Emerging Markets : Instant Messaging Craze Sweeps China

Instant messaging (IM) has become a cultural phenomenon in China. Tencent Holdings is a Hong Kong-listed company with the bulk of its assets in China, where its QQ brand controls 80% of the IM market.

Shenzhen-based Tencent is expanding into online gaming, media, e-commerce, auctions and advertising. The company claims its Olympics channel on its QQ.com portal attracted more than 1 billion viewers daily during last summer’s games.

Tencent was listed on the Hong Kong Stock Exchange in 2004 and was added to the Hang Seng Index in June 2008. Its largest shareholder is South Africa-based Naspers, which holds a 35% stake.

Tencent’s earnings rose to a record $109 million in the third quarter of 2008, an increase of 75% from the third quarter of 2007. Ma Huateng, chairman and CEO, says the global financial crisis and US recession are putting pressure on China’s economy. He says the Chinese people recognize the value of the Internet as a technology that increases efficiency and saves money.

Tencent’s Internet and wireless services are characterized by low average spending per user and should be resilient during an economic downturn, although online advertising would be affected, according to Ma.