Tencent boosted its profits by 58 per cent year on year in the first quarter as China’s biggest technology company ramped up advertising revenues and continued to dominate the mobile gaming market.
Revenues rose 55 per cent year on year to Rmb49.55bn ($7.2bn), outperforming analysts’ consensus estimates of Rmb43.86bn gathered by Thomson Reuters, with profits climbing to Rmb14.48bn.
Tencent’s gaming, entertainment and social media apps dominate Chinese mobile use. Its most well-known app, WeChat, commands nearly all of China’s mobile internet users, of whom more than half spend over 90 minutes day on the app. WeChat combines messaging, social media, mobile payments and even travel bookings — and is often jokingly referred to as a “public utility” by Chinese users.
The fastest-growing contributor to Tencent’s revenues was social and other advertising revenues, which grew 67 per cent year on year to Rmb4.38bn.
The company is keen to defend its cap of two adverts per day on WeChat Moments — the social feed of friends’ updates — in order to protect its user experience. This suggests that increasing ad revenues have come from higher ad pricing and better customer targeting, rather than increasing quantity.
Tencent also announced that it had doubled its mobile payment users last year to 600m monthly active users — taking the chance to upstage Alibaba’s payment affiliate Ant Financial, which announced a doubling of daily active users on the same day.
“WeChat Pay initially followed Alipay, but now in many ways, the opposite is true, with Alipay trying to add more functions that emulate WeChat, like social networking features,” said Mark Natkin of Marbridge Consulting, a Beijing-based tech consultancy.
Tencent also disclosed that it is working with China’s central bank to develop a central payment-clearing platform for online payments, a move that would signal greater regulatory oversight of the mobile payment industry.
“Market expectations towards Tencent are becoming higher and higher,” said Jessi Guo, head of internet research for Jefferies, the investment bank. “In particular, there are high expectations of its mobile gaming performance.”
Honor of Kings, one of its mobile games, was the most downloaded app in the world for the previous quarter on the iOS App Store, according to Ruika Lin, mobile insights strategist for Sensor Tower, a research firm.
The company’s results were announced a day after it clinched a deal with Universal Music to stream its music in China, meaning Tencent Music now has partnerships with all three major western music labels.
“Tencent is doing a very good job in diversifying its business, casting a lot of lines in the water,” Mr Natkin said.
After overtaking Alibaba as the most valuable emerging markets stock in March, Tencent’s share price has continued to climb, hitting a stock market capitalisation of HK$2.46tn ($320bn).
Additional reporting by Yingzhi Yang
This story has been corrected to reflect that Ant Financial had announced a doubling of daily active users, not of all users
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