Tencent’s Quarterly Earnings Disappoint As WeChat And Mobile Gaming Growth Slows

Chinese Internet juggernaut Tencent issued a disappointing third-quarter earnings report today, missing profit estimates. This was due in large part to slowing revenue from mobile gaming, which generates more than half its sales. The company also disclosed that it had spent less money advertising its messaging app WeChat in the West because of sluggish adoption in those markets.

Tencent’s third-quarter net income increased 46 percent to 5.66 billion RMB ($924 million), behind the 6.1 billion yuan analysts surveyed by Bloomberg had predicted. Meanwhile, revenue climbed 28 percent to 19.8 billion RMB ($3.2 million), but that was the slowest quarterly growth in over seven years.

Revenue from its mobile-gaming business declined to 2.6 billion RMB, compared 3 billion RMB in the previous quarter. Furthermore, WeChat’s monthly active users rose just 6.8 percent during the quarter to 468 million monthly active users, its most sluggish growth since Tencent first started releasing user numbers.

Tencent had warned investors back in August that it expected its mobile gaming revenue growth to level out temporarily as it works on adding more titles and integrating e-commerce services. During its earnings call today, Tencent said that titles on its games portal QQ are better at making money than games on WeChat, but it didn’t break out whether WeChat or QQ makes more on game revenue.

At stake is the rivalry between Tencent and Alibaba for mobile users. Alibaba has launched its own messaging app, called Laiwang. In turn, Tencent is trying to grab a share of China’s e-commerce market, which is currently dominated by Alibaba. In March, Tencent took a 15 percent stake in Alibaba rival JD.com. As part of the agreement, JD.com acquired Tencent’s QQ Wangguo B2C and PaiPai C2C marketplace businesses, while Tencent agreed to support JD’s e-commerce growth by offering access to users on WeChat, Mobile QQ, and other platforms. Both companies are also working on an online payment service that may become a competitor to Alibaba affiliate Alipay.

from TechCrunch http://feedproxy.google.com/~r/Techcrunch/~3/QxlLzg1xFlM/

via IFTTT