Tencent's profit grew 50% in the fourth quarter reports Crest View International
Crest View International commented on Tencent Holdings Ltd.'s 50% profit growth in the fourth quarter showing its continued dependence on online games. Analysts from Crest View International said that a big challenge for the Chinese Internet giant is how to build new sources of revenue through its messaging and social-networking services.
So far, Tencent has been generating some of its revenue by offering mobile games through WeChat and QQ, and has added new advertising features to those social platforms.
“Investors and analysts see a potential gold mine in Tencent's WeChat and QQ messaging and social-networking services, which have hundreds of millions of active users in China, where major U.S. services such as Facebook and Twitter are blocked.” Commented Nathan Hu, Head of Research at Crest View International.
Still, Tencent's profit for the three months through December, which came a little below Crest View Internationals analyst expectations, was a reminder that the company still has a long way to go to cash in on the popularity of WeChat and QQ. The company, based in Shenzhen, China said Wednesday its net profit rose 50% to 5.86 billion yuan ($937 million) from 3.91 billion yuan a year earlier. Its revenue rose 24% to 20.98 billion yuan from 16.97 billion yuan a year earlier.
In the same quarter, Crest View International analysts said that number of users for Tencent's social platforms continued to grow. QQ's active users on smartphones and tablets increased to 576 million in December from 542 million in September, the company said, while active users of WeChat, which is called Weixin in mainland China, grew to 500 million from 468 million over the same period.
Tencent's revenue from online games, including those played on personal computers as well as smartphones and tablets, rose 41% to 11.96 billion yuan in the quarter. Mobile games offered through WeChat and QQ generated 2.9 billion yuan in revenue in the fourth quarter, rising from 2.6 billion yuan in the third quarter but at a slower rate of growth than some analysts had projected. Other than the social platforms, Tencent also distributes mobile games through app stores.
"If you look at the number of players for mobile games, it's actually much higher than players of PC games...but the percentage of people who pay is actually still quite small compared to PCs," Tencent President Martin Lau said. "There's still quite a bit of head room to grow."
In addition to typical mobile games that are basic and easy to play, Tencent is offering more sophisticated, engaging titles such as shooting games that could get more people to spend money while playing.