China's Tencent Acquires Google-backed Social Networking Company for $60 Million

By Ashok Bindra August 24, 2010

To further strengthen its grip on the growing Chinese Internet market, China's largest Internet service provider Tencent Holdings Ltd. has acquired Google-backed Chinese social networking company Comsenz for more than $60 million, as reported by Reuters, who first saw the news break in the China Business News on Tuesday.

With this acquisition of Beijing-based social-networking provider Comsenz, the number one online game operator with the largest instant messaging service in China hopes to take a much bigger share of the world’s largest Internet market. As per media reports, the online users in China is as high as 420 million. Comsenz is backed by Google Inc., Sequoia Capital and Morningside Ventures.

Tencent controlled 77 percent of China’s instant-messaging market as of December 2009, according to Analysys International. Microsoft’s MSN service had 4.2 percent market share, the Beijing-based researcher said. Tencent could not be reached for comments.

Comsenz, well known for its popular bulletin board software (BBS) Discuz!, offers free full-range social software for hundreds of thousands of China’s small websites, including BBS, CMS, SNS, microblogging and other softwares. 

According to China Web Radar blog, Tencent is interested in buying Comsenz because it has broad user base, whose websites can potentially make a large-scale affiliated websites network, covering tens of millions of Chinese netizens. By working closely with Comsenz’s software, it can enable Tencent’s new search engine to compete with China’s search engine giant Baidu.

Further, this deal will also help Tencent to boost its online ads, reports China Web Radar. In addition, this site also suggests that Tencent will assist Comsenz in monetizing traffics of those small websites.

In reality, PHPWind, a direct competitor of Comsenz was acquired by Alibaba in 2008.

Meanwhile, Tencent, which bought a 10 percent stake in Russian Facebook investor Digital Sky Technologies (DST) for $300 million earlier this year, could be eyeing more acquisitions as it plans to expand beyond China.

Sales of Internet value-added services, including online games and QQ-related subscription fees, rose to 3.58 billion yuan from 2.16 billion yuan, Tencent said. Online advertising sales increased to 397.5 million yuan from 243 million yuan. As per conversion rate today, 1 U.S. dollar = 6.80017 Chinese Yuan.

Ashok Bindra is a veteran writer and editor with more than 25 years of editorial experience covering RF/wireless technologies, semiconductors and power electronics. To read more of his articles, please visit his columnist page.

Edited by Erin Harrison

TechZone360 Contributor

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