Tencent's Quarterly Online Ad Revenue Jumps 73%

The Chinese Giant's Profit Surged to a Record on Entertainment, Mobile Games

Published on .

A woman checks her phone in Wuhan, China.
A woman checks her phone in Wuhan, China. Credit: Tomohiro Ohsumi/Bloomberg

Tencent's investment in NBA broadcasts and entertainment content is paying off, driving a surge in online ad revenue and boosting profits at Asia's biggest instant messaging company.

Net income climbed 33% to a record $1.4 billion in the first quarter, the Shenzhen-based company said on Wednesday.

After converting WeChat and QQ from message services into social network giants, with more than a billion combined users, Tencent added streaming content such as National Basketball Association games to attract big-budget advertisers. That spurred a 73% surge in online ad revenue during the quarter, even as the Chinese economy slows.

"Advertising is rising at a much faster pace than the rest of the company," said Li Yujie, an analyst at RHB Research Institute in Hong Kong. "It has a huge advantage in attracting advertisers with its huge traffic volume via instant messaging, its portals and video sites."

Sales jumped 43% to $4.9 billion in the quarter. Revenue from the Value Added Services unit, which includes online games and messaging, rose 34% to $3.8 billion. Adding titles such as Wind Saga and Kungfu Frontier not only helps make money from existing users, it attracts more customers to the platforms.

Tencent Holdings is buying up the rights for anime, comics and novels to convert them into content and boost its slice of a China mobile gaming market expected to reach $10.5 billion by 2018.

WeChat had 762.4 million monthly active users and the mobile version of QQ had 658 million users at the end of the quarter. Adding online payments and facilitating e-commerce are part of Chairman Ma Huateng's efforts to make money from China's 688 million internet users.

Shares of Tencent fell 1.1% in Hong Kong before earnings were announced. The stock has gained 5.6% this year, compared with a 2.4% drop for New York-listed Alibaba Group Holding.

Mr. Ma has identified online health care, education and the anime industry as potential areas of growth for this year. In a proposal to China's National People's Congress this year, he suggested that the government allow doctors to freelance, build online personal medical files, and relax digital content policies to help China's internet sector to prosper.

Tencent announced 40 deals worth $19.6 billion of acquisitions and investments in the past 12 months, according to data compiled by Bloomberg.

--Bloomberg News, with Ad Age staff--

Most Popular