As US Congress debates on the way forward for its IT utilities like Facebook and Google, there is a warning sign from China: Tencent has overtaken Facebook on market cap. This has a big implication – if you break Facebook, wounding it, and denying it economies of scale, it would struggle globally, against Chinese firms like Tencent. Unlike the old industrial firms which were bounded by geography, and easily regulated, web firms are both local and global.
The unbounded and unconstrained web, anchoring near-zero marginal cost, rewards big firms through a positive continuum of network effects. WeChat failed in Africa because of WhatsApp; cripple Facebook, it would win. Europe is not in the midst as it has used law to cage its innovators, and the region is not expected to produce any global web challenger, leaving the prize for U.S. and China. The success of TikTok should remind leaders that users are driven by different things: fun and scale, even if the product was baked in China. Yes, do not think they will not join because the product was Chinese!
Do not score an own goal please!
Tencent’s market capitalization has surpassed Facebook’s following a huge rally in the Chinese firm’s shares this year.
The gaming and social media giant’s market cap stood at 5.15 trillion Hong Kong dollars ($664.50 billion) at around 3:07 p.m. Singapore time. Meanwhile, Facebook’s market cap totaled $656.15 billion as of Tuesday’s close.
Tencent shares have rallied around 43% year-to-date, compared to just over 12% for Facebook. That has added around 1.53 trillion Hong Kong dollars ($197.74 billion) onto Tencent’s value.
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