Minnie Wang
Aug 17, 2023

Tencent’s online advertising bounces back despite quarterly revenue missing estimates

Total revenues fell short of expectations this quarter, but overall profit and online advertising spiked.

Tencent’s online advertising bounces back despite quarterly revenue missing estimates

Chinese tech giant Tencent has announced its second-quarter results, with revenue increasing to US$20.6 billion (149.2 billion yuan), marking an 11% increase compared to last year, but still below analysts’ expectations

Meanwhile, net profit for the quarter was US$5.2 billion (RMB37.5 billion), an increase of 33% year-on-year. 

Pony (Huateng) Ma, chairman and CEO of Tencent highlighted in a press release that cost control and shifting in revenue streams contributed to the quarterly growth, citing “a gravitation toward high quality revenue streams with better margins."

"This transition, combined with careful cost discipline developed in the previous year, resulted in profit growth exceeding revenue growth," he stated.

For gaming, Tencent’s domestic games revenues were flat at US$4.36 billion (RMB 31.8 billion) year-on-year. In comparison, its international games revenues jumped by 19% to US$ 1.74 billion (RMB 12.7 billion) supported by contributions from VALORANT, Triple Match 3D and Goddess of Victory: NIKKE.

WeChat (Weixin) became a primary driver of revenue growth this quarter as the combined monthly active users of Weixin and WeChat reached 1.327 billion, an increase of 2% YoY. 

Online advertising revenue went up 34% YoY to US$3.4 billion (RMB25 billion), with robust growth in Video Accounts advertisements, compared to low base data in the second quarter of 2022. Quarterly revenue from WeChat’s built-in video platform exceeded US$400 million (RMB 3 billion).

Ma also attributed the growth to machine learning and monetisation of video, “We achieved notably rapid growth in advertising business, benefitting from deploying machine learning on our advertising platform and from Video Accounts monetisation."

In June this year, Tencent announced its joint digital ads partnership with GroupM and Dentsu at Cannes Lions to drive up ROI for advertisers on its platform. 

The average time users spend on WeChat video channels almost doubled this quarter, and monthly active mini-program users surpassed 1.1 billion. Social networks revenues increased by 2% to US$4.07 billion (RMB 29.7 billion), driven by increased revenues from mini-games and music subscription services, though partly offset by decreased revenues from music and games-related live streaming services.

Revenues from FinTech and business services increased by 15% year-on-year to US$ 6.66 billion (RMB 48.6 billion), mainly driven by expansion in both offline and online commercial payment activities and fees generated from Video Accounts live streaming eCommerce transactions, respectively.

Unlike its competitors, such as other tech giants Baidu and Alibaba in China that have launched Chat-GPT-like AI models, Tencent keeps low profile in AI R&D. In addressing questions on AI, Tencent executives said in the earnings call, the company is going through internal testing of its HunYuan AI model, which according to Bloomberg is said to be unveiled later this year.  

Source:
Campaign Asia

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