Sarah Lacy has a nice profile on the Chinese internet giant Tencent (third largest internet company in the world).
Quick quiz: Who are the three largest Internet companies in the world by market capitalization?
If you guessed Google and Amazon you got two right, but I’m betting few of our American readers guessed the third. I certainly wouldn’t have a year ago. It’s not eBay or Yahoo; it’s Tencent. If you are in the Web space and haven’t heard of them, read this post, because Tencent’s cutesy penguin mascot is only going to cast a larger shadow in the global Web world in coming years.
Low-key Tencent is the largest, most profitable Internet company in China and it has just under 400 million active users–comfortably bigger than the population of the United States. Tencent recently bought 10% of Digital Sky Technology, which in turn owns huge chunks of Zynga and Facebook.
In the past, Tencent has held joint venture talks with Google and Facebook and made acquisition offers to a few smaller Valley companies that haven’t resulted in deals. But if investor pressure on the Hong Kong Stock Exchange is anything like investor pressure on Wall Street, some deal will happen soon.
Tencent’s stock has more than doubled in the last year, and it has a P/E ratio more than six times Google’s, according to Yahoo Finance. You think Apple’s stock has appreciated in recent years? Check this out
. Tencent has had more than double the stock appreciation of Apple over the last five years, according to Yahoo Finance. Investors itch for a company like that to go do something with that rich of a stock currency.
Even if you don’t know the name Tencent, you’ve probably heard of its core IM product QQ. Tencent started in instant messaging in 1999 and unlike nearly everyone else, figured out a way to make money from it by selling virtual goods and services to enhance your avatar. Today, the bulk of its revenue comes from online games, with meaningful amounts also coming from virtual goods sold over its social network QZone and ads over its QQ.com portal and search property.