Tencent’s Revenues Up 25 Pct As Consumers Use Digital Services

Thanks to the coronavirus, we’ve now entered the age of social distancing, where interactions will, at least for now, be done through zeros and ones.

The latest evidence of this comes from what might be considered the epicenter of the coronavirus pandemic: China.

In earnings results posted Wednesday, Tencent Holdings, the gaming and social media giant, said the continued shift to online media and meetings is likely to be an entrenched one.

As Reuters noted, the company does not have the exposure to supply chain risks that other companies might have, including those who focus on eCommerce.

In terms of headline numbers, revenues were up 25 percent to 105.8 billion yuan ($15 billion), and analysts had expected 102.9 billion yuan ($14.6 billion). In terms of earnings, profits of 21.6 billion yuan ($3 billion) were lower than the 22.9 billion yuan ($3.2 billion) expected.

Drilling down into the numbers, the company said the recent initiative to assign “health codes” for individuals — a necessity if they want to move around the country — spurred 8 billion visits to the WeChat platform. The company said that combined monthly active users of Weixin and WeChat were up 6 percent to 1.7 billion

In an interview with Reuters, Nan Lu, analyst at Sensor Tower, said, “Mobile games are one of the very few entertainment options during the coronavirus outbreak.”

According to that firm’s research, downloads of Tencent games increased by 10.4 percent year over year in February, and revenue increased by 11.8 percent.

Advertising, of course, remains a rough spot and is about 20 percent of the company’s top line. Economic pressures will certainly affect the company’s advertising results.

Some Bright Spots

But online gaming revenues were up 25 percent, and within that segment, smartphone game sales surged 37 percent. And, as noted by Pony Ma, CEO of the company, on a conference call with analysts, international revenues rose to 23 percent of online game revenue during the fourth quarter.

As far as mobile payments are concerned, FinTech and business services are 28 percent of total revenues. Management noted that average daily commercial payments transactions exceeded 1 billion in the fourth quarter as Ma said, “we deepened penetration among offline merchants.” Yet the post-quarter impact of the pandemic, said Tencent President Martin Lau, saw a decline in transactions and revenues as restaurants and stores were not open during the Chinese New Year.

“The volume resumed quickly after work resumed,” said Lau.

Management said during the call that users have been increasing the time spent on a range of digital content services.

The company also said that Tencent Meeting, the video conference app, has seen 10 million users since launch this past December.

“Our team responded swiftly to customer feedback and upgraded the product frequently, releasing 14 versions in the recent 40 days,” Lau told analysts.

In discussing the impact COVID-19, the disease caused by the coronavirus, has had on meetings, Lau said during the call that “during the time when nobody goes to work on location, and schools are not open, then clearly there’s only online solutions that are available for people.

“I think when the market actually reopens, then a lot of the use cases will shift back to offline. But, then, I think this consumer habit education will have already taken place and people would shift a part — or retain a part — of their usage habits online… If you don’t have to travel two hours to attend one hour of class or meeting, maybe that’s a better and more efficient way of doing it.”