Tencent poised to lead China's charge into the metaverse

Chinese tech giants are racing to build the metaverse, and technology conglomerate Tencent Holdings Ltd. may be best positioned to take an early lead in the country, analysts say.To get more tencent updates, you can visit shine news official website.

The metaverse largely refers to a virtual world where people can engage and share experiences. Relevant applications might combine gaming and social features, celebrity interactions, and virtual and augmented reality options. In terms of population size, China is undoubtedly an attractive space to build metaverses, with its total addressable market pegged at around $8 trillion, according to a 2022 Morgan Stanley report. On the other hand, with digital currencies banned in China and ongoing gaming and censorship regulation, the metaverse may face limitations.

Despite the regulatory hurdles faced by all players in the market, Tencent has several advantages when it comes to developing a metaverse offering, including a hefty cash balance, a leading position in the local gaming industry, a vast social network, and financial technology services that include a payment platform. Through a combination of tuck-in acquisitions and upgrades to its gaming capabilities, Tencent should be to build and populate a metaverse before its main rivals, NetEase Inc. and TikTok-parent Beijing Byte Dance Telecommunications Co. Ltd., analysts said.

"Tencent is best positioned to be a first-mover in the metaverse space given that it is extremely strong in developing content, tapping into old and new users, designing games, and is the second-largest cloud player in China," said Ivan Su, equity analyst at Morningstar.
Tencent has taken some first steps to make its social offerings more virtual. Earlier in 2022, Tencent launched a new feature called Super QQ Show on its QQ messaging platform, introducing a 3D interactive space where users can socialize, watch shows and play games together. The company also filed for virtual concert patents with the Chinese National Intellectual Property Administration in March.

Su sees an opportunity for Tencent to gamify the music sharing component of QQ through QQ Music. "I can see them embedding one of those tapping music games like 'Tap Tap Revenge' into their music streaming apps," Su said. Tapping music games require users to tap their fingers according to the beat of the music.

There is also potential to gamify features of its other messaging apps, Weixin and Wechat International Pte. Ltd., by introducing avatars on them, said Chenyu Cui, a senior gaming analyst at analyst and consultancy firm Omdia.

Weixin, the local version of WeChat, and WeChat's combined monthly active users, or MAUs, stood at 1.2 billion as of Sept. 30, 2021, marking a 4.1% year-over-year increase. QQ's mobile MAUs were 573.7 million for the same period.

Social celebrities

Tencent could look at introducing games with social celebrities, a strategy that has worked well with ByteDance, according to Ke Yan, head of research at small and mid cap specialist, DZT Research.

"Imagine you can play games with social celebrities or influencers that you follow, for example, challenging them to a virtual arcade game in the metaverse. Wouldn't that be amazing?" said Yan, adding that Tencent could use its livestreaming presence to help it.

Tencent is a majority shareholder in China's top two livestreaming platforms, DouYu International Holdings Ltd. and HUYA Inc..

If Tencent applies its gaming capabilities to its vast social networks, it will be able to create a metaverse that is easily accessible to many users, said Charlie Chai, vice head of research at 86Research.

"Tencent dominates in promotional and marketing resources where it can repeatedly push its products to customers to encourage adoption — this is a strategy that has proven effective and could help Tencent lead the metaverse gold rush as opposed to NetEase and ByteDance," Chai said. In the past, Tencent has used its muscle in this area to create "traffic support," pushing its new products out to its wide user base.