Growth in revenue from games and advertising on mobile helped Chinese internet giant Tencent beat analyst expectations for its Q1 2015.
The company, which runs popular messaging services QQ and WeChat, reported 22.399 billion RMB ($3.647 billion) in revenue for the period, surpassing the 22.08 billion RMB prediction from S&P Capital IQ analysts. Net profit came in at 6.930 billion ($1.128 billion), beating an 6.45 billion CNY ($1.04 billion) estimate.
Tencent’s net profit is slowing, however, having grown 8 percent year-on-year. Revenue from Q1 2015 was up 22 percent on the same period last year.
WeChat (know as Weixin in China), the company’s flagship mobile messaging service, now claims 549 million monthly active users. QQ, a sister service that began on desktops but is also on mobile, recorded 832 million. QQ’s figure is down 2 percent annually, but its userbase on mobile (603 million actives) increased by 23 percent. WeChat meanwhile has seen its growth slow. Its total userbase rose 39 percent year-on-year, up from 500 million MAUs in the previous quarter but its days of break-neck speed gains are gone. Tencent doesn’t break these user figures out by location, but most users are likely based in mainland China with a diaspora overseas.
Tencent pulled in 13.313 billion CNY ($2.15 billion) from online games during the quarter. The company said that figure, a 22 percent increase on one year prior, was “mainly driven” by smartphone titles — in-app purchases from social games that are popular within both chat services — though the figure also includes income from PC games.
Advertising is another area where mobile is key for Tencent revenue. The company began testing ad spots within Moments — the Facebook Timeline-like social feed inside WeChat — but it was primarily video advertising from brands inside WeChat and its Qzone social network that pushed its online ad revenue up 131 percent year-on-year to 2.724 billion CNY ($440 million) during the quarter.
Growing its ad business has helped Tencent shift away from a reliance on revenue from games — which can be a fickle niche, and were responsible for the company missing its targets in Q3 2014.
Laying Ground For Increased Engagement
Tencent has seeded other revenue-generating opportunities within its mobile messaging ecosystem. It pointed out that its Chinese New Year Red Envelope program, which lets users send traditional cash gifts using WeChat, helped it grow the reach of its payment platform. The company didn’t, however, provide concrete numbers for total users of payments or growth in the quarter.
The company is also working on increasing the utility of its services. To that end, it introduced ‘City Services’ in a number of municipals in China. The idea here is that, by providing a platform for booking doctor appointments, reporting incidents to the police, booking flights, hailing a taxi, and more, the app can further cement itself as the key mobile communications tool for Chinese consumers. Greater engagement means increased revenue potential.
The company has been busy with mobile games too. It forked out $126 million for a 14.6 percent stake in Glu Mobile, the company behind the hit Kim Kardashian: Hollywood game among others, and previously invested significant sums into 4:33 Creative Lab and CJ Games, two Korea-based companies.
Beyond games, it secured a deal to show NBA basketball in China and launched a mobile operating system for connected devices that integrates its social services.