China’s tech giant Tencent, which owns the social network platforms WeChat and QQ, reported 2020 first quarter results, ending on March 31, on May 13. The group’s total revenue reached 108 billion yuan ($15.2 million), an impressive 26 percent increase compared to the same period last year, especially during the ongoing COVID-19 pandemic.
As users’ screen time increased during the national lockdown in China from the end of January to March, Tencent’s online business has largely benefitted from this considerable boost in traffic. Among its three business segments: Value Added Services (including online games and social networks), Online Advertising, and Fintech and Other Services, online games and advertising showed the strongest growth, respectively reporting a 31 percent and 32 percent bump from a year ago. Within Online Advertising, social and other advertising revenues reported a whopping 47 percent increase to 14 billion yuan ($2 billion).
Going forward, the group is cognizant of the potential changes brought by China’s reopening — from consumers’ time spent online to decreasing advertisers’ budgets — and expressed cautions to its investors. “We see some headwinds for the online advertising industry including consumer time spent online normalizing, and multinational brands sharply reducing their global marketing budgets,” the company said in a statement.
Tencent’s strong online advertising performance shows how much advertisers are dependent on the Internet to reach their audiences during a global pandemic.
In Q1, WeChat’s monthly active users surpassed 1.2 billion worldwide, including a small 3.2% increase from last quarter. There might still be space for WeChat to grow its user number as a product, but WeChat as an ecosystem has a lot of business potential yet to be tapped. In the past few months, WeChat Moments advertising, Mini Programs, and WeChat’s answer to TikTok, Shipinhao, have continued to generate more buzz than ever among fashion brands and agencies.
The Internet giant dropped a humblebrag in the earnings statement about its Mini Program platform — a must-have for brands in the Chinese market — and said that it had a “rapid growth” in daily active users, which now exceed 400 million. While it remains to be seen if Tencent’s Q1 COVID-19 ad revenue bump will continue for Q2, this unprecedented time has given global and mainland advertisers a data-driven chance to see where their advertising money should be spent and a glimpse at what new possibilities lie ahead.
The Jing Take reports on a leading piece of news while presenting our editorial team’s analysis of its key implications for the luxury industry. In this recurring column, we analyze everything from product drops and mergers to heated debates that sprout up on Chinese social media.