Stunning first half for Tencent
+8* China QQPublished August 23, 2008 at 4:30 am 4 CommentsWith many on vacations, August is not the hottest month for financial reporting, but considering the stunning results posted by Tencent, which operates QQ, the leading IM-SNS-Games service in China, we thought we’d make a few comments. This company is gold medal material.
Most striking numbers for the first half of 2008 (1H08):
- Total Revenue | 442 million USD (by the way, +85% y.o.y.)
- Revenue from advertising | 53.6 million USD (12% of total)
- Operating profit | 219.1 million USD
- 341.9 million active IM users (out of 822.2 million registered accounts – for about 250 million Internet users in China)
- 26.1 million paying Internet users (7.6% of active IM users, 3.2% of registered users – though many have multiple accounts)
- 13.4 million paying mobile users (3.9% of active IM users)
Comment 0 | 822 million registered users? Are you kidding?
Nobody said “unique users”. But even looking at “active users”, there are 341.9 million of them.
Yes, that is more than MySpace and Facebook’s user bases combined.
What if China and “Western markets” were two LANs?
Comment 1 | Mobile and Internet value-added services represent 88%
This is an Internet company operating in a low-income market and making 88% of its revenues directly from users. Might be worth looking at how they do it! It must be an auspicious sign that we published a complete research on Tencent earlier this year (see “Inside QQ” report on our site. We also published one on Cyworld, Korea’s SNS phenomenon which very much inspired Tencent)
Comment 2 | SNS + Games
SNS have been hot for some time now, and casual gaming is one of the new kids on the block in the Valley. QQ shows how to combine both.
Comment 3 | Online ads represent 12%
There are two ways to look at it: (1) Tencent is very good at monetizing from users (2) Advertising is still largely untapped and could be much, much higher. Notably, Tencent has revamped its advertising strategy with their new “MIND” plan (Measurability, Interactive experience, Navigation, Differentiation) and is getting serious about it.
Comment 4 | Only 7.6% of Internet active users pay
This sounds low, but this is actually a pretty high figure for a SNS-like service considering that (1) There are many multiple accounts. If we count as a maximum user base the number of Internet users in China, this number goes up to 10%. SNS have generally a large number of non-paying users who mostly bring value by their presence. Skype has less than 5% paying users, but their presence is critical to make Skype a valuable tool.
Comment 5 | 13.4 million paying mobile users?
Considering the largest mobile SNS in Japan has about 10 million users, most of them not paying, that’s pretty good, isn’t it? Especially considering the poor mobile infrastructure in China and the large variety of handsets out there.
Comment 6 | 442 million USD and 219 million operating profit in six months?
Again, in a low-income market, with very limited advertising. As a reminder, Facebook had about 150 million USD in revenues and a 50 million loss last year. If things continue smoothly, Tencent could hit 1 billion USD in revenues and close to 500 million USD operating profit this year.
Final comment: aware? beware?
This company could buy one MySpace a year (580 million USD) based only on their profits. The more we look at it, the more we think that Western markets are really, really lucky that despite their ignorance of China’s leading Internet players, they are not threatened (yet) as Chinese leaders are still largely focused on the local market. For those who pay attention, this is a tremendous chance to learn useful lessons, business models and critical elements to make them work. For the rest, another train will pass you by as China’s successful models are replicated or reinvented in your market.
[...] Original post by benjamin [...]
[...] Original post by benjamin [...]
[...] Original post by benjamin [...]
[...] China                                                                                                                                                      China’s Tencent Reports First-Half Results. Ben Joffe always writes some the very best posts about innovation in China, South Korea, and Japan. This post is no exception, and I am really taken aback by Ben’s suggestions of what Tencent could actually buy with all that money. Amazing. [...]