Gaming Keeps Tencent Green in Q4

    Tencent saw balanced growth across all its core business segments, but its standout was international gaming, which grew by 43 percent.
    Tencent saw balanced growth across all its core business segments, but its standout was international gaming, which grew by 43 percent. Photo: Shutterstock
    Kevin RozarioAuthor
      Published   in Finance

    Internet tech giant Tencent saw its growth slow slightly at the end of 2020. But solid performances across its core businesses led to a full-year revenue increase of 28 percent over 2019, reaching 73.9 billion. A fourth-quarter lift of 26 percent contributed 20.5 billion.

    Tencent, founded in Shenzhen in 1998 and listed in Hong Kong since 2004, saw its four main divisions — social networks, online games, online advertising, and fintech/ business services — all perform at similar levels, but an extra focus on global gaming and social video could fuel future growth.

    Chairman and CEO of Tencent, Ma Huateng, said in a statement, “We extended our leading position in the consumer internet space with enriched content and innovations across our products, while making notable progress in international expansion, starting with games.”

    The company also invested in its communications and social platforms — such as Weixin, WeChat, and QQ — which connect more than 1.2 billion users, mainly in China, and give luxury brands and marketers access to valuable demographic targets.

    In the final quarter of 2020, the take from online games hit 6 billion, up by 29 percent. Within that, international gaming revenue soared by 43 percent to 1.5 billion, as cloud gaming worldwide has become a colossal 150 billion market, attracting 2.5 billion players.

    Smartphone games, such as Peacekeeper Elite, Honor of Kings, PUBG Mobile, and recently-launched titles such as Moonlight Blade Mobile have been the main driver for Tencent. Revenue from this segment (including smartphone games revenue attributable to Tencent’s social networks business) reached 5.6 billion in the quarter, more than three times that for PC client games.

    A partnership with Nintendo has also extended Tencent’s home entertainment offerings to consoles. By the end of 2020, it had distributed over one million Switch consoles and published a dozen popular Switch titles in China.

    Video permeates social networks as well as games and is considered the future of immersive experiences. Tencent says, “Users are increasingly uploading personal videos, and sharing them with friends, in Weixin Moments and chats.” Through a new service called Video Accounts, users can also share videos publicly, while brands can broaden their audience reach and drive transactions via links to Mini Programs.

    Luxury brands, for example, are increasingly using Mini Programs to connect with consumers, and with Weixin Pay, annual transaction volumes from Mini Programs more than doubled year-on-year in 2020.

    Other business segments performed as follows:

    Social networks#

    : up 27 percent to 4.3 billion, mainly driven by digital content services, including a consolidation impact from gaming leader Huya’s live broadcasts, music and video subscriptions, and in-game virtual item sales.

    Online advertising#

    : up 22 percent to 3.8 billion, thanks to rising demand from advertiser categories such as education, e-commerce platforms, fast-moving consumer goods, and the consolidation of advertising revenue from Bitauto. Social and other advertising revenues grew by 25 percent to 3.13 billion, an increase that primarily reflects advertiser demand for Weixin Moments inventory and customized in-app ads on mobile networks.

    Fintech and business services#

    : up 29 percent to 5.9 billion due mainly to growth from commercial payments and wealth management services as both transaction volumes and values increased.

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