android, app-store, Apps, artificial intelligence, Asia, Beijing, bytedance, censorshit, China, cloning, computing, Facebook, files go, Google, internet service, JD.com, search app, search engine, Software, Tencent, Toutiao, United States, WeChat, world wide web | No Comments

Can Google’s week get any worse? Less than a day after the revelation that it is planning a censored search engine for China, so comes another: the U.S. firm is said to be developing a government-friendly news app for the country, where its search engine and other services remain blocked.

That’s according to The Information which reports that Google is essentially cloning Toutiao, the hugely popular app from new media startup ByteDance, in a bid to get back into the country and the minds of its 700 million mobile internet users. Like Toutiao, the app would apparently use AI and algorithms to serve stories to readers — as opposed to real-life human editors — while it too would be designed to work within the bounds of Chinese internet censorship.

That last part is interesting because ByteDance and other news apps have gotten into trouble from the government for failing to adequately police the content shared on their platforms. That’s resulted in some app store suspensions, but the saga itself is a rite of passage for any internet service that has gained mainstream option, so there’s a silver lining in there. But the point for Google is that policing this content is not as easy as it may seem.

The Information said the news app is slated for release before the search app, the existence of which was revealed yesterday, but sources told the publication that the ongoing U.S.-China trade war has made things complicated. Specifically, Google executives have “struggled to further engage” China’s internet censor, a key component for the release of an app in China from an overseas company.

There’s plenty of context to this, as I wrote yesterday:

The Intercept’s report comes less than a week after Facebook briefly received approval to operate a subsidiary on Chinese soil. Its license was, however, revoked as news of the approval broke. The company said it had planned to open an innovation center, but it isn’t clear whether that will be possible now.

Facebook previously built a censorship-friendly tool that could be deployed in China.

While its U.S. peer has struggled to get a read on China, Google has been noticeably increasing its presence in the country over the past year or so.

The company has opened an AI lab in Beijing, been part of investment rounds for Chinese companies, including a $550 million deal with JD.com, and inked a partnership with Tencent. It has also launched products, with a file management service for Android distributed via third-party app stores and, most recently, its first mini program for Tencent’s popular WeChat messaging app.

As for Google, the company pointed us to the same statement it issued yesterday:

We provide a number of mobile apps in China, such as Google Translate and Files Go, help Chinese developers, and have made significant investments in Chinese companies like JD.com. But we don’t comment on speculation about future plans.

Despite two-for-one value on that PR message, this is a disaster. Plotting to collude with governments to censor the internet never goes down well, especially in double helpings.

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J.J. Abrams and Tencent combine to form Bad Robot Games

Posted by | Gaming, J.J. Abrams, Media, Tencent | No Comments

Bad Robot, the media production company headed by famed nostalgia-lord J.J. Abrams, is expanding into the games industry with help from Chinese tech conglomerate Tencent. The company will lend its expertise in film to partner developers at both the indie and AAA level.

“I’m a massive games fan, and increasingly envious of the amazing tools developers get to work with, and the worlds they get to play in,” explained Abrams in the partnership’s announcement. “Now we are doubling down on our commitment to the space with a unique co-development approach to game making that allows us to focus on what we do best, and hopefully be a meaningful multiplier to our developer partners.”

Designers, visual artists and writers from Bad Robot will collaborate with developers, aiming at all game markets: PC, console and mobile.

Tencent will presumably provide funding and clout, in exchange for commercial rights to distribution of resulting titles. That probably limits the new company from doing what Abrams is perhaps most famous for, rejuvenating aging franchises with a modern aesthetic and a great deal of lens flare. Many popular AAA franchises — think Call of Duty and Uncharted — are deeply tied to publishers in multi-year or perpetual exclusivity arrangements.

Abrams himself won’t be the head of the new endeavor; the reins will instead belong to Dave Baranoff, who has done the gaming and interactive content for Bad Robot for the last decade. This isn’t his first foray into the “real” games industry — he and Bad Robot are currently working with Epic and ChAIR on a mysterious title called Spyjinx. But it is presumably the start of something rather bigger than a one-off partnership or movie promotion.

Tim Keenan, who created the amazing Duskers, will be the creative director, which is a good sign.

No further announcements, such as a first project or development partner, were made — just the formation of the company. We may hear more during E3, though, so stay tuned.

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