Thursday, May 14, 2009

Tencent earned $366.4 million in Q1, net up 94%

Chinese Internet portal operator Tencent Holdings Ltd. said Wednesday its first-quarter net profit rose a better-than-expected 94% from a year earlier on higher revenue from Internet services. This figure breaks down into $278 million strictly from sales of Internet virtual goods and related services and $64.3 million from mobile sales of virtual goods and services. The remainder of Tencent's revenue, about $21 million, is accounted for by advertising.

But Tencent warned its performance this year will be hurt by the global slowdown. The company said it expects the economic environment to remain challenging in the midst of the global recession. "Our online advertising business would continue to be affected by the economic slowdown as advertisers remain cautious on their spending for 2009," Chairman and Chief Executive Ma Huateng said in a statement.

It should be noted that the huge increases reported in the Internet and mobile virtual goods categories may be affected by seasonal changes in consumer behavior patterns. Chinese New Year and student winter break periods bring major increases in spending on Tencent's QQ value-added services. For strictly game-related value-added services, Cross Fire, QQ Dancer, and Dungeon and Fighter all posted positive revenues and gains in numbers of users. Exact amounts were not disclosed.

Looking ahead to Q2, Tencent expects to see virtual goods sales decline as a result of seasonality while the advertising segment is expected to improve somewhat. Generally, though, Tencent expects users to continue spending a lot of time online.

So long as users are on the Internet in their day-to-day lives, then Tencent believes it has ample opportunity to engage users and encourage them to spend on virtual goods and other services.

Originally Posted: China Business Daily
Author: Angulo Fu