Social Media

Chinese giant Tencent invests $50 million in messaging app Kik

China's Tencent 'Kiks' startup $50M

With texting apps from Line to Viber to Facebook's WhatsApp vying for teens' attention, is there a messaging start-up bubble set to pop? Chris Best, co-founder and chief technology officer of Kik, thinks there may only be room for one major mobile chat platform.

"I do think in the race to become the dominant chat platform, there may be a winner-take-all. And we've seen that in WeChat in China," Best said on CNBC's "Squawk Box" Wednesday.

Best is betting that Kik will be that winner in the U.S.

Kik announced Tuesday a round of funding totaling $50 million from China's largest online entertainment company, Tencent. The move, which will double the size of the Canadian start-up, aims to help the online messaging app become more of a multiuse platform by using techniques coined by Tencent, creators of competitor WeChat.

Rather than downloading multiple apps, Kik founder and CEO Ted Livingston sees potential for consumers to use a single messaging app as a one-stop platform or "chat-based ecosystem," not only to connect with friends, but also to book taxis, shop, order food, pay utility bills, play games, and follow stars and brands, he said in a statement.

"Chat is the most important thing you do on your phone," Best said. "We used to think phones were for making phone calls. That's crazy. We know that's not true, it's for texting."

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WeChat commercial promoting it's app.
WeChat | YouTube

It's a model that's already had success in China. WeChat allows users to connect with vending machines, coupons and printers, for instance.

In addition to chat, Tencent also makes money from online gaming and advertising. Kik also dabbles in a unique type of advertising, promoting posts and chats for 80 brands, including Viacom, Spotify, World Wildlife Fund, the band One Direction and the NFL's Indianapolis Colts.

In the "promoted chats" with brands, users have a conversation with an automated robot that represents the brand. For instance, users can ask a Spotify bot for a custom playlist, created with key words in the chat. About 16 million users have tried a promoted chat with a bot since the service launched a year ago, Kik spokesman Rod McLeod said.

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Despite Best's "winner take all" comments, Kik is hoping to coexist in a space already crowded by WeChat and Snapchat, to name two.

Best thinks the business models behind Snapchat and Kik can coexist. While Kik is focused on directing traffic to businesses, Snapchat is expanding into broadcasting, Best said, referring to content platform "Discover" launched by Snapchat at the end of January.

And Livingston said as Tencent continues to focus on its core business in China, Kik, which has 240 million registered users, will replicate the WeChat model with its user base of American teenagers. Approximately 40 percent of U.S. teens use Kik monthly, the company said.

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Despite Kik's popularity among youth, it doesn't break into the most-used social apps in the U.S., according to eMarketer. Facebook was No. 1 in June, with 127.5 million users spending an average of 45 minutes on the app. Snapchat is in the top five, with 34.1 million active monthly app users in June spending an average of more than 10 minutes a day on the app.

WeChat had 600 million monthly users at the end of June, Tencent said told Reuters last week.

The new investment puts Kik into the "unicorn club," Best said, referring to start-ups valued at $1 billion or more. Kik had previously received $70.5 million in funding since it was founded in 2009, according to Crunchbase.

—Reuters contributed to this report. NBC News, owned by NBCUniversal along with CNBC, has advertised on Kik.

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