Chinese Internet giant Tencent Holdings Ltd. has invested $50 million in Canadian startup Kik Interactive Inc., putting the tech company's value at $1 billion.
The Wall Street Journal reported that the investment allows Tencent, which had bought a stake in Snapchat Inc., to expand in the U.S. messaging market without having to bring in its successful homegrown messaging applications WeChat and Mobile QQ, which have combined 1.2 billion users.
In Kik, Tencent invested in a company that has 200 million subscribers to its Kik Messenger app as well as various games and a music-streaming service that could further lure in users.
The Wall Street Journal said Tencent declined to comment, but Ted Livingston, Kik's founder and CEO, said the deal was purely financial. The report added that Kik chose Tencent after looking for potential investors in Silicon Valley and Asia due to its grasp of the Canadian startup's direction.
The New York Times said in a separate report that Kik looks to make its messenger app the "WeChat of the West." It added that Kik will continue to target younger users, with 70% of its subscribers in 13 to 24 year olds.
The capital infusion will allow Kik to grow and create new projects, the paper reported, citing Livingston. The New York Times said the investment will go towards initiatives to generate revenues through initiatives with partners.
The Wall Street Journal noted that Kik, founded in 2009, raised close to $40 million in investments in November from included Valiant Capital Partners, Millennium Technology Value Partners and SV Angel.
It added that the acquisition as Tencent shifts focus on online advertising from online games. The company's second quarter profit rose by a quarter to 7.31 billion yuan ($1.16 billion) as revenues climbed by almost a fifth to 23.43 billion yuan from last year.
