Impact: Tecent is a Shenzhen-based game and social media company with four key divisions: 1) Internet Value Added Services (IVAS), which includes online games; 2) Mobile Value Added Services (MVAS) which includes mobile games; 3) Online Advertising and 4) the new category for 2012, e-commerce transactions. Tencent has fairly successfully weathered an industry-wide slowdown in ad revenue within the Chinese market – a fairly serious trend for a company heavily vested in web portals. Online advertising revenue was up 70% for the year. Another major growth area for Tencent was their Internet online games revenue in their IVAS business. Revenue for online games was up 44% to $3.5 billion making Tencent far and away the largest revenue generator for PC games. Tencent does not report mobile game revenue, but their MVAS division under which mobile games is reported grew 14% to $572 million.
Tencent is profiting significantly from the revenue coming in not just from League of Legends, but many other online games that are not well known outside of China. The company has a long-time association with Korean game publishers, notably NCsoft, and has done very well licensing Korean titles for the Chinese market. Rumors often swirl in Chinese media naming Tencent as a likely new partner for Blizzard’s World of Warcraft if relations with Netease sour.
The other recent money-maker for Tencent has been e-commerce revenue as the firm expanded its reach from Eastern China to Southern China, with plans set for an expansion into the northern portion of the country in the near future. Tencent also has an impressive mobile strategy. Instead of jumping into the crowded competition for low-margin mobile content, the company is pushing fast and hard into social networking and communication with WeChat, which already has 300 million users in China. The Chinese technology as well as digital entertainment market continues to evolve at a lightning pace, and companies like Tencent are taking savvy steps to keep up while growing huge in the process. Now the question for Tencent, like most successful Asian companies is whether they can expand into North America and Europe. Given there willingness to spend on established Western products they are definitely a major player to watch.