In 2020, we know almost every company has a tough year due to COVID-19 impact. But, Tencent is an exception.
The offline business is accelerating to migrating to online platform, and the offline lifestyle is replaced by online digital lifestyle in the epidemic period. For example, users video calling with friends through Wechat, playing online games, such as Honor of Kings, is more popular than ever before, and Tencent Meeting has become daily needs for business conference in China.
According to statistics, the users’ 36.2% time spent on apps in China is captured by apps of Tencent. In 2020, the digital ecosystem of Tencent has reshaped every one’s lifestyle in China.
Actually, from the successful digital ecosystem, Tencent has a massive and highly engaged user base from different area.
The most important part is the communication& Social, which is the basic foundation to provide large user traffic to the different services in the digital ecosystem.
For example, Weixin has evolved from an instant messaging app to a service meeting the digital needs of over 1.2 billion users. Each day, more than 120 million users post in Moments, 360 million users read Official Accounts articles and 400 million users access Mini Programs. SMEs and brands increasingly connect with users via Mini Programs and Weixin Pay, and annual transaction volume generated from Mini Programs more than doubled year-on-year in 2020.
Users are increasingly uploading personal videos, and sharing them with friends, in Weixin Moments and chats. They can now share informative videos publicly through our product innovation – Video Accounts. Video Accounts also enable brands and enterprises to broaden their audience reach and drive transactions, especially via links to Mini Programs
QQ focused on enhancing interactive experiences in vertical communities and increased stickiness among young users by enriching communal experiences such as playing AI-powered social games and watching Tencent Video together in video calls. QQ’s video and image feed services, Mini World, increased its user engagement as QQ added hashtag feature and initiated trending topics that resonate with Generation Z. QQ launched joint promotions and celebrity eSports events for Tencent popular games such as Honour of Kings and Call of Duty Mobile.
If we dive into the business model, we can find that there are four main businesses contributed the revenue streams.
In 2020, the largest business part is the online game. Tencent strengthened global leadership in mobile and PC games via self-developed franchises and IP collaboration with partners and investee companies. Tencent online game leadership spans multiple genres, including MOBA, shooter and MMORPG, as well as multiple platforms, including mobile and PC.
For example, Honour of Kings was the top-grossing mobile game worldwide for the second consecutive year and continued as the most popular mobile game in China by MAU. League of Legends attracted over 45 million peak concurrent viewers for its 2020 World Championship Finals, setting a record viewership for a games eSports event. The rollout of League of Legends’ mobile version, Wild Rift, further expanded its franchise user base. PUBG Mobile ranked as the most popular mobile game in international markets by MAU for the second consecutive year, according to App Annie. The PUBG Mobile Global Championship became the most viewed eSports tournament of mobile games.
2. Fintech and Business Services
Tencent FinTech business is to work closely with regulators and collaborate with industry partners to deliver compliant and inclusive FinTech products, such as LiCaiTong, WeSure, WeLiDai, etc. As consumption rebounded and payment digitalization accelerated, Wexin payment transaction volume increased healthily year-on-year, driven by more daily active consumers and higher payment frequency in multiple verticals, such as retail, public services and groceries. Tencent commercial take rates remained stable. For wealth management service, aggregated customer assets grew robustly year-on-year.
Tencent invested in IaaS technology, including customized “Star Lake” cloud server solutions and self-developed data centre technology “T-block”, to enhance Cloud Services’ performance and cost efficiency. Tencent is aim to leverage communication and productivity strengths while working with partners to upgrade PaaS and SaaS solutions, such as Smart Retail, Smart Healthcare, Smart Transportation, Smart Education, etc.
3. VAS: Digital Content
Tencent fee-based VAS subscriptions grew 22% year-on-year to 219 million. Tencent are the leader in the long form video industry with 123 million video subscriptions, benefitting from the release of popular anime IPs and drama series. Tencent have extended IP value across literature, anime, games and long form video services to create appealing content and attract paying users. Tencent are also building vibrant short form video communities to encourage interaction between viewers and creators, and to deliver knowledge-based video content. The mini drama series showed on Weishi gained great popularity, generating billions of video views and social media posts. Tencent sustained music subscription growth with the pay-for-streaming model. At China Literature, Tencent have sought to enrich free and paid content, community features and an IP-centric ecosystem.
4. Online Advertising
Tencent has the largest and diversified advertising platforms, and strengthen mobile advertising network as preferred choices for advertisers. For example, In Weixin Moments, we enabled performance-oriented advertisers to link their advertisements to Mini Programs, boosting their sales conversion. Our mobile advertising network offered customised in-app advertising solutions, ramping up in-game advertising revenue from third-party game companies and Internet services providers.
All of these businesses based on the digital ecosystem makes great financial results in the end. As Tencent digital ecosystem reshaped most Chinese people lifestyle in 2020, the 2020 financial performance is splendid.
The revenues and gross profit grew at around 30% in 2020, and the net profit grew more than 70% due to the fair change of the investment.
If we span the four business segments by quarters, we can see that all the four business grew QYQ in the last three year, that means these business has great synergies in Tencent digital ecosystem.