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Tencent Q4'17 profit nearly doubles; WeChat exceeds 1 billion users


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Tencent Q4'17 profit nearly doubles; WeChat exceeds 1 billion users

Tencent Holdings Ltd. platforms Weixin and WeChat's combined monthly active users exceeded 1 billion after the Chinese New Year, or Feb. 16, according to Martin Lau, president and executive director of Tencent.

Speaking during a March 21 earnings call, Lau said that the launch of the in-app services Mini Programs significantly increased user engagement with daily active users reaching over 170 million. As of January, 580,000 Mini Programs are running on the WeChat and Weixin platforms.

The company saw its profit attributable to company equity holders for the quarter ended Dec. 31, 2017, increase by 98% at 20.80 billion Chinese yuan, which is almost double the 10.53 billion yuan profit from the 2016 period, and is above the S&P Capital IQ analyst consensus estimate of 16.38 billion yuan for the 2017 period.

The Chinese giant's streaming platform, Tencent Video, is now leading among industry peers in China, with a faster growth rate, Lau said.

In terms of mobile daily active users and subscriptions, Tencent Video grew 44% year over year to 137 million mobile daily active users during the fourth quarter of 2017 and a 121% year-over-year increase to 56 million subscriptions by the end of 2017 and grew to about 62.6 million by the end of February. A study by Kagan, a media research group within S&P Global Market Intelligence, acknowledged the rapid growth of Tencent Video in 2016.

James Gordon Mitchell, Tencent's chief strategy officer and senior executive vice president, who shared that Tencent Video subscription revenue rose to 149% year over year to 2.2 billion yuan in the fourth quarter of 2017, said that the company's video market share gains stem from increased investments in original content and partnerships with adjacent businesses.

Tencent's PC client games, despite showing a 13% year-over-year jump in revenue, dropped 13% quarter over quarter to 12.8 billion yuan. According to Mitchell, this was due to "increasing time spent on mobile games."

He also said that "revenue from PC games is likely to be under continued pressure due to the PC to mobile shift."

Tencent's total revenue for the quarter ended Dec. 31, 2017, was up by 51% year over year at 66.39 billion yuan from 43.86 billion yuan in the year-ago period, but fell short of the S&P Capital IQ analyst consensus estimate of 68.87 billion yuan for the quarter ended Dec. 31, 2017.

Value-added services made up 60% of fourth quarter total revenues at 39.95 billion yuan, up from 29.19 billion from the year-earlier period. This includes a 37% contribution from its online games business at 24.37 billion yuan, which increased by 32% year over year, primarily attributed to the revenue growths in both new and existing smartphone games.

Also under VAS revenues, social networks revenues saw a 45% year-over-year increase at 15.58 billion yuan, which is mainly due to higher revenues from its digital content services such as subscription video streaming and live broadcast, on top of in-game virtual sales.

Tencent's online advertising business, which accounts for 19% of the company's total revenues for the fourth quarter of 2017, rose by 49% to 12.36 billion yuan, from 8.29 billion yuan in the quarter ended Dec. 31, 2016. Meanwhile, revenues from the company's other businesses notably increased by 121% year over year to 14.08 billion yuan for the fourth quarter of 2017, from 6.39 billion yuan in the year-ago period.

Looking toward 2018, Tencent said it will "aggressively invest" in a number of key areas that include online video, payment services, cloud services, artificial intelligence and smart retail.

Lau said that the primary factor driving Tencent to invest aggressively in different areas is the "amount of opportunity" that the company sees, and that they want to go for "long-term large opportunities" to "achieve a better market position."

As of March 21, US$1 was equivalent to 6.33 Chinese yuan.