Tencent and NHN are 'credible threats' says Ovum

  • After gaining a foothold in several Asian markets, China’s Tencent and South Korea’s NHN are eyeing other large markets
  • Ovum sees both companies as ‘a credible threat’ in most markets they enter

Tencent and NHN are 'credible threats' says OvumINDEPENDENT telecoms analyst firm Ovum has put China’s Tencent and South Korea’s NHN on the radar, as both companies look to expand beyond their home region.
 
Categorised as large Asian over-the-top (OTT) service players, both brands have leveraged upon their social messaging platforms to gain significant user bases in several Asian markets and have plans to target other large markets, including the US.
 
As of Sept 2012, Tencent’s Wechat (called Weixin in China) had a user base of over 200 million users, while NHN’s Line had over 60 million users.
 
Better known for its messaging, digital gaming, and social networking services, Ovum consumer analyst Mark Ranson said that Tencent is taking a long-term view with Wechat, steadily building a large user base before focusing more heavily on monetization.
 
“Tencent knows from experience that building scale and loyalty among users is the key to long-term profitability in the value-added services (VAS) market and with a market capitalization of approximately US$61.5bil, it can certainly afford to wait,” he said.
 
Ranson added that Tencent’s planned Wechat digital game center is likely to be the best opportunity to create significant revenues from the service.
 
Having had much success in the fixed-line Internet service market, NHN generates most of its revenues in Korea and Japan, with its Naver web search service and Hangame online game portal being its biggest revenue streams.
 
According to Ovum, the company sees its Line messaging application as key to improving its mobile platform business and creating growth by entering new markets. It also sees digital games as central to its monetization strategy for Line.
 
Ranson said that both companies have been built largely on revenues generated from fixed network online game services, and are naturally planning to expand on this success in the less mature mobile game market.
 
“Tencent and NHN’s current and future competitors should be aware that the companies’ expertise in online gaming and the monetization of online content, combined with their strong finances, will make both players credible threats in most markets they enter,” he added.

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