Smart phone gaming drives Tencent revenues up nearly 50%

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Tencent, the Chinese social media group, reported a 43 per cent rise in net income to Rmb41.4bn ($6bn) as its top grossing Honor of Kings continued to dominate domestic gaming charts.

The company flunked analyst expectations, which called for net income of Rmb44.1bn, according to Bloomberg consensus. Fourth quarter results also came in slightly below expectations, with net income of Rmb10.5bn against expectations of Rmb11bn.

But total revenues rose 48 per cent over the year to Rmb151.9bn.

The numbers confirm Tencent’s role as an ecosystem of gaming, chatting and payments – alongside a plethora of other activities such as music and reading – and art of the very fabric of life in China.

Online games revenues increased by 25 per cent to Rmb70.8bn, driven largely by revenue growth from Tencent’s smart phone games such as Honor of Kings, Cross Fire Mobile and JX Mobile.

Last year, the company paid $8.6bn for a majority stake in Clash of Clans developer Supercell. But the group has also succeeded in monetising other social streams, pulling in nearly Rmb27bn in revenue from online advertising in 2016 – an 18 per cent jump from the previous year.

Commenting on its plans for 2017, Tencent said it wanted to expand the popularity of its major smart phone games while also adding new PC games and make a further push into advertising market share in part through deeper targeting algorithms.

Tencent’s numbers reflected another new reality for China’s trio of tech titans – including Baidu and Alibaba and collectively known as BAT – the rising cost of content.

All three are eagerly buying up content, especially in sports and blockbuster movies, and the cost is dragging on margins.

Tencent has exclusive coverage in China of the NBA basketball championships, for which it charges between Rmb22 and Rmb60 a month depending on the subscription package, as part of its “freemium” model that offers some content free and charging at the premium end.

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