Tencent in talks to buy into Happy Networks

Tencent Holdings (0700.HKG) is in talks to buy a stake in Happy Networks, owner of the popular Kaixin001 social networking site, the Wall Street Journal reported, citing anonymous sources familiar with the matter. One of the sources said that Tencent would initially spend US$40 million to purchase an undisclosed stake in Happy Networks, with the option to increase its stake later. The investment would give Tencent access to Kaixin001’s users, which tend to be older and better paid than Tencent’s young user base. Tencent rival Sina (SINA.NASDAQ), which owns the Weibo microblogging tool, also owns a share of Happy Networks; however, the deal would strengthen Tencent’s competitive position against Sina. Tencent’s microblogging tool, integrated with its popular QQ chat client, has been losing traction against Weibo over the last year. A partnership with Tencent might also help Happy Networks compete with social network site Renren (RENN.NYSE).