Tencent’s revenues increased by 24% year-on-year, primarily benefiting from growth in payment-related services, online advertising, digital content sales, and cloud services. Operating profit increased by 22% year-on-year. Non-GAAP operating profit increased by 4% year-on-year.
Profit attributable to equity holders of the Company increased by 30% year-on-year, mainly due to higher net other gains generated from investment related items compared to the same period last year. Non-GAAP profit attributable to equity holders increased by 15% year-on-year.
- Total revenues were RMB80,595 million (USD11,716 million), an increase of 24% over the third quarter of2017 (“YoY”).
- Operating profit was RMB27,861 million (USD4,050 million), an increase of 22% YoY. Operating margin broadly stable at 35%.
- Profit for the period was RMB23,405 million (USD3,402 million), an increase of 30% YoY. Net margin increased to 29% from 28% last year.
- Profit attributable to equity holders of the Company for the quarter was RMB23,333 million (USD3,392 million), an increase of 30% YoY
In October 2018, Tencent announced a strategic organizational upgrade, which involves the formation of two new business groups, the Platform andContent Group (PCG), and the Cloud and Smart Industries Group (CSIG), and of a new business line, Advertising and Marketing Services (AMS), from the reorganisation of three existing business groups: the Mobile Internet Group (MIG),the Online Media Group (OMG) and the Social Network Group (SNG).
Tencent Social Platforms Highlights
Smart device MAU increased by 6.9% year-on-year to 697.9 million. Tencent continued to expand its young user base and enhanced engagement with this targeted group via new entertainment-driven features and enriched video content. MAU and DAU for users aged 21 years or below grew year-on-year and quarter-on-quarter and smart device MAU for young users climbed 16% year-on-year.
Young users’ time spent within Mobile QQ increased steadily year-on-year and quarter-on-quarter, mainly driven by increased consumption of video content and new interactive features. Tencent reached 7 billion daily short and mini content video views across Tencent platforms, in particular, QQ KanDian, its newsfeed service within Mobile QQ.
MAU reached 1,082.5 million, up 10.5% year-on-year. Tencent saw healthy growth in user engagement benefiting from the increasing use cases offered by Mini Programs and WeChat Pay.
Mini-Programs deepened penetration across different industries, such as transportation and healthcare. User activity within WeChat benefited from strong growth in social video content viewing, with hundreds of millions of daily social video uploads.
Tencent Online Games
Smartphone games revenues (including smartphone games revenues attributable to its social networks business) grew 7% year-on-year and 11% sequentially to RMB19.5 billion, mainly due to the contributions from new games.
Tencent released 10 new titles, including Free Fantasy Online Mobile, MT4 and Saint Seiya during the quarter. Benefiting from positive seasonality and new avatar personalization items, Honors of Kings’ paying users increased sequentially, resulting in increased revenues quarter-on-quarter. Honors of Kings continued to be the leading game in China in terms of MAU and DAU.
During the quarter, Tencent further increased its smartphone games market share by user and time spent.
In the international market, its PUBG MOBILE title became the 2nd most popular smartphone game globally (excluding China) by MAU, according to AppAnnie.
PC client games revenues were down by 15% year-on-year and down by 4% quarter-on-quarter to RMB12.4 billion. The year-on-year revenue decline was due to users’ migration to mobile games and the high base in the same quarter last year.
While its reported revenues declined quarter-on-quarter, its cash sales (before deferral) increased, benefiting from favorable seasonality and content updates for CrossFire, Dungeon & Fighter, and its sports titles. In November 2018, League of Legends achieved viewership records for its World Championship final, at which Invictus Gaming became the first China team to win the Championship.
Tencent Digital Content
Tencent’s fee-based VAS subscriptions were up by 23% year-on-year to 154 million subscriptions, mainly attributable to growth in video subscriptions, in turn, due to popular premium content, such as drama series Ruyi’s Royal Love in the Palace and anime series Land of Warriors.
Digital content revenues grew at a double-digit percentage rate year-on-year and at a high single-digit percentage rate quarter-on-quarter, benefiting from increased monetization of its live broadcast services, significant uptake of its video subscriptions, and more sales of music and literature products.
Tencent achieved 82 million video subscriptions, up 79% year-on-year and 10% quarter-on-quarter. Three drama series (Legend of Fuyao, Ruyi’s Royal Love in the Palace and Sand Sea), and the anime series Land of Warriors contributed substantially to the subscription growth.
Tencent Online Advertising
Tencent’s online advertising business achieved 47% year-on-year and 15% quarter-on-quarter growth in revenues. Media advertising revenues grew by 23% year-on-year and 8% quarter-on-quarter.
For video advertising, revenues growth of 34% year-on-year and 13% quarter-on-quarter benefited from commercially successful drama series and increased sponsorship advertising for self-commissioned variety shows.
For news advertising, revenues increased year-on-year due to higher ad-fill rates but decreased slightly quarter-on-quarter due to fewer sports events in the third quarter compared to the second quarter.
Social and others advertising revenues grew by 61% year-on-year mainly driven by WeChat Moments, Mini Programs, mobile advertising network, and QQ KanDian.
Social and others advertising revenues grew by 19% sequentially due primarily to increased impressions and click-throughs of Mini Programs advertisements, and more impressions of WeChat Moments advertisements. Tencent has been expanding its long-tail advertiser base for WeChat Moments through cooperating with local advertising agencies and converting WeChat Pay merchants to advertisers.
Tencent maintained its leadership in China’s mobile payment market in terms of MAU and DAU. Its daily transaction volume increased over 50% year-on-year, within which its offline daily commercial payment transaction volume grew 200% year-on-year.
Tencent strengthened its payment infrastructure to ensure safer and more convenient payment services and largely completed its transition to the NetsUnion Clearing Corporation’s centralized clearing and settlement system.
In October 2018, Tencent launched the first of its kind Cross-Border Mobile Payment services, allowing WeChat Pay HK users to conduct RMB-denominated transactions with Hong Kong dollars in Mainland China. Leveraging its large-scale payment platform and core technologies, it expanded its FinTech services in areas including wealth management, microloans, and insurance.
LiCaiTong added pension funds to its fund offering and its aggregated customer assets surpassed RMB500 billion at the end of the quarter, TencentBank-originated TencentiLiDai loan balances grew rapidly while their non-performing loan rate remained at the below-industry level, benefiting from its advanced risk prediction models and user targeting.