Games lift Tencent to outstanding Q2

By Chu Daye and Zhang Hongpei Source:Global Times Published: 2017/8/16 20:53:39

Ad revenue surges as users base, mobile Internet expand

A woman plays Tencent's online game Honor of Kings in Beijing in July. Photo: CFP

Tencent's financial performance

A strong performance in online games boosted Chinese videogame and social media giant Tencent's performance in the second quarter, as the company announced a 59 percent year-on-year increase in revenue to 56.6 billion yuan ($8.46 billion) on Wednesday.

Second-quarter profit increased 45 percent to 16.4 billion yuan.

Second-quarter revenue for the online games business continued to soar, with mobile games growing 54 percent to 14.8 billion yuan and for the first time surpassing PC-based games in terms of revenue generation. The gain was achieved despite fierce media criticism and a decision by the company in July to limit playing times.

The figures lifted Tencent's share price in Hong Kong to HK$323.2, up 1.38 percent on Wednesday. The share price has staged a strong recovery from the HK$280 level when the company was criticized by the People's Daily newspaper over mobile games' negative impact on young players.

Zhou Zhaoning, an analyst at IDC China, said that a dominating gaming title such as Honor of Kings can still be a strong driver of income for Tencent, as the report showed, and can blunt the impact of media criticism.

Zhou added that other games, some developed in cooperation with other technology companies, are contributing to Tencent's fortunes and diversifying its content portfolio.

"There hasn't been anything new in terms of tightened rules for the online gaming sector and the company is complying with regulators on matters such as limiting playing times, so there are no regulatory risks on the horizon now," Zhou told the Global Times on Thursday.

Tencent Chairman Pony Ma Huateng, who just became the richest man in China last week according to estimates by Forbes, said in a statement Tencent sent to the Global Times that as the gaming business grows, the company will strive to develop healthy ways for users to participate in online games.

Tencent's online advertising business grew 55 percent year-on-year in revenue to 10.15 billion yuan, the statement said.

Revenue in this category includes media advertising, with rising mobile video views and feeds by Tencent News mainly driving the growth, along with social media and other types of advertising. This latter segment posted a 61 percent year-on-year increase.

Liu Dingding, a Beijing-based independent Internet analyst, told the Global Times on Wednesday that Tencent's outstanding ad performance was mainly due to its large user base and the advertising patterns it has adopted based on the mobile Internet's rapid development in recent years.

The combined monthly active users of Tencent's social media function known as Weixin in China and WeChat abroad totaled 963 million as of June 30, up 19.5 percent.

Primarily driven by the growth of its mobile payment-related services and cloud computing, the Internet giant achieved a 177 percent year-on-year revenue gain for businesses other than online games, digital content and online advertising.

Tencent's Cloud further expanded its global infrastructure coverage and now operates 34 availability zones around the world.

Nearly every business line of Tencent is now reliant on the support of its cloud services, which also offers support for other companies like the car-hailing platform Didi Chuxing, Liu noted.

"Creative business represented by its cloud computing, which has shown explosive gains with enormous potential, will strongly promote Tencent's growth and even surpass the contribution of its online gaming segment very soon," Liu remarked.

"As long as customers' habit of paying for valuable content is cultivated, digital subscriptions will bring unbelievable benefits to the company, equal to its current revenue," Liu forecast.

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