Tencent's WeChat claims more than 370 million users, about 300 million of them in China. The mobile text and voice messaging offer available since January 2011 works in multiple languages for Google's Android, Apple's (AAPL) iPhone and the Windows Phone.
The games will make more money for WeChat, Barclays says in a July 9 research note.
"We believe it is possible that Tencent could leverage its strength in social networking/communication/data mining capability to create a viral traction for its games and eventually progress towards a powerful mobile games open platform to realize one of the potential monetization models for its mobile traffic," the note says.
Synergy across Tencent platforms has helped the company grow. One platform leads to the next, with particular attention to paid services. WeChat will "act as one of several tools" to promote mobile games and other paid services, says Mark Natkin, managing director with Beijing-based market research firm Marbridge Consulting.One such service is making payments. WeChat eventually will let users buy and pay for things as it's hooked up to the Tenpay payment platform, the consultancy said in a newsletter. It said China Unicom (CHU) was trying out this feature for its mobile account charge services. Tencent is all but assured growth inside China. Its early start has built name recognition to give it an edge over competitors, while the market is clearly massive and its members are getting wealthier. Tencent knows how to work with the Chinese government's rules on Internet censorship. Back when my friend started urging me to use QQ and I declined, MSN's free instant messaging system was popular in China. It remains a common way to communicate, from inside a Beijing office where you don't want the boss to overhear some remark to across international borders where the other side is more likely to have MSN chat than QQ (which is still basically a China thing). Microsoft surely knows all this. It has made a push into China by doing what the government there wants, first locating an "innovation center" in the unlikely province of Hainan and then working with a Chinese cloud enabler offer Windows Azure. But aside from messaging, Microsoft's business doesn't quite overlap Tencent's, especially mobile games and payment platforms inside China. Link Link, one of the new games, is being beta tested now for Android, and Barclays expects that the company will integrate its Tenpay system into WeChat so users can press "pay" as well as "play." As long as users do both, Tencent is around to stay. At the time of publication the author had no position in any of the stocks mentioned. Ralph Jennings is on LinkedIn.