Naspers and DST are not household names, but they have long fascinated me for their huge level of ownership and influence over Social Media globally.
If the global evolution of Social Media interests you, watch these companies. They have a track record of being smart, fast and highly intelligent investors.
Their strategy: Arbitrage Internet experience across geographies by investing in developing world markets where most Western investors are reluctant to go.
The graph to the left, from a Naspers document, outlines the company’s investment strategy matrix.
The investment world now seems to be taking more notice of the companies, with The Economist writing a short but informative piece about Naspers and DST.
– Based in Cape Town, Naspers is nearly 100 years old and is the publisher of the Daily Sun, South Africa’s biggest newspaper.
– Using cash thrown off by print and pay TV sales – 28 billion rand ($3.6 billion) in the year to March – it has invested around the globe in Social Media and Internet.
– Naspers owns part of mail.ru, was an early investor in Tencent (now holds 35% owner).
– Naspers has the largest portfolio of internet firms in developing countries, for instance in Brazil (BuscaPé, a comparison-shopping site), India (ibibo, a social network) and at home in South Africa (24.com, a portal).
– Created in 2005 when two Russian Internet investors, Yuri Milner and Gregory Finger pooled their interests in mail.ru, a Russian web portal
– Today the firm controls many of the country’s leading websites and account for more than 70% of page-views on the Russian-language internet
– Eclectic ownership which includes Goldman Sachs and Alisher Usmanov, a Russian billionaire, who holds 27%.
– The websites of Digital Sky Technologies (DST)
– DST’s prime investment territories include Russia and neighbors, with investments that include social networks such as VKontakte.ru and Nasza-Klasa.pl
– DST paid an estimated $800m for a 10 percent stake in Facebook. When Elevation Partners recently invested $120m in Facebook, that deal put the company’s value at $23 billion, implying that DST’s investment has almost trebled.
– Some analysts say that DST overpaid for Zynga, the world’s largest online-gaming service, and for Groupon, a website that aggregates buyers and gets them special deals. But DST may prove these critics wrong again.
– DST has experimented with a range of revenue models for social networks and online games, such as charging for services and selling virtual goods. In December it merged mail.ru with Astrum Online, a gaming firm—in effect forming a Russian equivalent to China’s Tencent. Free communication tools such as instant messaging are creating the audience that then pays for other services and virtual goods, according to the company.
Tencent follows suit?
China’s Social Media giant, Tencent is interlinked with both DST and Naspers. For those unfamiliar, Tencent is the Shenzhen-based company founded in 1998 that has grown revenue to $1.8 billion in 2009. Although best known for QQ, a popular instant-messaging service with 567m users, much of its profits come from online games and a virtual currency, called Q coins. Users purchase this with real money and use it to buy digital wares, such as virtual weapons to increase the powers of their avatars.
– Tencent bought 10 percent of DST in April for $300mn (Giving DST a valuation of about $3 billion)
– Tencent has an interest in the Indian arm of MIH, Naspers’s internet division.
– Tencent may be following the Naspers and DST in overseas investment, having purchased a minority stake in Vietnam’s VinaGame.