In China, Tencent and ByteDance are at war, and even “Tencent and Old Mom’s advertising door” have been at war. But in the United States, competitors are hard-to-brother. Beijing time on August 7 (august 6 th. local time) U.S. President Donald Trump signed an executive order prohibiting Tencent from conducting any transactions with WeChat between Tencent and any individuals and entities subject to U.S. jurisdiction. The executive order will take effect in 45 days (September 20, local time).
Another executive order signed by Mr. Trump that day also called for a September 20 ban on Any transactions between U.S. individuals and entities with Byte Dance, the parent company of TikTok.
According to executive orders posted on the White House’s official website, Mr. Trump views the two apps, WeChat and TikTok, as “a threat to U.S. national security” and “responds to a national emergency in the ICT and service supply chain.”
Byte Dance, the parent company of TikTok, which has been mired in public opinion over the sale to Microsoft, has made it clear that it will sue for unfair treatment, reversing the image of “kneeling too early”. Tencent has yet to take any action.
While WeChat has not been so desperate in the U.S. compared to TikTok, which was forced to sell, the ban also has a big impact on Tencent.
Tencent’s globalization may be affected.
Unlike Byte Dance and Huawei, Tencent’s global layout is less interesting. In the U.S., Tencent is seeking to raise its profile.
Tencent has signed a contract with real estate company Irvine to lease an office building at 15201 Laguna Canyon Road, Irvine, California, with a total area of about 2,430 square meters, according to a report on August 3 by Costar, a U.S. commercial real estate data website. Currently, the contract is the largest office lease on the market in the second quarter of this year.
However, compared with the impact of the ban, the rental expenditure of the office building is not worth mentioning.
Tencent Holdings fell more than 10 per cent in the trading day after the ban was announced, eventually closing down 5.04 per cent, wiping out more than HK$260bn in market value and barely holding the HK$5, 000bn mark.
It is not that WeChat has been banned in the US, where the proportion of us with its total users is almost negligible. But if the Black Swan event expands, Other Tencent businesses in the United States will also be affected, even the global layout will be affected.
WeChat began internationalizing in 2012 and has entered the Indian and Southeast Asian markets. In the U.S. market, WeChat’s user volume had an initial wave of small growth. According to Global WebIndex, weChat’s number of users in the U.S. has grown 11-fold to 3 million since the end of 2014.
At the time, according to Tencent’s official data, WeChat’s monthly user base at the end of 2014 had reached 468 million.
Of the 10 most popular apps of the year in 2019, weedy isn’t even weS, according to App Annie, but WhatsApp Messenger, Snapchat, Facebook and Instagram are among them. China is listed as Byte Dance’s Tik Tok and The Likee of the Reunion Group.
Although WeChat’s u.S. users are small, Tencent will also suffer from administrative orders. If successful, WeChat will not be able to appear on Apple’s App Store and Google’s Play Store, nor will the deal be made. Not only will WeChat fail to grow users, but it will no longer be able to generate revenue from the United States.
Both Apple and Google will be affected by executive orders, with some of the loss coming from WeChat’s revenue.
Tencent is in a long-term uncertainty.
WeChat’s presence in the U.S. is very weak, so the administrative order’s restrictions on WeChat will not have a material impact on Tencent in the short term, but in the long run, the negative effects and long-term uncertainty of this event will affect Tencent’s global presence.
Although White House officials have said the presidential order is limited to WeChat and WeChat-related companies, it does not involve Tencent-owned gaming companies. As a result, Riot’s League of Legends and Epic’s Fortnite are currently unaffected.
But the future remains vague. Most of Tencent’s cash flow business esparta has overseas presences, particularly gaming and cloud services.
Tencent’s overseas gaming revenue more than doubled year-on-year in the fourth quarter of 2019, accounting for 23% of online gaming revenue and revenue of about 6.97 billion yuan, according to Tencent’s fourth-quarter 2019 results. By the end of 2019, five of the world’s top 10 most popular smartphone games (based on the number of daily active users) were developed by Tencent.
In the first quarter of 2020, Tencent’s online gaming revenue grew 31% to RMB37,298 million, with overseas games, including PUBG Mobile and Clash Clans, contributing to the revenue growth. Based on a 19% month-on-month increase, Tencent’s online games have generated more than 8 billion yuan in overseas revenue.
PubG Mobile’s overseas revenue in January 2020 was nearly $83 million, with the U.S. the largest contributor, accounting for 29.1 percent, according to Sensor Tower.
Huatai Securities estimates that Tencent’s gaming business in the U.S. accounts for about 20 percent of overseas gaming revenue, falling to 5 percent of Tencent’s gaming revenue and less than 1 percent of Tencent’s overall revenue. Tencent’s games will have to bear the burden if they are also banned in the U.S., and in the long run they will have little impact on revenue.
Tencent Cloud also has a presence in the U.S., with four availability zones in the U.S., including two in Silicon Valley, two in Virginia and a cooperative infrastructure in Dallas, according to Tencent’s official website. But compared to Amazon’s AWS and Microsoft cloud, Tencent Cloud is still a small presence overseas, with its main business and revenue coming from China. As a result, the ban will also have a limited impact on Tencent Cloud’s U.S. operations.
By comparison, Tencent’s capital markets in the U.S. are bright, and Tencent has an investment relationship with Tencent, all of which are listed in the U.S., such as Tencent Music, JD.com, Ping Duo Duo, Sogou, Fishfish, Tiger Tooth, and so on. Tencent has also made several acquisitions in the U.S., mainly in the gaming sector.
Riot Games, the hero’s developer, is wholly owned by Tencent, owns 48.4 percent of Epic Games, the developer of Fortnite, and 5 percent of Call of Duty developer Activision Blizzard.
In addition, Tencent owns 5 per cent of electric car maker Tesla, 10 per cent of social software Snapchat and 10 per cent in music software Spotify, and has invested in entertainment social networking sites such as Reddit and Universal Records.
“The short-term impact is not obvious for Tencent, but in the long run, the instability of the US political environment and the global constraints it imposes could have a negative impact on the business mix, especially as Tencent has a lot of investment in the US, particularly gaming.” A lawyer who did not want to be named told Sina Tech that a situation similar to the U.S. influence on the U.K. restricting Huawei’s use was unlikely to happen to Tencent, but did not rule out the U.S. and its allies following suit and taking other steps to restrict Chinese technology companies, including Tencent.
“Tencent’s best option is litigation, taking advantage of the checks and balances of the separation of powers in the U.S. political system, and if it wins, Mr. Trump’s executive order will be revoked because it is unconstitutional.” Dong Yizhi, a lawyer at Shanghai Zhengze Law Firm, told Sina Technologies that in the short term the executive order will not escalate and expand into other businesses, and that the executive order against the U.S. president is the best option.
There has been a precedent for Trump’s executive order to be overturned. On February 3, 2017, U.S. District Court Judge James Robart of the Western District of Washington ruled that a nationwide executive order restricting the entry of groups such as refugees is suspended nationwide. The State Department immediately withdrew its previous decision to revoke visas for national personnel under the Trump executive order.
On the afternoon of August 7, Byte Dance issued a statement in response to the executive order signed by Trump, saying that TikTok would continue to exist for a long time and would sue the U.S. government for unfair treatment.
One of its biggest rivals has said it will fight against “unfair treatment” and if Tencent joins, it will be one of the few to fight alongside. And if Tencent silently accept, the future you come to me, Tencent will inevitably lose some points.
Whether it is hard resistance or soft, Tencent needs to make a choice.
Sina Technology Flower Jian.