World News: 13:12 GMT Wednesday 14th August 2019. [Yahoo Business News Feed via SPi World News]
(Bloomberg) -- Tencent Holdings Ltd.’s comeback is taking a little longer than expected.China’s leading social media and gaming company posted disappointing revenue growth after rivals like ByteDance Inc. siphoned off advertising. Online ad revenue grew a worse-than-expected 16% as the internet wunderkind undercut Tencent’s efforts to load more ads into its WeChat super-app.The social media giant is trying to bounce back from a horrendous 2018, when a regulatory clampdown walloped its marquee games business. While regulators are again green-lighting games after last year’s freeze -- including Tencent’s breakout hit of 2019, Peacekeeper Elite -- they’re doing so at a slower pace. The emergence of a formidable competitor in ByteDance, the world’s most valuable startup, has also exacerbated the cooling effect on marketing spending of a sputtering Chinese economy.“Tencent’s advertisement revenue was disappointing, partly due to competition from ByteDance,” said Canaan Guo, an analyst at Pacific Epoch. “Even though WeChat increased its ad inventory, it wasn’t able to fully sell its ad space because it charges more than rivals.”Shares in Naspers Ltd., which as Tencent’s biggest shareholder is a proxy for the Chinese company when Hong Kong is closed, slid 2.8% in Johannesburg. Tencent reported revenue of 88.8 billion yuan ($12.7 billion), lagging the 93.4 billion yuan average analyst estimate. While sales of social media ads and “others” jumped 28%, media ad revenue slid 7% because of unexpected delays in the airing of certain drama series.Click here for a Live Blog on Tencent’s resultsTencent blamed “the challenging macro environment and increased supply of short video advertising inventories across the industry,” according to its exchange filing. “We expect the negative impact from the current business environment will persist in the second half of 2019.”Tencent can still accelerate growth, riding Peacekeeper Elite as well as older, durable titles such as Honour of Kings. It released 10 games in the second quarter. To fend off ByteDance, it’s adding content and services to its WeChat social media super-app, partnering with the likes of Q&A platform Zhihu and funneling more of its 1 billion-plus users to mini-programs -- lite apps that offer third-party services from ride-hailing and food delivery to bike sharing. WeChat, the ubiquitous messaging service that acts as a gateway to those activities, grew users 7% to 1.1 billion.“We expect gaming revenue to re-accelerate starting from the second quarter onward,” said David Dai, a Hong Kong-based analyst at Bernstein, adding this would also drive an acceleration of overall revenue.Net income rose a better-than-expected 35% to 24.1 billion yuan in the three months ended June, but that was boosted by gains of more than 4 billion yuan partly from the rising valuation of investees. The company is one of China’s most prolific tech investors, and in past years has acquired slices of major startups from ride-sharing giant Didi and on-demand services firm Meituan to video site Kuaishou. Hunkering down for tougher times, selling and marketing expenses dived 26%.Some of Tencent’s younger divisions came through. The fintech and business services group -- a newly formed unit that includes cloud and payments -- grew revenue 37% to 22.9 billion yuan. Its Licaitong wealth management platform, which competes with rival Chinese billionaire Jack Ma’s Ant Financial, had accumulated 800 billion yuan of customers assets by the end of June.The company however still derives the lion’s share of its revenue from gaming. Tencent’s biggest hit of 2019 -- bereft of much of the violence typical of duel-to-the-death titles, to appease regulators -- is expected to generate $1 billion in revenue by the end of the year, according to gaming consultant Niko Partners. It pays tribute to China’s air force and Tencent sought out the country’s military recruitment arm for advice during development. It’s snagged more than 50 million daily active users since the title launched, Tencent said.The game should have brought in $49 million of revenue in May and June, or about two thirds of the revenue generated by long-time favorite Honour of Kings, Bernstein’s Dai said. He estimates that Tencent’s gaming revenue growth could surpass 20% in the third and fourth quarters.Shares of Tencent rose 1.8% in Hong Kong before earnings were announced. Adjusted earnings per share were 2.46 yuan, surpassing the 2.39 yuan average projection.To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Peter Elstrom at email@example.com, Edwin Chan, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
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