“The $50 billion valuation puts Facebook in league with publicly traded Tencent Holdings Ltd. The Shenzhen, China-based internet company, whose services include online games and instant messaging, is worth more than $42 billion on the Hong Kong stock exchange. Tencent trades at about 15 times revenue. The Facebook valuation is about 25 times its 2010 revenue. Google’s price-to-sales ratio is 9, analysts estimate.” – Bloomberg
So is Facebook more like Tencent than Google? Let’s find out.
This presentation,prepared in 2009 by Plus 8 Star Ltd, provides us with an excellent introduction to Tencent.
So what does Tencent look like today?
Well moving forward it comes as no surprise to discover that Tencent are busy making plans to launch their own branded smart phone.
If we examine the latest set of financials The Wall St Journal Reports that Tencent claimed 636.6 million active instant-messaging user accounts at the end of September 2010. So even though it services just the Chinese market this puts its flagship offering – QQ.com – on a par with Facebook in terms of global reach.
What is interesting is the revenue breakdown. An examination of the 3rd quarter results from last year reveals $780 Million for the quarter. The bulk of this came from Internet value-added services ($616.2 Million) and mobile & telecommunications value-added services ($103.7 million). Revenues from online advertising were reported as $57.1 million or just over 7% of revenues.
Now assuming that at least 90% of Facebook’s revenues are from advertising this suggests that even a comparison with Tencent’s valuation is erroneous. After all, if Tencent’s market capitalization was measured purely by its advertising revenues then it would be worth less than $3 Billion.
This suggests that Tencent isn’t so much what Facebook will look like in the future. It is more like what AOL, MSN and Yahoo! could have looked like if they had successfully made the transition from a dot-com mega portal to a next generation Social Media Portal.
Posted on January 28, 2011
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