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Odds are pretty good you haven’t heard about Tencent. But the company has become one of China’s Internet giants and, in the process of doing so, it has also become the world’s largest game company.
The Shenzhen, China-based company said today that its revenues were $3.65 billion in its first quarter ended March 31. That was up 22 percent from a year ago, while non-GAAP profit was $1.16 billion, up 37 percent from a year earlier. In games, Tencent holds big stakes in companies such as Riot Games, the maker of League of Legends; Activision Blizzard, the maker of Call of Duty and World of Warcraft; and Epic Games, the maker of the Unreal Engine.
Profit growth slowed from previous quarters, but it is still pretty enviable, and the stock price is up.
Ma Huateng, the chairman and CEO of Tencent, said in a statement, “During the first quarter of 2015, we continued to expand our mobile user base and improve our engagement with users while delivering solid financial results. Our key mobile properties extended their leadership in China and continued to broaden user activities from social and communications to gaming, entertainment, media content, payment, and beyond.”
He added, “Driven by mobile-social and video advertisements, our total advertising revenue more than doubled year-on-year. Our Red Envelope gifting initiative spurred increased adoption of our payment solutions and boosted total payment volumes. Looking ahead, we aim to bring further technology benefits to users through our ‘Internet +’ strategy of connecting users with services in various vertical industries through collaboration with a broad range of partners.”
Tencent’s “value-added services” revenue was up 29 percent to $3.0 billion. Online game revenue grew 28 percent to $2.14 billion, with revenue growth driven by a diverse portfolio of smartphone games.
Revenues from PC client games also contributed to the increase, driven by growth in key genres. Social networks revenues grew by 32 percent to $856 million.
The increase primarily reflected revenue growth from in-game item sales within mobile platforms and higher subscription revenues from QQ Membership, Qzone, and digital content subscription services. Online ad revenue grew 131 percent to $439 million. Total cash was $4.08 billion, down 26 percent due to strategic investments.
During the quarter, Tencent partnered with the NBA to bring basketball video streams and other digital content to Chinese users. Tencent’s smartphone monthly active users for its QQ service was 603 million, up 23 percent from a year ago. The combined monthly active users for its Weixin and WeChat services were 549 million, up 39 percent.
The Qzone service had 668 million users, an increase of 4 percent. During the quarter, Tencent invested in U.S. game company Pocket Gems and Europe’s Miniclip.
Riot’s League of Legends, the most popular PC online game in world, saw a healthy year-over-year increase, Tencent said. FIFA Online 3 also contributed to revenue growth with more in-game micro-transactions, including sales of player cards.
Revenues from smartphone games were more than $700 million, up 82 percent from a year ago. That makes Tencent the largest publisher of mobile games in China, the company said. Popular genres include quiz show and shooting games, and top titles include licensed titles such as I Am MT2, Infinity Blade Saga, Carrot Fantasy 3, Naruto, and the mobile version of DNF.
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