The number of monthly active users (MAU) of WeChat grew by 5.4% YoY to 1,212.8 million in the third quarter of 2020, according to Tencent’s quarterly results. Smart device MAU of QQ decreased by 5.5% to 617.4 million.
Tencent’s fee-based VAS registered subscription grew 25.1% to 213.4 million in Q3 2020.
Social Media
Tencent is facilitating more convenient access to high-frequency services within the WeChat Pay interface by regrouping such services into four verticals, namely Financial Services, Daily Services, Travel & Transportation, and Shopping & Entertainment.
For the Travel & Transportation vertical, WeChat connects automobile owners with a range of car services, such as car wash and car insurance, as well as general users with public transportation services, such as transit codes and bus schedules.
It has now extended these mobility services to ten provinces and municipalities in China.
And, it’s also enhancing the efficiency of content and service discovery via cross-referencing within WeChat properties, so that users can press-to-search words and phrases that appear in chat boxes and find content and services from Mini Programs, Official Accounts and Moments.
In Moments, contributors can create hashtags in posts, and their friends can click these hashtags and access deep-linked search results from Official Accounts, video feeds and H5 pages.
In QQ chats and groups, Tencent enabled users to watch Tencent Video together while they are making video calls, to compete with friends via battle-mode Mini Games, and to co-edit classwork via our online collaborative tool, Tencent Docs.
The launch of QQ’s Mini World video and image feed service has increased QQ’s appeal among the younger audience. Through Mini World, it encourages contributors to create videos and images, and share them beyond their existing friend circle.
QQ recommends attractive content in Mini World to users based on their interest graphs, enabling users to explore more content and communities. These initiatives, along with the growing demand for real-time video chatting since the onset of the pandemic, drove daily time spent per QQ user up.
Online Gaming
Online game revenues grew by 45% to RMB41,422 million.
Tencent’s online game revenue increased year-on-year, driven by healthy growth in paying users in China and international markets. For smartphone games, it celebrated the fifth anniversary for Honour of Kings, which exceeded 100 million average DAU for the first ten months of 2020.
Since it first released the game in 2015, it has expanded the user base of Honour of Kings through constant innovation and user-centric operations, backed up by Tencent’s robust technology infrastructure.
Tencent aims to unleash the potential of this IP by rolling out two new games, an animated series and a live-action drama series based on the Honour of Kings’ world.
While Tencent’s best-known games such as Honour of Kings attract the most attention, lesser-known games also contribute to Tencent’s game business’ stable growth.
For example, Naruto Mobile, an internally developed game based on the popular anime IP, has recently become one of the top fighting games in China with all-time high DAU and revenue, despite being first released over four years ago.
This speaks to Tencent’s team’s success in making ongoing game enhancements, such as refining a highly popular PvP game mode.
As for new games, it believes that its Moonlight Blade Mobile represents 2020’s most successful launch of a new MMO role-playing game in China, and Tencent’s battle arena game League of Legends Wild Rift is currently among the most-downloaded mobile games across its available markets, according to App Annie.
Tencent has a constructive view on PC game opportunities as the IP and influence of Tencent’s major franchises remain notably robust. League of Legends released a major thematic event, “Spirit Blossom Festival”, coordinating the release of new champions, new skins, and new event passes.
The recent League of Legends World Championship in Shanghai attracted a sizeable audience globally. Tencent Video aired a highly-rated drama series based on Tencent’s CrossFire game during the quarter, which tied into a new in-game mode and skins, reviving the game’s popularity and monetization.
Valorant became a breakout hit in the tactical shooter genre and was widely watched on Twitch.
Digital Content
The fee-based VAS subscriptions increased 25% year-on-year to 213 million, primarily driven by video and music content subscriptions.
Video subscriptions expanded 20% year-on-year to 120 million. Its self-commissioned drama and animated series such as Nothing But Thirty, The Song of Glory, and The Land of Warriors Season 3 have attracted additional subscribers for Tencent Video.
Music subscriptions grew 46% year-on-year to 52 million, due to an expanded paid content library and a higher retention rate.
Revenues from VAS increased by 38% to RMB69,802 million for the third quarter of 2020 on a year-on-year basis.
Online Advertising
Revenues from Online Advertising increased by 16% to RMB21,351 million for the third quarter of 2020 on a year-on-year basis.
Following the COVID-19 outbreak, overall China advertising activity appears to have largely returned to normal conditions, albeit with a few industry exceptions lagging (for example, the travel industry), and with substantial changes in advertiser behavior (for example, toward retargeting and toward video format advertisements).
By category, advertising spending from sectors such as education, Internet services, and e-commerce platforms experienced rapid growth through the pandemic, and sustained robust year-on-year growth during the quarter.
Advertising spending from categories which dipped during the pandemic, such as financial services and consumer staples, were flattish year-on-year. Internally, Tencent upgraded its algorithmic advertising buying solutions, delivering higher conversion rates for advertisers and attracting increased share of budgets towards its services.
Tencent also provided incremental advertising inventories in casual game apps, eSports events and live streaming platforms.
WeChat properties achieved solid revenue growth year-on-year, driven by higher impressions and eCPM. Its mobile advertising network revenue grew rapidly year-on-year as advertisers responded favorably to its video formats, such as rewarded video advertisements.
For media advertising, the rate of revenue decrease moderated to minus 1% year-on-year.
FinTech
Tencent’s FinTech revenue grew healthily at a similar rate to prior quarters, led by the continued expansion of its commercial payment and wealth management businesses, while its social payment and micro-lending businesses grew at moderate rates.
Revenues from FinTech and Business Services increased by 24% to RMB33,255 million for the third quarter of 2020 on a year-on-year basis.
Its TPV increased over 30% year-on-year as commercial payment DAU and transaction value per user grew robustly year-on-year, mainly driven by its deeper penetration in offline transactions and expansion of its Mini Programs transactions in retail categories such as grocery and apparel.
The number of its wealth management customers increased by over 50% year-on-year, and its aggregated customer assets expanded at a similar rate.
LiCaiTong’s penetration rate among its payment users is still quite low, and Tencent is seeking to further grow its wealth management customer base at a measured rate via long-term initiatives such as investor education programs and an expanded product offering.
Financial Results Highlights
Revenues: +29% YoY, non-IFRS profit attributable to equity holders of the Company: +32% YoY
- Total revenues were RMB125,447 million (USD18,421 million), an increase of 29% over the third quarter of 2019.
- On a non-IFRS basis, which is intended to reflect core earnings by excluding certain one-time and/or non-cash items:
- Operating profit was RMB38,116 million (USD5,597 million), an increase of 34% YoY. The operating margin increased to 30% from 29% last year.
- Profit for the period was RMB33,325 million (USD4,893 million), an increase of 33% YoY. Net margin increased to 27% from 26% last year.
- Profit attributable to equity holders of the Company for the quarter was RMB32,303 million (USD4,743 million), an increase of 32% YoY.
- Basic earnings per share were RMB3.402. Diluted earnings per share were RMB3.314.
- On an IFRS basis:
- Operating profit was RMB43,953 million (USD6,454 million), an increase of 70% YoY. The operating margin increased to 35% from 27% last year.
- Profit for the period was RMB38,899 million (USD5,712 million), an increase of 85% YoY. Net margin increased to 31% from 22% last year.
- Profit attributable to equity holders of the Company for the quarter was RMB38,542 million (USD5,660 million), an increase of 89% YoY.
- Basic earnings per share were RMB4.059. Diluted earnings per share were RMB3.964.
- Total cash was RMB265,892 million (USD39,044 million) at the end of the quarter.
