Staff Reporters
Nov 17, 2023

Alibaba and Tencent's earnings boosted by growth in generative AI advertising innovations

Chinese tech giants Alibaba and Tencent both report strong growth across the ad sectors, after integrating generative AI in their solutions for advertisers.

Alibaba and Tencent's earnings boosted by growth in generative AI advertising innovations
Alibaba reported a year-over-year revenue (YoY) increase of 9%, reaching RMB 224.8 million (US$30.8 million) in the quarter ended September 30, 2023. 

Alibaba's advertising and commerce sectors, particularly through its Taobao and Tmall platforms, have both shown growth, with a significant increase in user engagement which Alibaba attributes to the company’s efforts to enhance content, especially short-form video content. The number of transacting buyers and order volume also increased, after Alibaba changed its user engagement strategies, according to the earnings release by the tech giant.

Alibaba has also integrated AI tools to improve user experience and seller efficiency. The Wanxiangtai Unbounded Edition advertising platform is a notable example, offering AI-driven data analysis and marketing tools for advertisers, which Alibaba claims have improved merchant ROI. 

Alibaba’s community and marketplace platform Xianyu witnessed a daily active users increase of over 20% YoY. Its revenue streams, including advertising and value-added services, have also shown rapid growth. 

The company’s digital media and entertainment group reported an 11% increase in revenue YoY, amounting to RMB5,779 million (US$792 million). Alibaba said this growth is driven by the strong performance of offline entertainment businesses and an increase in subscription revenue. 

Alibaba said the acquisition of Damai by Alibaba Pictures and the collaboration between Damai and Youku are examples of strategic moves to enhance their position in the offline and online entertainment sectors. 

"Alibaba Group delivered a solid quarter, marked by renewed momentum and energy across multiple businesses as a result of our strategic reorganisation. As we embark on a new phase of development, we have clearly defined our strategic focus and priorities,” said Eddie Wu, chief executive officer of Alibaba Group. 

“We will maintain an entrepreneurial mindset. We are committed to investing for growth and making bold decisions where necessary. Through a more flexible organisational governance mechanism, we aim to capture brand new opportunities from the ongoing AI technological transformation and create more value for our customers,”  

Alibaba’s Q3 earnings are its first after former CEO Daniel Zhang suddenly exited in September, which saw Wu—an experienced executive—take the helm as CEO and Joe Tsai, a co-founder of the company, assume the role of chairman. 

Tencent earnings

Tencent has also reported a 10% year-over-year increase in total revenues, reaching RMB154.6 billion (US$21.5 billion). 

Overall revenue for Tencent’s value-added services such as online advertising and business grew by 4% YoY to RMB75.7 billion (US$10.4 billion). 

Tencent’s online advertising experienced a 20% YoY increase, reaching RMB25.7 billion (US$3.5 billion), driven by advertisers’ demand for its video accounts, mobile ad network, and Weixin Search, with notable growth in the local services and FMCG categories. 

The company has also expanded its advertising AI models and introduced generative AI tools for advertisers, allowing dynamic generation of advertising visuals from text prompts. 

Tencent is enhancing its AI proprietary foundation model, Tencent Hunyuan, for broader application in products and services. 

WeChat revenue remained stable at RMB29.7 billion (US$4 billion), supported by growth from music subscriptions, mini games platform service fees, and app-based game virtual item sales. However, there were revenue declines from music-related and games-related live streaming services. 

Tencent also reported total video views on WeChat video accounts surged over 50% YoY and music subscriptions rose by 21% YoY to 103 million, with a notable increase in average revenue per user. 

For gaming, Tencent saw a 14% increase in revenues for its international games division, with titles like PUBG Mobile and Valorant making significant contributions. 

Meanwhile, domestic games’ revenues grew by 5% to RMB32.7 billion (US$4.5 billion), driven by new launches and strong performance of existing titles like Lost Ark and Valorant, as well as increased revenues from evergreen titles such as Honour of Kings and Dungeon Fighter Online. 

Tencent also reported it published four out of the seven game titles included in the 19th Asian Games, marking eSports' debut as a medal event. 

“During the third quarter of 2023, we achieved solid and high-quality revenue growth, notable margin expansion, and structural operating leverage. Relatively new services such as video accounts and mini games contributed high margin revenue streams while we re-focused away from less-scalable activities,” said Ma Huateng, chairman and CEO of Tencent. 

“We are increasing investment in our AI models, providing new features to our products and enhancing our targeting capabilities for both content and advertising. We aspire to position our leading AI capability not only as a growth multiplier for ourselves, but also as a value provider to our enterprise customers, and the society at large.” 

 

Source:
Campaign Asia

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