Facebook Inc (NASDAQ:FB) Advertising Success Acts As Learning Ground For China’s Tencent Holdings Ltd (OTCMKTS:TCTZF)

Tencent Holdings Ltd (OTCMKTS:TCTZF), a Chinese Internet portal akin to Facebook Inc (NASDAQ:FB), has started plagiarizing the advertising strategies followed by the latter. Tencent is doing so on the grounds of WeChat, also known as, Weixin. As of now, the Chinese company was minting cash on WeChat by distributing the mobile games through it. WeChat is in often in direct comparison to WhatsApp of Facebook.

Why are analyst so optimistic about FB?

Tencent using the Facebook-like moments feed for ads

Even though WhatsApp is just the chatting messenger, but WeChat is considered as the social networking platform as well. Tencent is making use of the Facebook-like ads in WeChat’s moments feed. This is much similar to the news feed of FB timeline. The experiment by Tencent regarding this scheme of advertisement is in process since January 2015.

The Enormous Revenue-Generation Potential

The opportunity for making money through this scheme is enormous; much more than the meltdown observed in gaming business. In the year 2014, FB clawed $11.5 billion from just the advertising business. This was roped in from the 1.39 billion active users in just one month. Tencent has a much higher margin because WeChat has a huge number of active monthly users (500 million to be precise). The plus point is that most of these users are concentrated solely in China and the Government censorship there has not allowed Facebook to have a presence at all.

Tencent Deriving Advantage from Facebook

Apart from the clear cut advantage of sharing a huge number of users in China and giving no way to Facebook for creating its presence, Tencent Holdings Ltd (OTCMKTS:TCTZF) also has another positive aspect. Facebook’s experience of creating faster revenue through ads is giving a lot of learning path to Tencent. And, keeping in view with this strategy, the Nomura analysts also believe that the Moments Page of WeChat shall be more of experiment in 2015. However, the investors need to slow down their horses since the results wouldn’t be as quick as expected.

About the Author

Michael joined US Markets Daily in 2009 and is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments.

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