Tencent Profits on Online Games as Advertising Revenue Surges

Shenzhen-based Tencent, Asia’s second-largest internet company after Alibaba, posted a 25 per cent increase in net profit to 7.3 billion yuan last quarter, up from 5.8 billion yuan in the same period previous year.

That’s 19% more than a year earlier, and less than the 24 billion yuan average of 16 analyst estimates compiled by Bloomberg News.

On one hand, sales at its core smartphone games business slowed down.

“We believe there is ample room for growth in mobile games in China”, said Chief Strategy Officer James Mitchell during a conference call with analysts Wednesday.

Tencent, which operates China’s most popular messaging app WeChat, has recently ramped up online ads, following the lead of U.S. social media peer Facebook Inc (FB.O). Online-games revenue in the second quarter was “a bit disappointing”, he added.

Since last year, Tencent has been pouring resources into getting more people to use Tenpay.

Earlier this month, Tencent proposed to buy the shares of mobile and online travel services provider eLong that it still did not own and take the Nasdaq-listed firm private. It’s also focused on improving content and building partnerships for its subscription services such as e-reading, video and music, and driving volumes over its integrated payments services.

To process more mobile transactions, Tencent has invested in a number of mobile apps and other services that connect online users with bricks-and-mortar services.

According to various media reports, Chinese web giant Tencent revealed yesterday that its WeChat messaging app now has 600 million monthly active users (MAUs) which is a big step up from 549 million MAUs in Q1 2015, and up from 438 million one year ago at Q2 2014.