Tencent – a Company That Secretly Owns the Gaming Industry

Tencent works in the shadows. Why? For example, do you know how many products from Tencent you use after you turn on your phone/PC? A lot more than you think. You can count after you read the article. 

Influence of Tencent company from gaming industry to social media, global gaming domination

The company has quietly but assertively established its dominance in the global gaming industry. Originating from Shenzhen, China, Tencent has grown from its roots as a tech startup into an international giant, with its interests across various sectors: social media, messaging, digital payment services, and notably, video gaming – they own everything.

The Foundations of Tencent's Gaming Empire

Originating in 1998 by founders Ma Huateng and Zhang Zhidong, Tencent initially carved out its niche as a leading entity in China. 

Tencent's founders Ma Huateng and Zhang Zhidong, Tencent's beginning in 1998

The debut of its gaming platform, Tencent QQ Games, in 2004 marked the company’s significant entry into the gaming domain, quickly capturing the interest of Chinese gamers.

QQ Games catalyzed Tencent, so they could acquire Riot Games (the minds behind League of Legends) and Supercell (the creators of Clash of Clans).

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What Products are Under Tencent?

In 2018 The Wall Street Journal published an article that claimed that Tencent has bought stakes in 277 tech companies since 2013

In 2019 the number of Tencent’s stakes raised to 600 companies. We’re not going to mention them all. 

Beyond its game division subsidiaries, Tencent has invested in domestic and international game companies since the 2010s. We’ll separate each of Tencent’s possessions/investments depending on the sphere of influence.

Social Media

Tencent’s first and flagship product, Tencent QQ, was introduced in February 1999. It quickly became a leading instant messaging platform in China. The platform saw over 100 million simultaneous QQ account logins. Tencent also developed QQ International, an English version of QQ, to facilitate communication with mainland China accounts.

The graph of Qzone's rise to 600 million users by 2013 in China
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Tencent Weibo, a microblogging service, was launched by Tencent in April 2010. The platform started its public beta test on April 1, 2010, allowing users with an invitation code to participate. Tencent Weibo was designed to act as an “open” platform for developers and users to communicate and share data widely.

However, in September 2020, Tencent shut down Weibo, integrating its operations more closely with the company’s other services.

WeChat, another major product by Tencent, was first released on January 21, 2011. It quickly became the most popular social mobile app in China and among overseas Chinese communities. However, WeChat hasn’t made significant inroads into major international markets outside of China.

By 2019, WeChat had been used by 93.5% of Chinese internet users, but its international expansion faced challenges, including regulatory issues in countries like India and the US.

The graph of growth of WeChat users from 2020 to 2023
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Domestic Investments

Within China, Tencent’s strategic investments include a 20% stake in Wangyuan Shengtang, an 18.6% stake in iDreamSky, and a 5% stake in both Century Huatong and Game Science

Television and Film

In April 2009, Tencent released iTQQ, a “smart interactive television service”, through a collaboration with TCL.

Tencent Pictures, a film distributor and production company, was launched by Tencent in 2015. This entity focuses on creating and distributing films inspired by books, comic books, animated series, and video games.

In the same year, Tencent introduced Tencent Penguin Pictures – a unit producing online dramas and making minor investments in feature films. Operating under Tencent’s Online Media Business Unit, it collaborates closely with Tencent Video.

Comics

Tencent launched Tencent Comic on March 21, 2012, growing to become China’s largest online animation platform. In September 2017, Tencent announced its intention to bring Chinese online comics to global markets, starting with North America, through a partnership with San Francisco-based digital publisher Tapas Media. This collaboration aimed to release several popular Chinese titles in English.

Music

Tencent has established exclusive distribution partnerships within China with major music producers, including Sony, Warner Music Group, and YG Entertainment, since 2014. A significant deal with Universal Music Group in 2020 allowed Tencent to stream its music in China.

In 2017 Tencent collaborated with Alibaba Group to share music-streaming rights, aiming to have a protected streaming environment that supports China’s streaming market.

Tencent Music secured a distribution deal with CD Baby and TuneCore in October 2019, expanding access to the Chinese music market for independent artists.

In March 2020, Tencent acquired a 10% stake in Universal Music Group from Vivendi, with an option to purchase an additional 10% under similar terms.

In June 2020, Tencent purchased 1.6% of Warner Music Group’s shares following WMG’s IPO.

The graph of annual profit of entertainment group from 2010-2020, Tencent strategic alliances and distribution deals
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Video Streaming

Tencent Video, a video streaming website, was launched in June 2011. In March 2020, Tencent began testing Trovo Live, a global live-streaming service. By June 2020, Tencent acquired Iflix, a Malaysian Video-on-demand service. Tencent has investments in several major Chinese live-streaming platforms, including Huya Live, DouYu, Kuaishou, and Bilibili.

Virtual Reality

In 2017, Tencent announced plans to release its virtual reality headset within the year. In December 2022, Jia Wang, Deputy Director of the Technology Service Center at Tencent’s Palo Alto office, discussed the impact of technologies like augmented reality, virtual reality, and artificial intelligence in an interview with WIPO Magazine. Wang talked about the significance of intellectual property protection in ensuring that developers can earn returns on their investments and continue innovating.

Jia Wang, Deputy Director at Tencent's Palo Alto office, Tencent's VR headset release plan in 2017, impact of AR, VR, and AI on innovation

E-commerce Initiatives

In September 2005, Tencent launched PaiPai.com, a C2C auction website, alongside TenPay, an online payment platform akin to PayPal, facilitating B2B, B2C, and C2C transactions. 

Facing competition from Alibaba Group in the e-commerce sector, Tencent aggressively expanded its e-commerce footprint. In 2014, Tencent acquired a 15% stake in JD.com Inc., exchanging cash, its e-commerce platforms PaiPai.com, QQ Wanggou, a portion of Yixun, and investing in 58 Tongcheng. This deal granted JD.com exclusive integration with Tencent’s WeChat and MobileQQ platforms. JD.com made history in May 2014 by being the first Chinese e-commerce company to go public on the NASDAQ with the ticker “JD”.

Tencent's e-commerce ventures, PaiPai.com and TenPay in 2005, JD.com stake in 2014, integration with WeChat & MobileQQ platforms

By the end of 2015, JD.com decided to discontinue PaiPai.com due to counterfeit goods issues, integrating its team into other e-commerce ventures. PaiPai.com was rebranded as PaiPai Second Hand.

In 2021, Tencent collaborated with China’s Central Bank to develop a centralized clearing platform for online payments. Tencent also expanded its financial portfolio by investing in the UK’s digital bank, Monzo.

Utility Software Development

Tencent launched its search engine, Soso.com, in March 2006, reaching significant global and national online traffic rankings. However, in September 2013, Tencent phased out Soso.com in favor of Sogou Search, following an investment in Sogou. Tencent also developed QQ Player, a free media player, and Tencent Traveler, a web browser based on the Trident engine, which became highly popular in China.

In 2016, Tencent ventured into international real estate through QQ Haiwai, in partnership with Juwai.com. In 2017, Tencent introduced its credit scoring system, Tencent Credit, mimicking Alibaba’s Sesame Credit, managed by Ant Financial.

Healthcare and Insurance Innovations

Tencent has ventured into healthcare with initiatives like WeChat Intelligent Healthcare, Tencent Doctorwork, and the AI Medical Innovation System (AIMIS), merging Tencent Doctorwork with Trusted Doctors. Tencent also launched WeSure Internet Insurance Ltd., partnering with Chinese insurance firms to offer digital insurance services.

In 2020, Tencent released AIMIS, also known as Miying, focusing on AI-driven medical imaging and diagnosis. AIMIS aids in screening for diseases like diabetic retinopathy, lung cancer, and esophageal cancer, boasting high accuracy rates in disease recognition. The system is under clinical evaluation in over 100 major hospitals in China, significantly contributing to medical imaging and patient care.

During the COVID-19 pandemic, Tencent sourced over 1.2 million protective masks for American healthcare workers.

A man in a lab coat points at a screen displaying medical images, part of Tencent's healthcare innovations

Data Processing Innovations

In 2020, Tencent, in collaboration with Huawei, unveiled a co-innovation lab to spearhead the development of a cloud-based gaming platform. By using the power of Huawei’s Kunpeng processor they could enhance Tencent’s GameMatrix cloud gaming platform.

In this way, the company is developing its gaming as a service system.

Tencent announced its plan to invest 500 billion yuan (approximately US $70 billion) over the next five years in new digital infrastructure projects. This strategic investment aims to support Beijing’s objectives to stimulate economic growth and technological innovation in the aftermath of the coronavirus pandemic.

Accessibility Achievements

In 2023, Tencent was honored with the Zero Project Award for its innovative Information and Communication Technologies (ICT) solutions designed to assist people with disabilities. 

One notable development, the MTGPA (Magic Tencent Game Performance Amelioration) Haptics, uses vibrotactile signals to aid users with visual impairments or the elderly in orientation and notifications. Integrated with the Tencent Map app, it provides indoor and outdoor navigation assistance through vibration patterns to signal deviations from a set route.

Tencent Zero Project Award, a group of individuals recognized for their solutions in information and communication technologies

Urban Development and Investments

In 2019, Tencent launched its WeCity initiative, aimed at developing smart city technologies for digital governance, urban management, and industrial connectivity.

By 2020, Tencent revealed plans for “Net City,” a visionary urban development in Shenzhen covering an area as large as Monaco (21-million-square-foot). This project focused on pedestrian priorities, green spaces, and autonomous vehicles.

In mid-2020, Tencent increased its direct investment in Nio, the Chinese electric vehicle manufacturer, raising its stake to 15.1% by acquiring additional shares listed in New York. This investment was part of a strategic move, costing $10 million for 1.68 million American Depositary Shares, as disclosed in Nio’s filings with the U.S. Securities and Exchange Commission. Beyond this investment, Tencent also holds an indirect stake through its subsidiaries, underscoring its significant influence in Nio’s strategic direction and its position as one of the leading shareholders, second only to Nio’s founder, Li Bin, in terms of voting rights. Tencent further expanded its stake in Nio to 16.3%, reinforcing its commitment to the future of electric vehicles.

Tencent Games' invested studios, Riot Games, Epic Games, Bluehole, Ubisoft, Activision Blizzard, Grinding Gear Games

Every Game Company that Tencent Has Invested In

Tencent Games operates five internal studios: TiMi Studio Group, Lightspeed Studios, Aurora Studio Group, Morefun Studio, and Next Studio.

Tencent has had former stakes in companies like Glu Mobile, Playdots, Activision Blizzard and Tesla indicating its active engagement and realignment in the gaming investment landscape over the years.

  • 1

    Riot Games (League of Legends)

    Tencent transitioned from Riot Games' publishing partner to its majority stakeholder in 2011 with an investment of $400 million for a 93% stake, later acquiring the remaining 7% to gain full control. This move proved strategic as League of Legends became a global esports phenomenon, generating significant revenue. Although Tencent and Riot had disagreements, particularly over the development of a mobile version of LoL, their relationship has evolved, with Riot now developing a mobile version.

  • 2

    Epic Games

    In 2012, Tencent's $330 million investment for a 40% stake in Epic Games marked a pivotal shift in the gaming industry towards the games-as-a-service model. This partnership led to significant changes in Epic's operations, including the adoption of a free version of the Unreal Engine and the success of Fortnite.

  • 3

    Bluehole (PlayerUnknown's Battlegrounds)

    Tencent holds an 11.5% stake in Bluehole by having stakes in both PUBG and Fortnite, with PUBG mobile player monthly spending 103.96m USD. This position underscores Tencent's competitive edge in the gaming market.

  • 4

    Ubisoft

    With a 11% stake, Tencent played a crucial role in helping Ubisoft fend off a hostile takeover, establishing a strategic partnership that expanded Tencent's influence in the gaming industry without the ability to initiate a takeover.

  • 5

    Activision Blizzard

    Tencent's acquisition of a 5% stake helped Activision Blizzard regain independence from Vivendi, illustrating Tencent's strategic investments in major gaming companies.

  • 6

    Grinding Gear Games (Path of Exile)

    Owning an 80% stake, Tencent's acquisition raised concerns among fans about potential changes to the game's economy, though the company has maintained its operational independence.

Foreign Studio Assets

  • Funcom (Norway): wholly-owned as of 2020;
  • Leyou, including subsidiaries Athlon Games, Digital Extremes, and Splash Damage (Hong Kong): acquired in 2020;
  • Riot Games (United States): investment began in September 2009;
  • Sharkmob (Sweden);
  • Sumo Group (United Kingdom);
  • Visual Arts (Japan);
  • Turtle Rock Studios (United States);
  • Wake Up Interactive (Hong Kong);
  • Inflexion Games (Canada);
  • Fulqrum Publishing (Poland);
  • Tequila Works (Spain);
  • Klei Entertainment (Canada).
The graph of Tencent Holdings annual online games revenue from 2012-2022, Tencent strategic alliances and distribution deals
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Impact on the Gaming Industry

“We think a good publishing strategy is to look at the whole market and do the global version [of any game] first, not to go separately step-by-step – I don’t think that’s a good approach…” 

Tencent’s global games CEO Michelle Liu tells GamesIndustry.biz.

Tencent has rapidly expanded beyond its gaming origins, becoming a formidable presence in the tech world. This expansion has seen Tencent diversify its portfolio through strategic investments and acquisitions. Yet, this rise has been accompanied by various challenges and criticisms.

A significant critique of Tencent revolves around its dominance in China’s tech sphere, particularly through its ownership of WeChat with MAU of it worldwide 1.3bn. This dominance raises concerns about market fairness and potential antitrust issues.

Given its extensive data collection through its vast array of services, a lot of people want to know how Tencent manages and secures user data. The intertwining of its services with daily life, coupled with its alleged close government ties, sparks fears about data misuse and surveillance.

Operating in a country with stringent online content regulation, Tencent faces backlash for its compliance with government censorship policies. This has included instances of blocking or deleting content considered sensitive or politically controversial on platforms like WeChat, sparking debates over free speech and corporate responsibility in censorship practices.

Tencent’s substantial footprint in the gaming sector, owning stakes in major titles and studios, has stirred unease about its influence on gaming culture and development.

While Tencent dominates the Chinese market, its ventures into international territories, especially the U.S., have encountered obstacles. Efforts to mirror its domestic success globally have been challenged by regulatory scrutiny and cultural differences.

Infographic of top games and companies, Tencent's impact on the gaming industry

Connections with Chinese government

During the 19th National Congress of the Chinese Communist Party, Tencent launched a mobile game called “Clap for Xi Jinping: An Awesome Speech,” allowing players to applaud the party leader as many times as possible within 19 seconds.

In 2019, reports emerged of Tencent working alongside the Guangdong Propaganda Department of the Chinese Communist Party and the People’s Daily to create games that promote patriotism.

A December 2020 article in Foreign Policy quoted a former high-ranking CIA official stating that the agency had determined Tencent received initial funding from the Ministry of State Security, aiming to support the development of China’s internet censorship infrastructure. Tencent has refuted these claims.

By 2021, it was known that Tencent, in collaboration with Ant Group, was assisting the People’s Bank of China in the development of a digital currency for the central bank.

In June 2022, Tencent and Shanghai United Media Group initiated a project focused on nurturing influencers both within China and internationally.

Tencent's Complicated Dynamics with the Chinese Government

The Chinese government has levied substantial fines against Tencent, criticizing the company for insufficient censorship efforts. Although these fines have not significantly impacted Tencent’s overall operations, the government has exerted pressure in other ways. Notably, in 2018, China imposed stricter controls on video game licensing, which temporarily impacted Tencent’s gaming revenue with a 4% drop during the initial phase of the new restrictions. This licensing hiatus highlighted the challenges Tencent faced, especially when none of its games were approved in the first batch of licenses once the restrictions were lifted. In an intriguing turn, Tencent developed a game celebrating Chinese President Xi Jinping, titled “Clap for Xi Jinping.”

Criticisms and Controversies

1. Tencent’s investments in high-profile companies have drawn attention and scrutiny from governments globally, notably from the United States. The U.S. Committee on Foreign Investments has been particularly vigilant, sending inquiries to companies like Riot Games and Epic Games, in which Tencent holds significant stakes, to examine the security measures in place for protecting customer data. This scrutiny is part of broader efforts by the U.S. government, especially under the Trump administration, to understand the data handling practices of Chinese corporations with American users.

2. Tencent faced challenges that did not escalate to the extent of action taken against some of its other business ventures. For instance, the Trump administration imposed a ban on WeChat, a messaging app owned by Tencent, in September 2020, citing data privacy concerns that could potentially lead to corporate espionage. This ban was paralleled by similar actions against Bytedance’s TikTok, highlighting the administration’s apprehensions about data collected on Americans by Chinese tech firms.

Tencent has also faced accusations of intellectual property infringement, particularly in the gaming sector, where it has been criticized for closely replicating popular games. Historical criticisms label Tencent’s founder, Ma Huateng, as a “plagiarism king,” a reputation that traces back to the company’s early days. Despite such allegations, Tencent has not only continued to replicate game designs but has also legally defended its intellectual property vigorously, winning significant lawsuits against perceived imitations of its games. One example is Tencent’s game, Kings of Glory, which bears remarkable similarities to League of Legends, a game produced by Riot Games — a company Tencent owns.

4. Tencent’s strategy of acquiring licenses for beloved franchises has often led to anticipation and high expectations among gamers. However, the execution, particularly with games like Arena of Valor and the mobile adaptation of Command & Conquer: Red Alert, has sometimes been met with disappointment. These games have been criticized for lacking depth and failing to fully utilize their licensed content, leading to skepticism about Tencent’s commitment to honoring the original material.

5. The revelation that Apple shared user data with Tencent’s Safe Browsing service raised privacy concerns. While intended to protect users from harmful web content, the implications of sharing sensitive information, such as IP addresses, without explicit user consent highlighted the delicate balance between security and privacy in digital services.

Tencent's Antivirus Software Controversy

Tencent faced a scandal in 2015 when it was found to have manipulated results in antivirus software tests conducted by AV-Comparatives, AV-TEST, and Virus Bulletin. The company’s antivirus product initially received commendable scores, but investigations revealed that Tencent had manipulated the testing process by whitelisting the testing tools used by these organizations. This manipulation artificially inflated the software’s performance metrics.

As a result of these findings, Tencent, along with two other companies caught in similar acts, had their awards and certifications revoked. This incident tarnished Tencent’s reputation within the antivirus software community, raising questions about its commitment to ethical practices and consumer protection.

Future Trends and Tencent's Role

Tencent has earned it a prestigious spot among the FAAMG stocks, standing tall with tech titans like Facebook, Apple, Amazon, Microsoft, and Google. Tencent’s strategic move to diversify its income sources has been a cornerstone of its success, branching out into social media, digital advertising, cloud solutions, and financial technology. 

Tencent's new trend smart city platform, Tencent tech expertise

Tencent’s expansion has been remarkable within China, yet it has also progressively marked its territory globally. Through strategic investments in global gaming leaders like Epic Games and Riot Games, Tencent has cemented its international presence. Anticipating the future, Tencent is expected to ramp up its international expansion. By penetrating new markets and optimizing its vast investment portfolio, Tencent aims to broaden its global user base and enhance revenue streams.

With its advanced infrastructure and technological prowess, Tencent Cloud has seen exponential growth, mirroring the sector’s overall expansion. As businesses worldwide continue to migrate to cloud platforms for efficiency and scalability, Tencent is well-equipped to broaden its cloud services, challenging AWS, Azure, and Google Cloud. Through continued investment in R&D, improved offerings, and strategic alliances, Tencent could strengthen its foothold.