Tencent sees 2017 profit climb 75 percent on robust ad sales

Tencent has reported a 75 percent climb in profit for its fiscal 2017 to US£11.09 billion (72.47 billion yuan), fuelled by high growth rates in its online advertising revenue and value-added services business unit. The Chinese tech giant said it clocked a 56 percent increase in total revenues for the year, ended December 31, to hit US£36.39 billion (237.76 billion yuan). Tencent’s value-added services, which comprised messaging apps such as WeChat and online games, saw a 43 percent increase in revenue to 154 billion yuan (US£24.32 billion).

The business unit accounted for 65 percent of the company’s total revenue. Sales from online games rose 38 percent to 97.88 billion yuan (US£15.46 billion), fuelled primarily by revenue increases in smartphone games such as Honour of Kings and Dragon Nest Mobile. Social networks revenue grew 52 percent to 56.1 billion yuan US£8.86 billion, which growth Tencent attributed to its digital content services such as subscription video and music streaming and sales of in-game virtual items.

Online advertising revenue climbed almost 50 percent year-on-year to hit 40.44 billion yuan (US£6.39 billion), and accounted for 17 percent of the company’s total revenue. Ad revenue from social and others grew 65 percent 25.61 billion yuan (US£4.05 billion), while media ad revenue rose 30 percent to 14.83 billion yuan (US£2.34 billion). The increase here was fuelled by higher traffic and revenue figures from its Tencent Video and other video streaming services.

Tencent’s chairman and CEO Ma Huateng said: “Looking forward, we are substantially increasing our investment in areas including video, payment, cloud, AI (artificial intelligence) technologies, and smart retail, which will impact our near-term earnings but which we believe can generate long-term value and growth opportunities.”

The Chinese vendor last April said it was opening data centres outside its domestic market as it looked to expand its portfolio to include cloud and AI. These new facilities were earmarked for Mumbai, Seoul, Frankfurt, and Moscow, adding to its global network of data centres that included Singapore, Toronto, and Hong Kong. Tencent also operated at least 12 data centres in mainland China.

Tencent in March 2017 also acquired a 5 percent stake in Tesla for US£1.78 billion and, in October, invested US£400 million in Indian cab-hailing platform Ola.

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