Tencent has rebutted reports claiming it plans to increase its advertising revenue to up to 40% of its gross corporate revenue.
According to tech media outlet 36Kr (in Chinese), a high-level officer at Tencent said on June 21 that in one to two years the company plans to increase its advertising revenue’s contribution to corporate gross revenue to 30% to 40%. The anonymous source also stressed that Tencent would like to keep the rate below 50% to best protect user experience.
TechNode contacted Tencent to confirm the information. A spokesperson said the report is not true.
Tencent so far has released no statement to formally comment on the reports. Major websites in China including Sohu Tech and financial information platform Tonghuashun (同花顺) are still republishing and circulating the information.
According to Tencent’s fiscal report for the first quarter of 2018 (in Chinese), the company’s advertising revenue channels include internet advertising, social media advertising, and other advertising. TechNode reported in May that Tencent’s internet advertising revenue grew by 55% to RMB 10.68 compared to the same time last year. Additionally, social and other advertising revenue grew by 69% to RMB 7.39 billion, largely due to WeChat Moments’ advertising services. These revenues already account for 24.6% of the RMB 73.5 billion gross corporate revenue during the same period.
“Our social media and feed advertisements are significantly fewer than the industry’s general figures. We believe that our social media and other advertising sectors will maintain long-term growth,” Tencent said in the 2018 first quarter fiscal report (in Chinese), summarizing past performance and giving hints for future revenue strategies.
The company’s words are true: in 2017, Facebook alone made a staggering $39.9 billion in advertising revenue, around 98% of the social networking platform’s global revenue. Considering WeChat’s one billion-strong global user base and dominant position in China’s social media landscape, the figure of 30% to 40%, though denied by Tencent’s public relations office, is commercially reasonable.
Another member of Tencent staff quoted by 36Kr said the company’s next stage of focus is the service capability of small and local merchants. Smart retail tools will improve operational efficiency in brick-and-mortar stores. At the moment, medium to small merchants’ contribution to Tencent’s social media advertising revenues is around 30%, whereas big brands contribute 70%. Tencent wishes to keep a balanced 50:50 ratio.
Tencent’s WeChat has been going through active system updates. New services including healthcare support, smart public transportation, global tax rebates, and new mini program functions are building channels and technological infrastructure for the company.
Though figures quoted in 36Kr’s report is said to be false, Tencent’s growing ambition for a larger profitable and sustainable commercial ecosystem is clear.