Tencent releases Q4 2016 and annual results

Chinese online internet giant Tencent delivered another year of robust revenue growth in 2016, benefiting from gains in its online games, social networks and online advertising, our sister site Technode Chinese is reporting.

Tencent yesterday announced the unaudited consolidated results for Q4 2016 and audited consolidated results for the year ended Dec. 31, 2016.

The company reported a net profit of RMB 41.45 billion for 2016, up 42 percent from the previous year, on revenue of RMB151.94 billion, up 48 percent, according to the financial report.

Tencent’s revenue structure is composed of value-added services (VAS), online advertising and others.

VAS revenue refers to revenue generated from online games and social networks, encompassing that from digital content service and game-related virtual props as well as outright revenue of online games. Online advertising revenue mainly comes from WeChat Moments, WeChat official accounts and the company’s mobile media advertising. Others mainly include payment-related services and cloud services.

To be specific, the revenue growth can be attributed to its stunning performance of smartphone games, paid digital content, social and performance advertising, as well payment-related services.

It’s worth noting that online game segment revenue rose 25% to hit RMB 70.84 billion, representing 47% of the internet behemoth’s 2016 revenue. This makes Tencent the largest online game publisher in China, dwarfing its rival NetEase, which grossed RMB28 billion in gaming revenue last year (in Chinese).

Much of the gaming revenue growth can be credited to mobile MOBA Honor of Kings (王者荣耀), which has amassed 50 million active daily users as of the end of 2016.

Online advertising revenue soared by 54% year on year to RMB 26.97 billion, propelled by a growth in advertising from its mobile news app, WeChat Moments, and WeChat official accounts.

Weixin (微信 in Chinese) and WeChat saw combine monthly active users (MAU) rise 27.6% year on year to 88 million. (Weixin is targeting Chinese users while WeChat refers to international version  of the messaging service). The figure is higher than the company’s other instant messaging service QQ, whose MAU reached 868 million, a slight rise of 2% year on year.

As internet population growth has slowed, WeChat has been trying new means to generate more revenue from individual users or explore more revenue models such the launch of WCchat Moments advertising.

In addition, Tencent introduced the “mini program” (小程序 in Chinese) feature on its WeChat last year, enabling users to access mobile services directly in-app, in its renewed effort to attract and retain users and service providers.

Mobile payment and cloud services, despite being the least lucrative segment last year, are a strategy that Tencent pursues to position itself in the front of the new technology arena. This segment contributed RMB 17 billion or roughly 11.2% of the company’s 2016 revenue.

Thanks to a substantial rise in the number of corporate customers as well as the increased amount of usage among its existing customers, cloud service revenue nearly doubled from 2015.

In the 2016 financial report, Tencent pointed out that they are “investing in forefront technologies such as artificial intelligence and machine learning to position their ‘Connection’ strategy for the future”.

At the market close today, Tencent’s market cap was worth HKD 2.11 trillion, remaining the country’s most valuable company.