Tencent has posted a record 32 per cent profit gain in the third quarter bolstered by mobile games and advertising revenue, as the company puts aside last quarter’s concerns of a shrinking mobile game market and a slowing economy.
The company’s net profit rose to RMB7.45 billion (US$1.17 billion) in the three months preceding September, while total revenue jumped 34 per cent to RMB26.59 billion (US$4.17 billion). The company’s social networks business, which includes WeChat and QQ services, grew 32 per cent year-over-year, while advertising revenue jumped 102 per cent to RMB4.94 million (US$775,863).
Tencent’s report cited an increase in digital content subscription services as one of the reasons behind the growth of its social networks. The company has been aggressively extending into subscription services as market rival Alibaba makes similar investments.
Tencent inked a deal with Metro-Goldwyn-Mayer Studios earlier this month to distribute the entire James Bond franchise, as well as a separate deal with Paramount Pictures to release upcoming films. In September, they sealed a deal making Tencent the exclusive online platform for all six of the first Star Wars films.
One of the most surprising elements of Tencent’s Q3 report was the 60 per cent revenue growth in mobile games after second quarter revenue growth of just 11 per cent. It released some big-name games in the third quarter, as well as implemented a “new smartphone game strategy,” according to the company.
Going forward, Tencent will focus on building out player communities around its social platforms as well as building content and pushing new games to keep smartphone game engagement high. Tencent has been making a series of new PC and mobile game investments over the past three months, including an A series investment in Palo Alto-based game company Artillery last month.
The company has also been building its cash reserves through a series of loans including a US$1.5 billion syndicated loan. The loans have been reportedly earmarked for acquisitions and investments, spurring discussion as to what Tencent’s fourth quarter portfolio might include.
According to sources who spoke to the Wall Street Journal, approximately US$1 billion of that capital is earmarked for an investment in the the on-demand giant created by the Meituan-Dianping partnership.
The article Tencent Rides Out Economy Woes With Growth In Mobile Games And Ads was first published on TechNode