Supercell Joins a Mobile Internet Giant: Fitting into Tencent’s Overall Business Strategy

On June 21, 2016, Tencent, the Chinese mobile internet giant spent $8.6 billion to purchase 84.3% stock of Supercell, the wildly profitable Finnish firm behind hit games Hay Day, Clash of Clans, Boom Beach and Clash Royale. This was Tencent’s largest oversea deal ever. While it has bought other gaming firms including the one in 2015 e.g. Riot, the maker of the online battle game “League of Legends,” this acquisition is far larger. As most analysts have assumed, given Tencent’s long-standing dependence on game revenue in PC era, at one level, this deal indicates the continuing importance of games to Tencent strategy. However, this misses the important fact that in Chinese market, Tencent’s true customer acquisition strategy is centralized around QQ, which is its PC chat platform, and WeChat, the smartphone chat platform, and its increasingly important e-payment system. Tencent today is no longer a game company and not even a simple chat-based social network.

We suggest that Tencent is developing a “platform business group” (PBG) model based strategy as many other Chinese firms. The PBG model exploits synergies created by linking the constituent businesses to cross-market services. To demonstrate, we briefly explain its PBG model, and Tencent’s transformation from an online gaming company into a PBG. In addition, we explore the reasons why Tencent bought Supercell and explain their possible scenarios for future business strategies.

Date: 31.01.2017
Pages: 4
Language: English
ISSN: 2323-2463
ETLA Muistio – ETLA Brief 54