It takes a good manager to know one.

EAST LONDON - The Chinese growth bonanza - and how Western businesses can get in on the action - has dominated the minds of economists and entrepreneurs for the past decade and last week South African company Naspers (JSE:NPN) showed us how it's done. And it wasn't down to luck or happenstance or even a quick killing. 

The company that began life in 1915 as the plodding, nationalist Afrikaans print firm and publisher of newspapers such as Beeld and Die Burger released its interims for the six months to the end of September 2009, and what incredible results they were for a media company amid a recession.  Revenue was up by 6% to R13.5bn compared with the comparable period in 2008. Core headline earnings were 37% higher at R2.4bn. All in all, this makes Naspers a R115bn company, far and away the market leader compared with other South African media companies such as Caxton (JSE:CAT), which has a market cap of R7.4bn, and Avusa, worth R1.7bn.

A large part of Naspers's growth was driven by its lucrative pay-TV operation in this country and sub-Saharan Africa. Some say that you can't call Naspers a media company anymore because of its pay-TV business and its diverse holdings in internet companies in emerging markets throughout the world.   But, really, the future of media firms throughout the world is diversification. Newspapers just don't make enough money anymore and online news is given away for free. Even that venerable old-media firm, The Washington Post Company, gets most of its revenue these days from Kaplan, the world's largest providers of educational services - not from its newspaper or Newsweek magazine.

The sexiest story of the Naspers interims was undoubtedly its 35% holding in Chinese internet services firm Tencent, which contributed a remarkable R1.1bn of Naspers's R4.1bn consolidated profit -  a 49% increase from the same period in 2008.

Naspers bought into Tencent, which is based in Shenzhen, almost ten years ago when it was as cheap as chopsticks and it was a loss-making instant messaging outfit with 30 employees. Today it is one of the biggest internet success stories in the world. It has 11 000 employees, a market cap of $35bn and its shares have nearly tripled this year on the Hong Kong Stock Exchange on its strong growth prospects. According to the Naspers interims, Tencent has a colossal 485m active instant-message account holders.

Thomson Reuters reported recently that Tencent has more than 50m online gamers and it is expected to corner more than 40% of the global market, which will be worth more than $13bn by 2011, according to research firm Samsung Securities.

The scale of the business is staggering but what is Tencent exactly? If you can't get your head around what it does, that's because we don't have anything like it in the English-speaking internet world. It is, quite simply, an ecosystem.

If you speak Chinese, you can go to Tencent.com and not have to go anywhere else, whether you're accessing it through a PC or a cellphone. It is an internet portal, has a search engine, online auctions, music, games (which Tencent develops itself), avatars, virtual clothes, hairstyles and even online gardens and pets. It sells its own virtual currency and its instant messaging system, QQ, has penetrated the market to such a degree that the term "QQ" has replaced "online chat" in the Chinese lexicon, much as Google has replaced "internet search" in the West.  

The individual payments on Tencent are minute, often less than $1, but it all adds up to what Forbes magazine called a "fee monster" when Tencent  made its Fab Top 50 Asian companies' list in September.  

The international analysts find it hard to spot weak points in such a diverse internet offering except that its lack of focus may open the door to niche competitors and that online gaming is becoming an increasingly competitive arena. There are also noises from the Chinese state that it may impose regulations to root out violent games.

Koos Bekker, Naspers's CEO, sees Tencent's diversity as its strength (Click here for Bekker's insights). He told me last week: "Should people play fewer games, they will do something else on the web. They might socialise more. Well, Tencent has the biggest social network in China. Or maybe they'll interact with each other in the blogging set-up or maybe there's a new kind of Twitter activity. Who knows? It doesn't really matter. Tencent now employs almost 11 000 people and last year alone it appointed 400 new engineers so it's an enormously hard-working, very tech-savvy outfit. And, consequently, if something new develops on the internet, they have a chance of adapting and using it for themselves."

On its weaknesses, Bekker had this to say: "It has very limited search capability. It's also by far the number two (in China) in terms of e-commerce...  So on search, it's a distant third and on e-commerce a distant second and the other areas it's quite strong in."

Naspers's modus operandi in emerging markets is to be a hands-off, long-term investor and South African analysts say it's clear that this is starting to pay off. We have Tencent this year and then there's Naspers' holdings in digital businesses in Eastern Europe, which are also showing high growth.

The interims also tell us that Naspers' 43% holding in the Russian e-mail and social-networking business, Mail.ru, is doing very nicely, thank you, with 81m users. Mail.ru contributed  R54m to the group's core headline earnings compared with R38m in the previous comparable period. And there's expansion plans there, as Bekker confirmed that Mail.ru is actively negotiating to buy Russian games developer Astrum and that anti-trust permission should come through this week for the deal.

He also said that Naspers is looking at potential acquisitions in Malaysia and Indonesia but that there was no substance to speculation last week that it was talking to AOL about buying instant messaging service ICQ.

So it looks as if Naspers's digital investments in emerging markets are set to become an ever-increasing slice of the revenue pie. In these latest interims, they made up 23% of revenue compared with 21% for the full year in 2008/9 - quite a feat considering the pay-TV operation showed so much growth (a 15% rise in revenue to R8bn).

The key to Tencent's success, says Bekker, is its excellent management team and that's what Naspers does in emerging markets. It finds excellent local management and backs them over the long term. In fact, Tencent's 38-year-old CEO and co-founder, Ma Huateng, recently made Fortune magazine's top 40 hottest young business stars.

I can think of quite a few South African media companies that, quite frankly, wouldn't know a good management team if it leapt up and slapped them in face. And that, I think, is what sets Naspers apart from the rest and lies behind Tencent paying off so handsomely for the firm. It takes a good manager to know one.

 * Media columnist Gill Moodie spent 14 years as a salaried hack in print media in South Africa and the UK before escaping to the blogosphere and freelance journalism. She is the publisher of Grubstreet http://grubstreet.co.za/ in between unpacking and packing the infernal dishwasher and bringing up a four-year-old with attitude.

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Great Good news for my shares by Koos on November 30 2009, 01:57 Find this comment inappropriate? Report it

Well done Kudo's to the oke that pushed Naspers into buying into this company. Goodness, what a nice way to get exposure to China's explosive growth. Thumbs up to Naspers, and seeing that I'm a paying customer, I will invest in Naspers to get some ROI. by Dstv customer on November 30 2009, 09:08 Find this comment inappropriate? Report it

ja, gr8 except, the NASPERS 'dutchmen' down in ct - please change the wing tips on your shirts when you go on tv - - it is so PW Botha-era. by phil on November 30 2009, 09:13 Find this comment inappropriate? Report it

The guys behind the purchase were... Neville Meiers, the CEO in China at the time, and David Wallerstein, an American working for MIH in Beijing at the time. by Anzhu on November 30 2009, 10:52 Find this comment inappropriate? Report it

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