Tencent Profit Rises on Online Gaming, Social Network Business

Chinese mobile entertainment and online services giant Tencent said Wednesday that its fourth-quarter results grew by double-digit percentage figures.

Fourth-quarter profit leapt 50 percent to $958 million (RMB 5,860 million) on revenue that grew 24 percent compared with the year-ago period to hit $3.43 billion (RMB 20,978 million). The Shenzhen-based company posted revenue of $12.90 billion for the full year 2014.

Announcing its latest results in Hong Kong, Tencent reported growth in all segments, but its huge mobile games division continues to lead the way.

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Mobile and online games, a relatively mature part of Tencent's business, grew 41 percent in revenue in the fourth quarter to hit $1.92 billion (RMB 11,964 million). Tencent is the leading mobile games company in China, both from in-house games, third-party games, as well licensed games such as EA's Fifa series and Activision's Call of Duty.

Social networks also performed strongly for the company, with revenue growing 50 percent to $830 million (RMB 5,173 million) in the latest quarter. Tencent owns the popular WeChat (Weixin) and QQ instant messaging apps and has focused on increasing its China user base over the last two quarters. The company admitted that increasing WeChat, just as a chat app, outside of China wasn't currently worth the return on investment but the company may revisit those plans. The company is looking to cautiously increase the advertising content on both messaging networks, to mirror developments in the U.S. and Europe.

Tencent says that it has 815 million monthly active users (MAU) for QQ, which grew 1 percent in 2014 compared to 2013. The WeChat/Weixin service has a combined MAU of 500 million, an increase of 21 percent.

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Tencent said a third service, QZone, a blogging to music streaming service, had 540 million MAU, an increase of 30 percent year over year. QZone has seen a strong increase in users due to a slew of content licensing deals Tencent has signed with the likes of Sony Music Entertainment, Warner Bros. and South Korea's YG Entertainment.

Advertising revenue across Tencent's social networks grew 75 percent in the fourth quarter to $421 million (RMB 2,627 million), mainly driven by mobile video advertising.

In video content, the company pointed to its content deal with HBO as a sign of future deals. Tencent said Chinese consumers were becoming more discerning and that piracy would become less prevalent. Tencent is the number one platform for mobile video in China, a position achieved with licensed content and it's own produced content. The company said that revenue from video content had doubled year on year six quarters in a row.

This article was first published by The Hollywood Reporter.


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