Tencent Holdings, the operator of QQ, the mainland's most widely used instant messaging service, is expected to achieve a 40 per cent year-on-year growth in earnings, according to analysts. The company is due to release its interim financial results on Wednesday.
The internet and mobile and telecommunications provider became one of the constituents of the Hang Seng Index in June. It earned more than US$524 million in revenue and US$214 million in profit last year.
'The number of subscribers of its service has been very stable in the past few years,' said Kenny Tang, an analyst at Tung Tai Securities. 'The three new games it launched earlier in the year have also been quite successful. I believe the growth of its earnings in the next few years will be more than 40 per cent.'
Total first quarter revenue this year reached US$204.1 million, an increase of 27.7 per cent over the last quarter of 2007, according to the quarterly financial report issued by Tencent Holdings in May. Profit for the same period was US$77.2 million, a year-on-year increase of 86.8 per cent. It reported a rise in online advertising revenue of US$20.6 million - a year-on-year increase of 95.2 per cent.
CLSA senior investment analyst Elinor Leung said: 'A lot of people believe social networking online is the next big thing after search engines. With about 70 per cent of market share, QQ is dominating the mainland market, which is very good for online advertising.'
At the end of last year, QQ had about 78 per cent of the 390 million active messaging accounts on the mainland, according to analysts. Tencent Holdings' quarterly financial report said that the number of total registered instant messaging user accounts reached 783.4 million, a 5.6 per cent quarterly growth.
Ms Leung compared Tencent Holdings with Facebook, which attracted Microsoft to take a US$240 million equity stake last year, and said that the potential of profits generated by online advertising from social networking was enormous.