Tencent, one of the world’s biggest technology company, reported better-than-expected revenue for the fourth quarter ended Dec. 31 of 2020. Revenue totaled 144.95 billion yuan ($21.07 billion). This was helped by the growth in ads within its growing “video accounts” business. It was the first time in more than a year that Tencent’s online ad revenue grew. Most of the ad spend came from e-commerce companies, fast-moving consumer goods, and games.
Video accounts sit within the WeChat messaging and social media app and are a way for individuals and businesses to share short videos and livestreams on the platform. This quarter, average monthly users of WeChat in both China and overseas also increased by 3.5%, with 1.31 billion accounts. It also led to the growth of its ad revenue: in-feed ads for video accounts generated more than 1 billion yuan in revenue during the fourth quarter. The user time spent on video accounts was also more than 1.2 times that spent on WeChat Moments, which has a structure similar to Facebook’s News Feed.
Moreover, WeChat also has mini-programs that allow users to buy products from merchants within the app, and the user time spent on mini-programs doubled in the fourth quarter. This contributed to the “several trillions” yuan of gross merchandise value (GMV) last year. This amount of GMV puts Tencent in the same league as one of the largest e-commerce platforms, allowing it to begin to monetise amount.
Advertising expenditure is always an indicator on economic sentiment. Tencent’s Chief Strategy Officer James Mitchell said on an earnings call that companies selling lower priced goods had already seen a broad-based recovery. For companies selling higher-ticket priced items, he said, it varied category-by-category, and consumer sentiment was expected to pick up later in the year.
Despite the growth of the online ads, ads still only constitute less than one-fifth of Tencent’s overall revenue, which barely grew in the fourth quarter and declined for the entire year due to the pandemic. Meanwhile, the gaming business (the largest revenue segment) decreased by 2%, and the financial technology and business services revenue dropped by 1%.
Future prospects are bright, however, as the company is looking forward to developing financial products such as wealth management, loans, and insurance over the longer term. It is also working on an artificial intelligence “foundation” model called Hunyuan, which will act as an important amplifier for future growth in AI-generated content.
Apart from Tencent, the article also discussed James Mitchell, the Chief Strategy Officer of Tencent. He is a veteran executive with more than two decades of experience in the technology sector, leading departments and companies, both large and small. He has been responsible for all of Tencent’s corporate and product strategies, including new media and entertainment, games, innovation initiatives and global expansion. His insight and evaluation of technology trends provide strong support for Tencent’s long-term development in the highly competitive global market.
