Tencent advertising revenue soars 44%

China internet giant Tencent Holdings saw its advertising business grow rapidly in 2018, driven by a social-media ad explosion, but economic uncertainties dampened fourth-quarter growth.

Tencent’s net income registered 77.4 billion yuan (US$11.6 billion) in 2018, an increase of 19% year-on-year, whereas the fourth-quarter figure dropped 32% to 14.2 billion yuan ($2.1 bilion), according to the financial statement the company released on Thursday.

Online advertising revenue surged 44% to 58.1 billion yuan ($8.7 billion), contributing around a fifth of 2018 total revenue. The fourth-quarter growth, however, slowed to 38% reaching 17 billion yuan ($2.5 billion).

Smartphone gaming remains a significant part of Tencent’s business, rising 24% to 77.8 billion yuan ($11.6 billion) for the year.

Following the release, James Michelle, chief strategy officer with Tencent, said in a telephone conference that macro-economic uncertainties in the second half of last year impacted the firm’s advertising business. Advertisers cut their budgets, especially those with large budgets, such as automakers.

“But Tencent’s fourth-quarter advertising business still grew much faster than the industry average, due to the company’s broad advertising inventory, improvement in technologies and attractive prices,” said Michelle.

Tencent launched advertising on its mini programs (apps within apps) at the end of the second quarter of 2018, which together with WeChat Moments, QQ and other channels drove its social and other advertising revenue to 39.8 billion yuan ($5.9 billion) in 2018, up 55% year-on-year.

Daily user numbers for the mini programs, which now cover 200 service sectors, grew rapidly, with daily visits per user increasing 54% year-on-year, the company said.

“Advertising revenue from mini programs witnessed sound growth in the third quarter and maintained double-digit growth in the fourth quarter, but the video advertising didn’t contribute much because of the delayed delivery of certain drama programming,” Michelle said.

At the conference, Tencent also expressed confidence in its future advertising revenue growth.

“We have enough ads provide them gradually,” Michelle said. “For example, users may see only one or two ads in WeChat Moments each day, while for similar products from international players, they provide around 10 ads. In addition, we have started to launch news feed ads…. Our financial statement showed this business posted good growth.”

The company made a point of stressing its commitment to protecting users’ personal data.

Asked how Tencent uses WeChat data to offer precision services, Tencent President Liu Chiping said, “We never provide user data to our partners… even among different departments and platforms, because we value privacy.

“As for precision advertising, advertisers need to explain what targets they are looking for, and then we will dig data in our network to provide matching services.”