Tencent profit surges 21 per cent for 2015 thanks to growth in online games, advertising revenue

Internet giant reports 2015 net profit of 28.81 billion yuan

PUBLISHED : Thursday, 17 March, 2016, 9:56pm
UPDATED : Thursday, 17 March, 2016, 10:29pm

Chinese internet powerhouse Tencent Holdings is looking at a year of intense investment activity, covering social media and smartphone games to advertising and financial products, after posting solid earnings last year.

“We aim to continue delivering superior experiences to our users by investing in our own platforms and cooperating with category leaders to cultivate a rich Internet Plus ecosystem,” chairman and chief executive Pony Ma Huateng said yesterday.

Ma referenced the ambitious initiative by the mainland Chinese government, which aims to push greater efficiency in traditional industries as these integrate internet applications and other new information technology.

Tencent’s mergers and acquisition deals mainly focused on game studios
Jefferies equity analyst Cynthia Meng

In that regard, Tencent’s popular social network QQ and mobile-messaging platform Weixin -- marketed as WeChat outside the mainland -- have become essential online tools used by many consumers and businesses in the world’s second-largest economy.

QQ had 853 million average monthly active users last year, while the combined average for Weixin and WeChat was 697 million.

The Weixin Pay function generated bank-handling fees related to consumer-to-consumer transactions, such as digital red packets, of more than 300 million yuan (HK$358.92 million) in January alone, Ma said.

He pointed out that Tencent had no plans to spin off WeChat, following the company’s strategy to pursue more investments and innovation.

Jefferies equity analyst Cynthia Meng said in a report that Tencent has invested in more than 300 companies in line with further developing its core businesses, which are social platforms, online games, and media and content.

“During the period from 2009 to 2013, Tencent’s mergers and acquisition deals mainly focused on game studios,” Meng said.

The following year, Tencent started to build is mobile ecosystem, she said. Tencent’s investments focused last year on so-called online-to-offline local services, she added.

After the close of trading Thursday, Tencent reported a 21 per cent increase in 2015 net profit to 28.81 billion yuan, up from 23.81 billion yuan in 2014, on the back of its smartphone games and online advertising.

Total revenue jumped 30 per cent to hit a record 102.86 billion yuan last year from 78.93 billion yuan in 2014.

Ma said a major goal this year was to further expand Tencent’s advertising business, which achieved a 110 per cent year-on-year revenue growth last year, by adding more mobile advertising inventory.

Research firm eMarketer has forecast digital and mobile advertising spending in China will grow 30 per cent to US$40.42 billion this year, from US$31.09 billion last year, despite the lingering economic slowdown.

Ma said Tencent aimed to broaden smartphone game activity in China into new game genres.

Tencent in November brought its domestic chart-topping mobile game WeFire to markets around the world through a partnership with US-based game developer Glu Mobile.

That followed its distribution of Hong Kong games developer Animoca Brands’ popular Armies of Dragons mobile game via WeChat in Hong Kong, Singapore, Indonesia, Malaysia and Thailand.

Shares of Tencent slipped 0.93 per cent to close at HK$152.30 on Thursday.