Not only did Tencent distribute money in a high-profile manner during Double Eleven, when Alibaba encouraged everyone to spend money, but the fast-growing business reported in its current financial report also happened to be on par with Alipay and Alibaba Cloud.
This evening, Tencent released its unaudited third-quarter financial report today. The report shows that Tencent’s total revenue in the third quarter increased by 52% year-on-year, and the growth rate was the same as the previous quarter; the growth rate of net profit declined.
It is worth noting that the proportion of Tencent's game revenue has declined for two consecutive quarters. In the third quarter, online game revenue accounted for only 45% of total revenue; while the proportion of emerging businesses such as payment and cloud computing continued to rise, exceeding 10% for the first time, reaching 12%.
Net profit growth declines
In terms of overall financial status, Tencent's total revenue in the third quarter was RMB 40.388 billion (USD 6.048 billion), a year-on-year increase of 52%, and the growth rate was the same as the previous quarter. However, the profit growth rate has declined. The profit during the period was RMB 10.776 billion (USD 1.614 billion), an increase of 42% over the same period last year; the net profit margin dropped to 27% from 29% in the same period last year.
The proportion of game revenue has declined for two consecutive quarters
In terms of segment business, value-added services including online games and social networks still account for the bulk of Tencent’s revenue, accounting for about 80%. However, the game business, which has always been regarded as Tencent's cash cow, has seen its revenue share decline for two consecutive quarters, and now accounts for only about 45% of total revenue. This business once accounted for 60% of Tencent's revenue in 2015. The growth rate of social network revenue is gradually increasing, and its proportion has been stable at 23-24%.
Taking a closer look, mobile games have become the main force of the game business. Of the 18.1 billion yuan in game business revenue, mobile games accounted for 9.9 billion yuan, a year-on-year increase of 87%; PC game revenue increased by only 10% year-on-year. Moreover, according to the financial report, the average number of concurrent online users of PC games is still declining. Therefore, Tencent is shifting its focus from increasing the time users spend in the game to expanding user interaction methods.
The proportion of online advertising revenue is also relatively stable, accounting for approximately 17% of the group's revenue. Among them, performance advertising revenue grew significantly, with a growth rate of 83%, mainly due to the contribution from advertising revenue from WeChat Moments, mobile news applications and WeChat public accounts. WeChat is also constantly exploring ways to monetize Moments, including its recently launched LBS local promotion ads and native promotion page ads for Moments.
In addition, against the backdrop of the peak of QQ monthly active users (877 million, an increase of 2% over the same period last year), the combined number of monthly active accounts of WeChat and WeChat continued to grow, reaching 846 million, an increase of 30% over the same period last year. However, compared with the number of monthly active users of QQ, if WeChat fails to further internationalize, the day when its users peak is obviously not far away. Therefore, WeChat’s current focus is no longer on increasing WeChat users, but on figuring out how to keep users on WeChat and spend all their time in this application. As a result, WeChat is testing “mini programs” that allow users to engage in low-frequency interactions without leaving the WeChat interface.
Other business income increased by 348%
The most eye-catching growth was in other businesses including payment and cloud services, which increased by 348% year-on-year to RMB 4.964 billion. So far, other businesses have accounted for 12% of the group's revenue, exceeding 10% for the first time.
Alibaba and Tencent are already two major payment giants in China. The former relies on e-commerce and the latter relies on social networking. They have launched multiple payment reduction and exemption wars. Alipay has been making frequent overseas moves recently, and Tencent has also begun to expand into the payment market in Southeast Asia following Alipay.
At the same time, although the specific revenue from cloud services has not been disclosed, even Alibaba Cloud, which is the dominant player in the domestic public cloud market, accounts for only 4% of Alibaba's total revenue. In addition, this market has just begun. Tencent, which has strong capital, has its own advantages in the vertical field of games and has the intention to expand into the field of artificial intelligence. It is not difficult to catch up.
From this point of view, although Tencent has suffered setbacks in the e-commerce field and Alibaba has not made any big moves in the film industry, in payment and cloud computing, Alibaba's two star businesses, it may still have to fight several bloody battles with Tencent.