The 1 Chinese Company Tech Investors Should Fear

Even as they fail to make a smooth transition from desktop to mobile, companies from SINA to Facebook are feeling the heat from one company not listed on U.S. stock exchanges: Tencent Holdings.

In a little over a year, Tencent's WeChat -- a mobile communication app -- has grown to hundreds of millions of users. All the while, Tencent has intelligently integrated social features. So far, the company is dominating China's mobile market, but Tencent also has international ambitions.

Here's what you need to know about Tencent and how it may disrupt your investments.

Tencent's growing fast
Since launching in September 2011, Tencent's WeChat has spiked to over 200 million users. To give you a sense of its staggering growth: Back in May, the app hit over 100 million users, and in January 2013 it may hit 300 million downloads.

For those who may not know, WeChat is a texting and voice messaging communication service available on Android, iPhone, Windows Phone, and Symbian. Users can communicate through three primary ways: mobile chat, web chat, and mobile walkie-talkie.

Source: Digital News Asia.

After conquering these three channels of communication, WeChat pushed forward to make the app even stickier with outlets for discovery and spontaneous interaction. You can chat with WeChat users around the world, or with those who live close by.

Perhaps the most intriguing feature is that WeChat rolled out a photo-based social network. Like Instagram, "WeChat Moments" enables you to tint the color of a photo through filters. To fill your Moments page, Tencent lets you download photos from Facebook and share them on WeChat Moments. You can also share those Moments directly via Twitter.

Why do these features matter? WeChat unites perhaps all of the mobile communication and social networking features you might need onto one simple-to-use platform. And after partnering with Sohu and Baidu this summer to share online video, Sohu and Baidu investors could also see greater video sharing on Tencent's WeChat .

If WeChat continues its rapid growth, then it'll soon become a one-stop communication/social network service for China's mobile population. In turn, WeChat may mean the end of some of China's biggest companies.

Why tech investors should be scared
The one company that could lose outright to Tencent's WeChat is SINA.

As the "Twitter of China," SINA's Weibo may seem like one app made perfectly for mobile. However, Weibo's 400 million user base in and of itself is not a sign of strength. During SINA's third quarter conference call, Chairman Charles Chao admitted that WeChat's growth has led to declining Weibo use.

To further compare, SINA took over two and a half years to reach 300 million users ; at its current pace, Tencent's WeChat could surpass SINA sometime next year. (As a point of reference, China's mobile user base is 330 million, but is expected to grow to 500 million.)

One consolation for SINA is that some of the world's biggest tech companies are also struggling against Tencent.

Though Renren , the "Facebook of China," has a mobile app available for download, it hasn't gone viral. When counting total domestic and mobile users, Renren has less than 200 million, and only around 50 million people logging in each month. In comparison to its competitors, Renren must increase its growth on web and mobile, or it might see itself eating dust.

Even Facebookinvestors need to watch out. Although the company has less than 600,000 users in China, Tencent has global ambitions. Since Facebook has yet to fully crack the code to mobile, it might have to resort to buying another U.S. start-up with similar features to compete.

A Foolish thought on China's social-mobile space
If you don't follow Tencent currently, start now. Tencent's WeChat application may have started as simple communication tool. But by developing Instagram-like features, the app has attracted enough users that it has started to see traction as a social network.

While you may have thought SINA, Renren, and Facebook were great buys for their niche or geographical focus, Tencent is better-positioned than all three companies to benefit from China's mass transition from desktop to mobile.

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The article The 1 Chinese Company Tech Investors Should Fear originally appeared on Fool.com.

Fool contributor Kevin Chen has no positions in the stocks mentioned above. Follow him on Twitter @k2chen. The Motley Fool owns shares of Baidu and Facebook and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Baidu, Facebook, SINA, and Sohu.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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