Tencent profit rises 25 per cent on soaring sales

PUBLISHED : Thursday, 16 August, 2007, 12:00am
UPDATED : Thursday, 16 August, 2007, 12:00am

Tencent Holdings, whose QQ instant messaging service is the mainland's largest, said profit rose 25 per cent in the second quarter on soaring sales from online advertising, internet and mobile services.

Net profit rose to 334 million yuan as sales leapt 23 per cent from a year ago to 868 million yuan. The results beat the 286 million yuan profit and 843 million yuan revenue estimates of Goldman Sachs, even as growth in both slowed from the 100 per cent rate of the final quarter of last year.

'The slowing down [of growth] is mainly due to product lifecycle,' Tencent president Martin Lau Chi-ping said. 'Besides, security measures introduced in the second half of last year to protect user accounts still had some impact.'

Revenue from QQ Show, an online identity product, is falling while QQ Fantasy, one of its online games, is facing declining sales due to ageing and competition from new titles.

'There are more ups and downs in Tencent's growth. It is not as smooth as companies such as Ctrip,' said an analyst.

Ctrip, the largest online travel agent in the mainland, is growing profit and revenue at consistent rates of 40 to 50 per cent. Tencent is introducing new online games and plans to launch a new version of QQ Show next quarter.

Online advertising revenue grew 80 per cent from last year to 189 million yuan. 'There is a long-term growth trend for online advertising in China. And, our user base is huge,' Mr Lau said.

Active QQ user accounts reached 273.2 million and as many as 28.9 million people logged on to the platform during peak hours.

Revenue from mobile valued-added services increased 18 per cent from a year earlier to 402.6 million yuan, outperforming rivals such as, whose second-quarter mobile sales dropped 24 per cent from a year earlier.

Last month, Tencent introduced Fetion QQ, jointly developed with China Mobile, after the mobile-telephone operator refused to renew its contract with Tencent for carrying the Mobile QQ service. Mr Lau said the transition might result in some user loss.

Tencent expects that some of its entertainment-related internet value-added services will benefit during this quarter from the summer school holidays.

It also expects its wireless value-added services will face pressure as the regulatory environment becomes more challenging.

Income streams

Revenues from internet, advertising and mobile services have improved

The amount of profits the firm earned during the second quarter, in yuan 334m