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Tencent

Tencent’s Q2 profit jumps 70 per cent as more gamers play on smartphones than computers

Honour of Kings, Tencent’s multiplayer, online battle arena game, is wildly popular. It boosts 200 million users, of which 80 million, equivalent to Germany’s population, play the game everyday.

PUBLISHED : Wednesday, 16 August, 2017, 6:54pm
UPDATED : Wednesday, 16 August, 2017, 11:21pm

Tencent Holdings has reported a 70 per cent jump in its second-quarter profit, as its wildly popular made-for-smartphone games including Honour of Kings helped it record more revenue from mobile devices than computers for the first time.

Net income jumped to 18.2 billion yuan, or 1.94 yuan per share, beating the consensus estimate in a Bloomberg poll by 35 per cent. Sales soared 59 per cent to 56.6 billion yuan (US$8.45 billion) for the three months ended June 30, according to a statement.

Tencent’s stellar earnings underscores how the Shenzhen-based company, already the operator of China’s largest social networking tool, is earning dividends from the ubiquity of mobile internet from the country’s almost 700 million smartphone users.

Game revenue from smartphones jumped 54 per cent to 14.8 billion yuan during the quarter, from last year, outpacing the 29 per cent growth in personal computer game sales at 13.6 billion yuan, Tencent said.

“Revenue growth in smartphone games was driven by existing titles such as Honour of Kings ... and new titles such as the China version of Contra Return, Dragon Nest Mobile and Legacy TLBB Mobile,” Tencent said.

Honour of Kings, Tencent’s multiplayer, online battle arena game, is wildly popular. It boosts 200 million users, of which 80 million, equivalent to Germany’s population, play the game everyday.

Online advertising grew 55 per cent to 10.1 million yuan during the quarter, as the company makes better inroads harvesting the earnings potential from the almost 963 million monthly active users on its WeChat social networking tool, also known as Weixin on the mainland.

Media advertising grew 48 per cent to 4.1 million yuan, in part due to more traffic and thus increased advertising revenue from the news feeds of Tencent News as well as its video platform, Tencent Video.

Social advertising, mainly driven by WeChat advertising, grew 61 per cent to 6 million yuan.

For WeChat, Tencent offers merchants advertisement placements in users’ Moments feed, a feature which works similarly to Facebook’s Timeline feature. It also makes advertising revenue from official accounts on WeChat.

Tencent’s shares rose 1.4 per cent to HK$323.20 in Hong Kong before earnings were released. The stock has gained almost 71 per cent since the beginning of this year, giving the company a market capitalisation of HK$3.07 trillion (US$392 billion).

It hadn’t been plain sailing all the way. Tencent’s stock price took a beating in early July after the Chinese Communist Party’s mouthpiece newspaper People’s Daily ran commentary that criticised Honour of Kings game as a “poison” and “drug” that is especially harmful to young players.

Tencent’s shares also received a hammering last week, when China’s cyberspace administration announced that it was investigating Tencent, Baidu and Sina Weibo for cybersecurity violations.