Tencent profits drop 13% as media ad revenue suffers

Tencent’s media advertising revenue fell by 23% in the third quarter, contributing to a 13% drop in the tech giant’s profit to 20.38 billion yuan (US$2.91 billion).

It was Tencent's lowest quarterly profit this year and its first profit fall since the fourth quarter of 2018.

China's biggest gaming and social media company had a mixed quarter for revenue in the three months ended 30 September in both its advertising and gaming divisions.

While media advertising revenues were down 28% year-on-year to 3.7 billion yuan ($399 million) due to lower sponsorship advertising revenues, social and other advertising revenues accelerated 32% to 14.7 billion yuan ($2.1 billion) in the quarter. Online advertising revenues grew 13% to 18.4 billion yuan ($2.6 billion), as strong advertiser demand from the games, education, and ecommerce verticals offset weakness from the automobile sector, the company said.

In its core value-added services (VAS) segment, a 25% year-on-year increase in smartphone games revenue to 24.3 billion yuan ($3.5 billion) was partly offset by a 7% drop in its PC games revenue to 11.5 billion yuan ($1.6 billion).

Revenues from its suite of social networks, which includes WeChat, QQ and Qzone, increased by 21% to 22 billion yuan ($3 billion), which it said was mainly driven by greater contributions from services such as live streaming, video streaming subscriptions and music streaming services.

Subscription revenue increased 11% year-on-year to 170.6 million yuan ($24 million), mainly attributable to video and music subscriptions. Tencent Video subscriptions grew 22% year-on-year to 100.2 million ($14.2 million), while music subscriptions increased 42% year-on-year to 35.4 million ($5 million).

Revenues from fintech and business services (such as its cloud business) increased by 36% to 26.8 billion yuan ($3.8 billion) for the third quarter.

Total revenue rose 21% to 97.2 billion yuan ($13.8 billion) but was short of analyst expectations.