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Tencent went public on June 16, 2004, and released its first financial report on August 19 of the same year. Ma Huateng, chairman and CEO of Tencent, said, "We will work hard to develop our IM (instant messaging) service from a pure communication tool to a platform that integrates services and marketing". 20 years later, on August 14, 2024, Tencent released its latest financial report. New businesses such as video accounts and mini programs are independent and support the backbone of Tencent together with traditional cash cow businesses such as games. The company achieved revenue of 161.17 billion yuan, a year-on-year increase of 8%. The net profit under non-IFRS standards was 57.313 billion yuan, a year-on-year increase of 53%, allowing Tencent to increase its net profit by more than 50% for two consecutive quarters.

Gaming resumes growth

When the second quarter 2024 financial report was released, Tencent was much more low-key and no longer emphasized the V-shaped curve. In fact, whether it is revenue or net profit under non-IFRS standards, Tencent maintained growth in these three months.

According to the latest financial report disclosed on August 14, Tencent's revenue in the second quarter of 2024 was 161.17 billion yuan, an increase of 8% year-on-year and 1% month-on-month; net profit under non-IFRS standards was 57.313 billion yuan, an increase of 53% year-on-year and 14% month-on-month. In 2024, this figure increased by more than 50% year-on-year for two consecutive quarters.

If the annual interval is used, the increase in net profit is more obvious. From the second quarter of 2023 to the second quarter of 2024, the year-on-year growth of Tencent's net profit under non-IFRS standards in its five financial reports was 33%, 39%, 44%, 54% and 53% respectively. "The profitability is eye-catching, mainly because Tencent continues to focus, requires its businesses to be self-sufficient, and cuts off projects that continue to lose money. The net profit data is a quantitative performance," said Li Jinqing, an analyst at Bida, to a Beijing Business Daily reporter.

From the perspective of specific business segments, the performance of games, advertising and WeChat businesses is relatively outstanding. Among them, Tencent's domestic game market revenue has resumed growth, and overseas market game revenue has continued to grow. Both domestic and overseas market revenues increased by 9% year-on-year. Tencent management said that this was mainly due to the increase in user participation in many evergreen games and the successful release of several new games.

Specifically for each business, international game revenue grew to 13.9 billion yuan. The quarterly average daily active account number of Brawl Stars hit a record high, ranking third among international mobile games in terms of daily active accounts, and revenue increased by more than 10 times year-on-year.

Game revenue in the domestic market increased by 9% to 34.6 billion yuan, among which "Honor of Kings" and "Peace Elite" both resumed year-on-year growth in the second quarter. The average daily active accounts of the "Naruto" mobile game in May reached 10 million, and the revenue of "Valorant" increased.

During the same period, social network revenue increased by 2% year-on-year to 30.3 billion yuan, "due to the increase in paid membership income for music and long video, as well as the increase in service fees for small game platforms and sales of virtual props for mobile games, which was partially offset by the decline in revenue from music live broadcast and game live broadcast services," Tencent explained.

Video account commercialization is accelerating

The online advertising business achieved 29.871 billion yuan in the second quarter of 2024, a year-on-year increase of 19%, which was mainly driven by the revenue growth of video accounts and long videos. Due to the reduction of advertising budgets of some Internet service companies, the revenue of the Mobile Advertising Alliance decreased year-on-year.

Through user data, we can see the growth of new products such as mini programs, mini games, and video accounts.

In the second quarter of 2024, the combined monthly active account numbers of WeChat and WeChat increased to 1.371 billion, and the monthly active account numbers of QQ mobile terminals reached 571 million. The user time of WeChat Mini Programs increased by more than 20% year-on-year, and the transaction volume facilitated by Mini Programs achieved double-digit year-on-year growth. Among them, the monthly active users of mini games are 500 million, and the user usage time continues to grow. The total turnover of mini games has increased by more than 30% year-on-year. The mini game platform has served more than 400,000 developers, of which more than 240 games have a quarterly turnover of more than 10 million yuan. The total user usage time of the video account has increased significantly year-on-year.

The financial technology and enterprise service business reflects Tencent's toB capabilities to a certain extent. In the second quarter of 2024, the revenue of this segment increased by 4% year-on-year to 50.44 billion yuan, of which the growth rate of financial technology service revenue slowed to a low single-digit percentage, and the growth rate of commercial payment revenue slowed further. At the same time, due to the strengthening of risk control measures, consumer loan service revenue declined, while financial management service revenue achieved double-digit growth. The revenue of the enterprise service business achieved a growth rate of more than ten percentage points, which was mainly due to the growth of cloud service business revenue (including the commercialization of enterprise WeChat) and the growth of technical service fees for video account merchants. At the product level, in the second quarter, Tencent launched Yuanbao, an intelligent assistant for the public, with functions including long text intensive reading, text-generated pictures, and picture-generated 3D.

Two 117 million

Digital content has not been presented independently in Tencent's financial reports, and the second quarter of 2024 is no exception. But coincidentally, in the second quarter of 2024, the number of Tencent Video paid members increased by 13% year-on-year to 117 million, and the number of Tencent Music online music paid users increased by 17.7% year-on-year to 117 million.

Specifically, Tencent Video launched a number of popular TV series in the second quarter, including "Celebrating Yu Nian Season 2" and "Journey to the West", both of which are adapted from Yuewen's online literature IP, produced by New Classics Media, and broadcast on Tencent Video. "Through self-made TV series adapted from Yuewen's IP, Tencent Video has achieved a significant increase in the number of viewers and paying members," Ma Huateng emphasized.

The "upstream IP + downstream production" linkage model also boosted China Literature's performance. According to the latest financial report released by China Literature not long ago, the company achieved revenue of 4.191 billion yuan in the second quarter of 2024, a year-on-year increase of 27.7%; net profit under non-International Financial Reporting Standards was 702 million yuan, a year-on-year increase of 16.4%.

When communicating with a reporter from Beijing Business Daily, Wang Qinglin, manager of Ruidaheng Research Institute, interpreted this strategy, "The idea of ​​​​Yuewen's IP operation seems to be relatively successful at present. However, there is a certain degree of randomness in this part. Whether we can continue to do a good job in IP operation and stabilize the way of creating popular products in the future, there will be a certain degree of uncertainty."

It is worth mentioning that on the day the financial report was released, Tencent recalled what has changed and what has remained constant in the 20 years since its listing.

"In the 20 years since its listing, Tencent has undergone four organizational structure changes. Since 2018, it has invested a total of 302.6 billion yuan in research and development just to cope with the ever-changing opportunities and challenges," Tencent concluded.

“Yes, competition is fierce, but growth is also fun. The Olympics emphasizes that every second counts, and a good company needs to travel through time. The three-month financial report is a pressure, but also a motivation. If you have seen the wind and waves, you will know that the Red Sea is only 438,000 square meters, and the rest of the sea is blue.” 20 years of ups and downs ended with this sentence.

Beijing Business Daily reporter Wei Wei