A move by Chinese tech titan Tencent to co-invest $300 million in American social news aggregator Reddit is part of its aggressive investment push in many leading tech companies.
Tencent has invested in Uber, Tesla and Snap, acquired a bunch of gaming companies including Riot Games and Supercell, and co-invested in several US and Asian tech startups in robotics, biotech and machine learning. It’s been on a path to seemingly own it all.
In its home base of China, Tencent has acted like a warrior. It’s targeted lead rival Alibaba with killer buys in e-commerce such as taking an 18.5 percent investment stake in social commerce leader Pinduoduo. It’s also sought to curb TikTok’s quick-start video app by backing its main competitor Kuaishou.
With the Reddit deal, Tencent is going out of its usual bounds. The deal was made with co-investors Andreessen Horowitz, Sequoia Capital and Fidelity Venture. Tencent has regularly made deals alongside Sand Hill Road players.
But this deal with the media-oriented Reddit has sparked protests of censorship from users who already recognize that many US social media sites are censored or blocked in China.
It’s interesting to see this deal getting an OK by US regulators particularly at this sensitive time in US-China trade and tech issues, when there is growing discussion over China’s growing challenge to Silicon Valley.
What attracted Tencent to Reddit was its strong base of gaming users. Games are a sandbox that Tencent typically plays in. The attraction for Reddit could be that Chinese buyers are often regarded by US tech company executives as premium payers who can provide access to the China market.
Tencent has been the most acquisitive of China’s BAT threesome investing in the US. That’s now slowing. Investment by Baidu, Alibaba and Tencent in US tech plunged in 2018, dropping to $2.1 billion in 31 deals, according to S&P Global Market Intelligence. This deal by Tencent into Reddit is sure to be one of the more high profile China-to-US transactions of 2019 for several reasons.
