Tencent leads $150m investment in Fab, hinting at upcoming China launch and WeChat monetization

Design-focused e-commerce service Fab.com is now valued at more than $1 billion after it announced a $150 million Series D round of investment led by Chinese Internet giant Tencent.

The Wall Street Journal reports that Fab.com — which has 14 million registered members and is two-years-old — has taken funding from a number of other investors, although neither it nor Tencent will confirm how much the Chinese firm contributed.

The deal is significant because Fab.com is still to reach profitability, although sales are tipped to more than double this year. Last year, the Manhattan-based start up booked $120 million in revenue, and it estimates that the figure will increase to $250 million in 2013 — though that will not make it profitable.

CEO Jason Goldberg told the Journal that the firm could take on as much as $100 million in further investment “over the next few months”. This newly confirmed round will be used to build out Fab.com’s digital stores, develop exclusive products and further its international footprint.

Given that Tencent is now a shareholder, China would be a logical future step and Fab.com says it will look for ways to work with the company. That’s similar to its intention to focus on India after taking funding from Times Internet back in December 2012.

Tencent is conducting final in-house tests before it introduces payments to its WeChat mobile messaging service — which has clocked more than 300 million downloads and has 195 monthly active users — while it its QQ instant messaging service boasts some 800 million users. Both of these services could provide an interesting avenue through which Fab.com could explore the Chinese market.

As for Tencent itself, the investment isn’t just about bringing Fab.com to China, the move will help the Beijing-headquartered firm learn more about global e-commerce models. WeChat has developed into its primary service, and, in a show of its prominence, it is even stealing market share from China’s Twitter-like Sina Weibo service, another massive Internet service in the country. Yet, despite its popularity, Tencent has not begun drawing revenue from the chat app.

Japan’s Line and Korea’s Kakao Talk are both seeing success in the early stages of monetizing their mobile messaging services thanks to virtual content like stickers (rich emoticons sold in packs for $1/2) and gaming platforms. Tencent’s alliance with Fab.com hints that the company — which is an investor in Kakao — might be aiming to do more than that by facilitating sales direct to users.

Already mobile messaging services are being used in Asia to conduct ‘social commerce’ sales — unofficially at this point — which suggests that Tencent may just be on to something with a potential model for WeChat.

Thanks to its vast income and capital at its disposal — Tencent posted revenue of $2.16 billion ($645 million in profit) for Q1 2013 — the company is the comfortable position of being able to scrutinize and evaluate business models before introducing them. Tencent has stepped up its rivalry to China’s established e-commerce leader Alibaba in recent times, and partners like Fab.com may help it eke out market share.

Fab.com has raised more than $150 million from investors. Its recent series C round saw Andreessen Horowitz, Menlo Ventures, Japan’s Docomo Capital, Atomico and others put in $105 million. Much of that was spent on internationalizing the service, which is available in more than 25 countries, with Asia a region that it is keen to expand into.

The Series D round also includes investor from Japanese retail conglomerate Itochu, suggesting that — like China and India — Japan will be a focus for Fab.com in Asia in the near future.

Also read: Smash-hit Chinese chat app WeChat’s long march to profitability

Headline via Thinkstock