Q2, Tencent ushered in the post-epidemic highlight moment: games, fintech, cloud business, social advertising in full bloom
Economic Watch Network Reporter. Ren Xiaoning On the afternoon of August 12, Tencent released its second quarter 2020 results. This is Tencent's second financial report since the outbreak.
Tencent's gaming revenue surged in the first quarter, will it be maintained in the second quarter? Ant Group is about to go public, how's Tencent's fintech going? During the outbreak, Tencent 2B business has a new target audience, will it bring good revenue? Tencent's second-quarter report gives answers to these questions.
Tencent's second-quarter revenue was Rmb114.9bn, up 29 per cent year-on-year and above market estimates of Rmb112.44bn, according to earnings figures. Net profit was RMB33.11 billion, up 28% YoY, exceeding market estimates of RMB27.29 billion. Tencent's main source of revenue was gaming, with online gaming revenue of 38.288 billion yuan in the second quarter, up 40% year-on-year. Fintech and corporate services revenue was 29.862 billion yuan, up 30% Year-on-Year. Social network revenue was 26.714 billion yuan. Online advertising revenue was 18.552 billion yuan, up 13% year-on-year.
Tencent's share price hit an all-time high of HK$564 on July 31st, surpassing the high of HK$470 set in early 2018. Since the beginning of this year, Tencent has competed with Alibaba for the number one internet market capitalisation in China, with a current market capitalisation of 4.47 trillion yuan.
Nearly 40 brokerages, including Citigroup and Nomura, gave Tencent a "buy" and "overweight" rating. After a long slump in 2018 and a bronthrift year in 2019, Tencent is in the spotlight in 2020.
Tencent's new year of gaming
Games have been Tencent's steady source of revenue and profit. The second quarter of this year is still the same.
In the second quarter, Tencent's online gaming revenue was 38.288 billion yuan, up 40% year-on-year. Compared with the first quarter of the national home, Tencent's game revenue still rose, online games rose 3% month-on-month.
Tencent's share price explosion in the second quarter of this year was related to the good performance of the game. Tencent topped Sense Tower's list of revenues for the Global App Store and Google Play from February to June. Among them, "Glory of the King" and its overseas version, "Peace Elite" and its overseas version, the total revenue of the two games for six months consecutively reached the top.
According to statistics, "Glory of the Kings" in the first half of the year received about $1 billion in revenue. Meanwhile, in the first half of the year, Tencent's "Eat Chicken" game "The Jedi" (the overseas edition of "Peace Elite") beat "Glory of the Kings" to become the world's highest-paid game.
This year is Tencent's big year for games. In addition to "The Jedi" and "Glory of the Kings," Tencent's other high-profile game, Dungeons and Warriors, is also scheduled to launch this year. The game, which had been scheduled to go online on August 12, has been postponed until October. The hand tour network booking volume has reached 58 million, Guojin Securities issued a research report that the "dungeon and warrior" hand tour version of the possibility of a burst, the first month of water or up to 3 billion yuan.
Dungeons and Warriors is Tencent's classic game, which has generated high revenues for Tencent in the field of end-of-the-line travel, and to this day is still Tencent's main end-of-the-line tour. Tencent's research and development capabilities have also been validated in the area of end-of-line IP adaptation. Tencent's two major studios, Tianmei and Photon, have experienced the "Jedi's Life" and "League of Heroes" end-of-life exercise.
Tencent has more game reserves. On June 27, Tencent released more than 40 games, of which more than 20 are new games, in addition to "Big Master: A Thousand Worlds," "Alloy Warhead Code:J," "Qin Shiming Moon World Hand Tour," "Light and Night Love" and other Tencent self-research new products, many other agents of new products, from Shengxi, Mid-Hand Tour, Xishan House, Zulong mutual entertainment, SNK and glory and many other domestic and foreign game manufacturers.
Tencent's gaming business is not only a domestic market, but also abroad. In the international market, Tencent's monthly active accounts increased significantly year-on-year and month-on-month due to the launch of new games and the increase in the length of time users spend. In the second quarter, Tencent released Valorant, an immersive team action-class personal computer game, a card-type game that spans personal computer ends and smartphones, Legends of Rune Earth, and a proxy role-playing hand-to-hand game, CODE:D Blood. Valorant has become the world's most watched game on Twitch in its second season.
Sensor Tower statistics found that the impact of the outbreak on the global application market was more pronounced in the second quarter. From the first quarter to the second quarter, consumer spending on apps and games grew 11 percent quarter-on-quarter, up 28.8 percent from a year earlier to $26.4 billion.
Fintech for labeled ants
On July 20th Alibaba's Ant Group announced plans to list, valued at $200bn. In 2019, Ant Group achieved operating income of RMB120 billion and net profit of RMB17 billion.
In the field of mobile payments, Alipay and WeChat Pay each occupy half of the wall, relying on Alipay's Ant Group listing, but also caused concern about Tencent Fintech.
In the second quarter, Tencent's fintech and corporate services revenue rose 30 percent to 29.862 billion yuan. The increase was mainly due Chinese mainland consumer spending, which led to increased revenues from commercial payments, social payments and cloud services.
Ant Group through micro-credit, insurance, financial management, digital payment of technical services, such as e-commerce, offline transactions and other consumer scenarios, each transaction, will generate such a fee, the rate is usually six thousandths.
Tencent Financial also has similar wealth management products and digital technology services. Guoxin Securities analysis said that under the impact of the epidemic, the profit margin of fintech business can remain stable, the main reasons are several: financial management platform and loans and other high profit margin business to maintain growth;
Since this year, Alipay has upgraded the digital life platform, WeChat is also trying to build a life circle. WeChat in the commercialization of a variety of paths, small programs to launch live functions, on-line express programs, to provide "small shop" standardization tools, and enterprise WeChat connectivity upgrade. On June 3rd, WeChat available on-line WeChat payment sub-function. At present, WeChat payment supports 1035 services, covering sharing rentals, transportation, shopping and entertainment, life services, accommodation reservations and other five categories. Including drops, dodo, the same journey, transfer, JD.com Express, China Hotel, Spring and Autumn Airlines, Ctrip, Wanda Hotel, the United States group taxi.
Tencent reported growth in both user and business size in its commercial payment and wealth management platform business, driving year-on-year and month-on-year growth in fintech revenue. Merchant demand for payment solutions increased during the quarter, particularly in sectors such as retail and catering. As a result, Tencent's average daily trading volume and the amount of single transactions paid by Tencent increased year-on-year.
First Shanghai Securities issued a research report that in this outbreak and the post-April outbreak, Tencent demonstrated its ability to cut into the B-side field in its areas of expertise, invest resources and penetration.
The cloud business has new customers
In the first quarter, due to outbreak-related restrictions, Tencent's cloud project deployment was delayed and offline transactions disrupted. Tencent Cloud, the driving force behind Tencent's long-term growth, was under pressure in the first quarter.
Tencent's cloud business grew rapidly in the second quarter. Data released by Tencent Cloud showed that the pan-Internet industry grew "with a cloud blowout" in the second quarter, with a five-fold surge in the first half of the year. Since May, the growth of cloud usage on major e-commerce platforms has accelerated significantly. Tencent Cloud's computing resources doubled from last year during this year's "618 Big Push". At the same time, live shipping is becoming a new trend. In the first half of 2020, the volume of live sales went up, with the industry-wide bandwidth of live sales up 500% in June compared to January.
In the second quarter, Tencent's revenue from fintech and corporate services was 29.862 billion yuan, up 30% YoY and 13% YoY. In the IaaS market, Tencent Cloud's global market share in 2019 is up one place from 2018, ranking fifth in the world, according to the latest Corporate Public Cloud Services Market Share Report from Gartner, an international research organization.
Tencent reported year-on-year and month-on-month growth in revenue from cloud and other corporate services, driven mainly by higher usage of cloud services by Internet companies and customers in the public service sector. Delivery of offline projects has not fully recovered in the second quarter as a result of the ongoing outbreak of the new coronavirus, but Tencent has signed major contracts with financial institutions and public service customers, while expanding its business in emerging verticals such as healthcare, education, conferences and exhibitions.
According to reporters, in the second quarter, Tencent Cloud entered a number of new areas. In May, Tencent Cloud Exhibition was held in 15 first-tier cities, including Beijing, Shanghai, Guangzhou, Shenzhen and Tianjin, with access to digital technology for more than 100 large-scale exhibitions covering a wide range of industries and fields, including finance, culture, trade, consumption and cross-border exchanges. On June 15, Sany Group's strategic cooperation with Tencent was upgraded. On June 29, Tencent Cloud (Zhangjiagang) Industrial Cloud Platform was officially launched. On July 10, Lingling Tire signed a strategic cooperation agreement with Tencent Cloud and Hua-based Intelligent on July 13, and Tencent Cloud's eighth industrial cloud base officially landed in Changzhi City, Shanxi Province. On July 14, Foxconn signed a strategic cooperation agreement with Tencent Cloud.
Tencent Cloud is still in the investment period. Tang Daosheng, president of Tencent's Cloud and Smart Industry Group, announced that Tencent will invest $500 billion over the next five years to further lay out new infrastructure. Tencent Cloud, will add a number of super-large data center clusters, long-term planning to deploy more than 1 million servers, the first data centers in Guangdong, Jiangsu, Hebei provinces.
Guojin Securities issued a research report predicted that in 2020, in the outbreak to accelerate the digital transformation of enterprises and rely on their own industrial advantages in the vertical field advantages of the background, Tencent cloud services can grow at a rate of 60% to 70% of the rapid growth.
Social advertising rose and media advertising fell
This year has been described as the toughest year for Internet advertising in China. Tencent advertising is less affected by its social attributes, but its media advertising business is also falling.
The overall size of Q1 Internet advertising in China is expected to fall by 35.8 per cent month-on-month, according to Aerrey, while talkingData data show that the proportion of advertisers who prefer to increase their marketing budgets by 2020 is down 7 per cent year-on-year.
Tencent's online advertising revenue in the second quarter was 18.552 billion yuan, up 13% year-on-year. Benefiting from WeChat's business boom, social advertising revenue was 15.262 billion yuan, up 27% year-on-year. Media advertising revenue was 3.29 billion yuan, down 25% year-on-year.
At the social advertising level, Tencent's month-on-month growth rate has slowed compared with the same period in the past. This is due to the fact that in the first quarter of 2020, the gaming and Internet services industry benefited from the home office and increased its advertising expenditure substantially, but in the second quarter, its advertising expenditure fell back to a more normal level.
On the media advertising front, Tencent's advertising revenue fell sharply year-on-year due to weak demand from brand advertisers and delays in the production and broadcast of some variety shows and TV shows.
In July, Tencent Ads launched a new delivery management platform that allows advertisers to more efficiently run ads in all Tencent resources, including mobile advertising networks. Tencent believes the new platform will enhance bidding efficiency and provide advertisers with more accurate targeted delivery services.
In addition to the financial data, Tencent also released several noteworthy user data. WeChat users are still growing, up 6.5% year-on-year from 1,203 million in the previous quarter and 1.206 billion in the quarter. QQ monthly live users 647 million. Tencent also added new members in the second quarter of the membership payment model. The number of Tencent fee-based value-added service accounts increased by 20% to 203 million yuan, with Tencent's video paid users reaching 114 million yuan, up 18% year-on-year, and Tencent's online music paid users reaching 47.1 million, up 51.9% year-on-year.
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