According to Futu News, after trading on March 21, 2018, Tencent released its fourth-quarter financial results and annual report for the whole year, in which fourth-quarter income and net profit continued to grow at a high speed.
According to the financial report, for the fourth quarter ended December 31, 2017:
Income is663.92RMB 100 million (same as below)Year-on-year increase51%；
The net profit is208100 million yuanYear-on-year growth98%Under non-generic accounting standards, the net profit is175100 million yuanYear-on-year growth42%。
The annual results for 2017 are as follows:
Annual income is237.76 billion RMB(same as below), year-on-year growth56%；
Full-year net profit is715.1100 million yuanYear-on-year growth74%. Under non-universal accounting standards, the net profit is651.26100 million yuanYear-on-year growth43%。
Tencent's annual report revealsRevenue from PC client games increased 13% year-on-year to about 12.8 billion yuanMainly benefited from the growth of "Dungeon & Fighter" and "League of Legends". The number of active users declined due to the overall transfer of users to mobile terminals, while revenue was affected by a decline in virtual props sales promotion activities in the fourth quarter of 2017.Smartphone gaming revenue rose 59 per cent year-on-year to about 16.9 billion yuan. The number of active users remained robust, while ARPU decreased month-on-month.
The user base of Wechat and WeChat has further increased, with the combined monthly active user accounts of Wechat and WeChat exceeding 1 billion after the Spring Festival.. Since the launch of Mini Program in January 2017, we have continued to enhance the functions of Mini Program to make it easy for users to detect and facilitate the development process. Mini Program connects users with a wide range of online and offline services, including retail, e-commerce, life services, government affairs and people's livelihood and games. In particular, Mini Game, a subset of Mini Program, has been very popular since its launch in December 2017, further driving the widespread use of Mini Program by users.In January 2018, we have launched 580000 Mini Program, with more than 170 million daily active users.
Ma Huateng, chairman of the board and CEO of Tencent, said:
Tencent implemented a number of important strategic initiatives in 2017, which further consolidated our leading position, and will continue to implement them in 2018. Our video service has become the market leader in China, with the largest number of mobile daily active users and monthly subscriptions. The number of developers and users of WeChat Mini Programs platform is growing rapidly.
Our racing game "QQ Speed Mobile" and shooting game "PUBG: exciting Battlefield" are absolutely ahead in their respective game categories, respectively, and lead to the growth of the number of players in related categories. look into the future,We are significantly increasing our investments in video, payments, cloud, artificial intelligence and intelligent retail, which will have some impact on our profits in the short term, but we believe these investments will bring us long-term value and growth opportunities.」
Analysis of business performance
Social interaction and Communication
-QQ: the number of monthly active users of smart devices rose 1.7 per cent year-on-year to 683 million, while the highest simultaneous online accounts, including personal computers and mobile devices, increased by 11.1 per cent to 270.8 million. The number of monthly active user accounts of smart terminals aged 21 or below increased compared with the same period last year, and their usage time per user also increased, indicating that QQ has a higher viscosity among young users. We introduce artificial intelligence features to create interesting photos, audio and video messages to attract young users. During the Spring Festival, users are encouraged to send short greeting videos to receive red packets, and to use Spring Festival-themed animation and background music to edit personalized greetings.
Qzone: the number of monthly active users of smart terminals decreased by 9.1% to 554 million compared with the same period last year. Campus space further increases the coverage of high schools and universities.
-Wechat and WeChat: the number of monthly active user accounts merged reached 988.6 million, an increase of 11.2% over the same period last year. After the Spring Festival, the number of monthly active user accounts merged exceeded 1 billion. We have optimized the Wechat user interface to better highlight Mini Program. Mini Game, launched at the end of 2017, has won widespread attention and rapid popularity among users.
Network game
PC client game revenue rose 13% year-on-year to about 12.8 billion yuan, mainly benefiting from the growth of "Dungeon & Fighter" and "League of Legends". The number of active users declined due to the overall transfer of users to mobile terminals, while revenue was affected by less virtual props sales and promotion activities in the fourth quarter of 2017. PC-side gaming revenue may still be under pressure in the coming quarter due to the shift of users to mobile terminals. We will enhance the participation of our core users by organizing professional e-sports competitions, promoting breakthrough new games (such as "PUBG" and "Fortnite", etc.), and exploring innovative game types such as "Deep Trek". Continue to develop the PC game franchise, so as to strengthen our platform.
Smartphone gaming revenue rose 59 per cent year-on-year to about 16.9 billion yuan. The number of active users remained robust, while ARPU decreased month-on-month. We launched a new version of the survival category for the shooting game "Mobile Games across the Line of Fire", which greatly expanded the user base, but was not immediately commercialized. This quarter, a number of role-playing games have entered the user consolidation phase, so the revenue has decreased compared with the previous quarter. We have consolidated our leading position in smartphone games by launching new game categories. We have launched two PUBG mobile games, "PUBG: exciting Battlefield", which have so far recorded the highest number of daily active user accounts in the survival shooting category, while the daily active user accounts of "PUBG: the whole Army attack" have also performed well. At present, we are focused on the user experience, and these games have not yet begun to be commercialized. We launched "QQ Speed Mobile" in December, and its daily active user account successfully exceeded 20 million and achieved steady income. The smooth launch of the above mobile games is enough to prove our strength in developing the original game IP, successfully operating on the PC side, and then successfully expanding to the mobile side.
Digital content
Subscription accounts for paid value-added services increased 22% year-on-year to 135 million, mainly driven by video and music services. Tencent Video has become the leading online video platform in China according to the number of mobile daily active user accounts and paid orders. Our mobile video daily active user accounts grew 44 per cent year-on-year to 137 million in the fourth quarter of 2017, while our subscribers grew 121 per cent year on year to 56 million at the end of 2017. With our diversified content strategy and proven operational expertise, our video subscribers further increased to about 62.6 million by the end of February 2018. The copyright combination of China Literature and Tencent games provides rich resources for us to adapt high-quality content into videos. We have also accumulated a reserve of exclusive content, including TV series, films, variety shows, animations, documentaries and music programmes. We are committed to investing in quality content to consolidate our position as the largest and fastest-growing online video platform in China.
Online advertising
Our online advertising revenue is up 49% from a year earlier.
In terms of media advertising, video revenue continued to show strong growth due to popular video content, such as the homemade Arena of Valor-themed variety show "attack of the King" and selected dramas. News revenue fell year-on-year as we were still improving our advertising system this quarter. We have launched a unified advertising platform for all information flow products.
In terms of social and other advertising, the enhanced targeting ability of our platform increases advertising demand, increases the number of advertisers through our partner platform, and enables our advertising revenue to grow year-on-year. Month-on-month growth is mainly due to the peak season of e-commerce. The number of ads displayed in Wechat moments and public accounts as well as in mobile alliance ads has also increased. We are currently testing pay-per-click ad links in public accounts that will allow users to connect to advertisers' Mini Program.
Other
Our other businesses recorded 121% year-on-year revenue growth, mainly driven by strong growth in payment-related services and cloud services. Driven by the doubling of offline business transaction volume compared with the same period last year, WeChat Pay's business transaction volume continues to grow rapidly.
As of the end of 2017, Tencent Cloud's infrastructure covers 21 regions and operates 36 availability zones around the world. While maintaining our leading position in vertical areas such as online games and video, we have also achieved rapid growth in the financial services industry through strategic partnerships with major banks and insurance customers. In addition, we provide smart retail solutions for supermarkets, department stores and FMCG companies.
Summary of corporate strategy
In 2017, we strengthened our "connection" strategy by enriching content and services and promoting user interaction and sharing in innovative ways.
-QQWe focus on introducing entertainment-oriented features that cater to young users, thereby increasing the length of time users spend on smart devices. Our focus information streaming service targets the entertainment-oriented information needs of young users. We have strengthened our content management capabilities and content recommendation algorithms to provide more personalized news flow services and enhance user stickiness. QQ has launched a series of artificial intelligence features to encourage users to interact with entertainment tools in rich media forms, such as face-changing effects and video chat filters.
-Wechat and WeChatThe user base of Wechat and WeChat has further grown, with the combined monthly active user accounts of Wechat and WeChat exceeding 1 billion after the Spring Festival. Since the launch of Mini Program in January 2017, we have been continuously improving the functionality of Mini Program to make it easy for users to detect and facilitate the development process. Mini Program connects users with a wide range of online and offline services, including retail, e-commerce, life services, government affairs and people's livelihood and games. In particular, Mini Game (a subcategory of Mini Program) received an enthusiastic response from users after its launch in December 2017, which further led to the widespread use of Mini Program. By January 2018, 580000 Mini Program had been launched, with more than 170 million daily active users.
We continue to achieve robust growth in our core business segments:
-online gamesThis year, we have once again achieved continued strong growth in both smartphones and PC games. On the mobile side, our self-developed multiplayer online tactical game Arena of Valor has become the most popular smartphone game in China in terms of daily active user accounts. The game has always been at the top of the list of total revenue of all app stores in China. With the launch of the overseas version of the game "Arena of Valor" in Southeast Asia, we have achieved some initial success. We have further strengthened our leading position as a priority distribution partner for domestic and international smartphone game developers in China. We have strengthened our position in this high-yielding type of games through the successful launch of several agent role-playing games. We have also diversified our smartphone game portfolio through the launch of strategic and racing games. On the PC side, in a challenging market environment, we consolidated our leadership position in 2017. We have increased the participation of core users by organizing e-sports competitions and live video events. By obtaining the PC distribution rights and mobile development rights of PUBG, a popular survival shooter game in China, we are ready to further develop this emerging game in 2018, as evidenced by the success of the mobile game PUBG: stimulating Battlefield launched before the Spring Festival.
-Digital contentDriven by the popularity of our solo TV dramas, movies and homemade content, the flow of Tencent videos and the number of paid households have increased rapidly. We have become the leading video streaming platform in China, with more than 137 million mobile daily active accounts in the fourth quarter and more than 56 million subscriptions by the end of 2017. In November, our online literature business (China Literature) was successfully listed on the main board of the Hong Kong Stock Exchange. China Literature operates one of the largest and most diversified online literature content libraries in China. We remain its controlling shareholder and will continue to explore and adapt to other forms of media through its rich and diverse content library. Tencent Music Entertainment operates three of the most popular music apps in China (in terms of daily active user accounts), namely QQ Music, KuGou and National singing. It has increased ordering revenue and achieved strong growth in virtual gift sales. In the field of information stream content and short videos, we upgraded the Tencent content open platform to centralize the content library, making it easy for original content to be published on our news, browsers and social platforms.
-advertisementIn terms of social and other advertising, we use our own artificial intelligence technology and data analysis capabilities to further enhance the user orientation ability of our advertising platform, so that advertisers can achieve a higher return on investment and results. In order to meet the needs of advertisers, we have increased the number of ads placed on Wechat moments in several first-tier cities and lowered the traffic threshold for Wechat public account ads. With the help of our self-service platform and partner platform, the number of advertisers in social advertising has grown strongly. In terms of media advertising, the popularity of our original and licensed video content has promoted traffic growth, user participation, and helped to attract more brand promotion and advertising sponsorship on our video platform. At the end of 2017, we completed the improvement of the news and information flow advertising system and began to resume commercialization. In order to promote the effective allocation of resources by advertisers, we have launched a unified advertising platform, which integrates the advertising resources of all our information flow products.
-payment related servicesWe have expanded our leading position in the field of mobile payments (by the number of active accounts) and further increased our position in the field of commercial transactions. In terms of social transactions, the number of red packets received and sent decreased but the total transaction volume increased compared with the same period last year, and money transfer transactions continued to grow. In terms of business transactions, our offline business transaction volume has more than doubled compared with the same period last year. We have deepened our relationship with our major channel partners and used technology to help more small businesses and improve their operational efficiency. Payment is also an important platform for selling our Internet financial products. Our wealth management platform "LiCaiTong" has accumulated more than 300 billion yuan in assets under management by the end of January 2018. WeBank's unsecured consumer loan business, WeiLiDai, has achieved rapid growth, with a loan balance of more than 100 billion yuan under management by the end of 2017, while maintaining a low non-performing loan ratio. In October 2017, we obtained a license to operate insurance agency business in China and began to work with insurance companies to provide customized insurance products.
-Cloud servicTencent Cloud continues to grow rapidly this year. We maintain a leading market position in the vertical sector of cloud services, including online games and video cloud services. We have deepened our penetration into the Internet industry and won more key customers, expanding our customer base in financial services and government agencies. Our sales, channels and big data capabilities help us provide smart retail solutions for supermarkets, department stores and FMCG companies.
We are committed to investing in artificial intelligence and applying artificial intelligence technology to our existing products, such as performance advertising systems, content services and financial services. In addition to these core business use cases, we are applying artificial intelligence to new areas such as healthcare and translation. We have launched an artificial intelligence-assisted diagnosis and treatment imaging product called "Tencent Miying", which is currently being used in nearly 100 hospitals in China. Our artificial intelligence laboratory has launched an artificial intelligence-assisted translation software. In view of the digital transformation needs of traditional retailers, we have launched an intelligent retail strategy to empower offline retailers with the help of technical capabilities such as payment, cloud, data analysis and artificial intelligence technology. We also provide traffic support to enable merchants to reach our network user base. In addition, Wechat public accounts and Mini Program can be used as retailers' customer relationship management systems to better connect with customers.
Company2018Prospects and strategies for the year
Looking ahead, we will adopt a more aggressive investment strategy to enhance our long-term competitive advantage in areas such as online video, payment services, cloud services, artificial intelligence technology and smart retail. Our development initiatives include:
-strengthen our social platform to encourage users to share, strengthen connections with their daily lives, and promote interaction with ecosystem partners
-increase the popularity of our games by upgrading existing game content and adding innovative new games
-invest in digital content, including long and short video content, to further expand the subscriber base
-expand the usage scenarios of payment-related services to promote universal use by merchants and users, and to develop Internet financial services with partners
-expand our cloud infrastructure and strengthen talent hiring to provide better service to our customers
-invest in artificial intelligence technologies in the fields of advertising targeting, recommendation algorithms and medical care
-use our smart retail strategy and empower offline retailers with our technical services.