Chinese Tencent: the “social king” who earned 525 billion in 2017
With a market capitalization of more than 525.685 billion USD, how does Tencent, the “social king”, earn Thirty million US dollars a day?
Tencent released its 2017 annual report last night. Although the market has given enough high expectations, this report still exceeds expectations. Another concern is that for large companies like Tencent, does high-speed growth mean a step closer to their “ceiling”?
Tencent, with a market value of more than 3.5 trillion, earned a net profit of 71.51 billion yuan last year, which is almost a daily profit of 200 million yuan. Although game-related business accounted for more than half of revenue, Tencent has already succeeded in getting rid of the game company’s label.
Although its games-related business still accounts for more than half of revenue, it has succeeded in getting rid of the “game company” label and become a platform-based company that plays a key role in social networking, smart retail, internet finance, and interactive entertainment. What is even more noteworthy is that among the more than 600 companies invested by Tencent, among which “Unicorns” such as the B station, Huya, Yilong, Didi, and the Meituan have brought huge investment returns to Tencent.
Total revenue in 2017 is 2377.60 billion
The financial report shows that Tencent’s total revenue in 2017 was RMB 237.76 billion, an increase of 56% year-on-year; profit attributable to equity holders of the company was RMB 71.51 billion, a year-on-year increase of 74%. Tencent’s total revenue for the fourth quarter of 2017 was RMB 66.392 billion, an increase of 51% year-on-year.
Specifically, the value of value-added services business in the fourth quarter of 2017 increased by 37% year-on-year to 39.947 billion yuan. Among them, online game revenue increased 32% to 24.367 billion yuan.
In addition, social networking revenue increased by 45% to 15.558 billion yuan, driven by revenue growth from digital content services such as subscription video streaming and live broadcast and in-game virtual item sales.
During the same period, Tencent’s online advertising revenue increased by 49% year-on-year to 12.361 billion yuan. Driven by the growth in payment-related services and cloud service revenue, Tencent’s other business revenues increased by 121% year-on-year to RMB 14.084 billion.
Data shows that after the Spring Festival, Tencent WeChat and WeChat’s combined monthly active accounts exceeded 1 billion. One year after the launch of the small program (January 2017 to January 2018), 580,000 small programs have been launched and more than 170 million daily active accounts have been launched.
A number of joint stock companies prepare for IPO
According to Tencent president Liu Chi Ping martin, Tencent currently has invested in about 600 companies. In addition to the listed readers, Sogou, and Yixin Group, Tencent’s B shares, Huya, and Yilong also launched the listing process, and the “Unicorn” such as Meituan, Didi, Mobai and so on has already had a huge valuation.
Tencent board chairman Ma Huateng Pony said that Tencent is significantly increasing investment in video, payment, cloud, artificial intelligence and smart retail. “This will have some impact on our earnings in the short term, but we believe that these investments can bring us long-term value and growth opportunities.”
Focus on Tencent Games
It is not an exaggeration to say that 2017 is the outbreak of Tencent’s games.
According to statistics, in 2017, Tencent’s game revenue reached 97.8 billion yuan, a 38% increase from the 70.82 billion in 2016, which was significantly faster than the previous two years. However, this does not mean the bright future of 2018.
Global game market intelligence company Newzoo’s report shows that in 2017 global gamers spent 707.8 billion yuan (108.9 billion US dollars), of which, the overall revenue of the Chinese gaming industry was 218.96 billion yuan, according to Tencent 97.8 billion game revenue, Tencent, With a pool of one billion users, it has already won 44% of the Chinese game market. This share, in order to further expand, is quite difficult.
Company Outlook and Strategies for 2018
Tencent will adopt a more aggressive investment strategy to enhance its long-term competitive advantage in the areas of online video, payment services, cloud services, artificial intelligence technology and smart retail, including:
－ Strengthening social platforms to encourage user sharing, enhance connections with users’ dailylives and facilitate interactions with ecosystem partners;
－ Enhancing the popularity of games through upgrading the content of existing titles and addinginnovative new titles;
－ Investing in digital content, including long form and short form video content, in order to further grow subscriber base;
－ Increasing use case scenarios for payment related services to accelerate merchant and user adoption, and cooperating with partners in developing Internet financial services;
－ Expanding cloud infrastructure and recruiting more talent to better serve clients;
－ Investing in AI technologies for applications such as advertisement targeting, recommendation algorithms, and healthcare;
－ Deploying smart retail strategy to empower offline retailers by leveraging our technology services.
