Tech

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

Tencent's $8.6 billion purchase of a stake in Finnish mobile-game developer Supercell could be just the power-up the Chinese internet giant needs to boost sales growth.

Just take a look at the chart below:

Super Boost
An acquisition of Supercell would boost Tencent's gaming revenue by more than 25 percent
Source: Bloomberg, SoftBank filings

That red bar is Supercell, and adding it could boost revenue at Tencent's biggest unit by about 27 percent, faster than the business expanded organically in 2015.

According to Bloomberg Intelligence, Supercell posted sales last year of $2.3 billion. Bringing it into the fold looks especially enticing considering Tencent's games division is growing at the slowest pace in at least five years.

The decision by Japan's SoftBank to part with Supercell will also cement gaming's importance in Tencent's income stream. While the share of advertising and social networking, through Tencent's messaging and calling app WeChat, is on the rise, the Shenzhen-based company still remains dependent on gaming for more than half its revenue.

Game's Up
Social is rising but gaming is Tencent's bigger money spinner
Source: Bloomberg

What's more, because much of the gaming growth has come from China, acquiring Supercell will add crucial international exposure.

Last year, one Saudi player in Clash of ClansSupercell's popular war-game app, reportedly spent more than $1 million on in-app purchases to buy his way to the top of the game's league system. With customers who are that devoted, it's hard to see how Tencent can lose.

 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net