Tencent’s Big Pay Day


Image source: Kaspars Grinvalds / Shutterstock.com

What's going on?

Chinese internet giant Tencent said on Wednesday that its revenue in the first quarter jumped 55% versus a year ago – a huge increase for such a large company!

What does this mean?

Tencent is a Chinese internet conglomerate. It owns WeChat, which is sometimes called the Chinese version of Facebook (FB), but in reality is an ecommerce platform as well as a social media company with almost 1 billion daily users. Tencent is also the world’s biggest video game publisher (by revenue).

Tencent’s revenue in the first quarter was significantly higher than investors were expecting, driven primarily by an increase in advertising on WeChat (similar to FB ads) and its continued dominance of the mobile gaming market, especially in China.

Why should I care?

For markets: Tencent is diversifying in an attempt to find new ways to grow.

Its stock price is up over 30% so far this year as investors bet on the company’s future growth. In order to drive that, Tencent is developing new product lines in finance (think: online payments) and cloud computing. It’s also moving some of its investments overseas, including backing Hollywood blockbusters such as Kong: Skull Island as well as buying a significant stake in electric car maker Tesla.

The bigger picture: WeChat shows the importance of building a “platform”.

The more services that WeChat offers its users (e.g. social media and ecommerce), the more opportunities it has to generate revenue from them, from selling advertising to helping them order a pizza. That’s one reason WeChat recently launched “mini programs”, which are independent apps that are embedded within it. Facebook is following a similar strategy (intending to embed ecommerce within its messaging apps, for example) and Amazon’s idea of a connected home centered around Alexa is, essentially, the same thing: a platform.

Originally posted as part of the Finimize daily email.

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