Recap: Tencent did very well in the three months ending in June, after a regulatory freeze in China was lifted earlier this year. The Chinese giant was able to revive its gaming business and saw a significant uptick in daily active users, who brought in enough revenue to compensate for other areas like advertising that didn't do as well.
The Chinese tech giant posted its latest financial report this week and it looks like the gaming arm has propelled it beyond analyst expectations. The net profit registered over the second quarter of 2019 was over 24.5 billion yuan ($3.5 billion), a healthy 35 percent increase over the same period last year.
Revenue growth saw a more modest result, with the company's overall revenue adding up to almost 89 billion yuan ($12.9 billion). This is just a 21 percent increase year-over-year, and can mostly be attributed to increased competition in the advertising space from ByteDance. That said, ad revenue saw a 23 percent increase year-over-year, which is still a formidable result.
Interestingly, PC gaming revenue saw a small, 9 percent dip to 11.7 billion yuan ($1.7 billion). The Shenzhen-based company is still feeling the effects of the Chinese regulatory freeze on new-game approvals that started in early 2018 and stretched onto the early months of 2019.
Once the approvals were resumed though, Tencent released 10 games in the span of three months, compared to just one during the last period of last year. It's worth noting that all of them follow the free-to-play business model, which means Tencent won't make any money upfront but will instead try to turn them into cash cows as and if they explode in popularity.
The company says "League of Legends cash receipts increased year-on-year driven by popular esports-themed skins," and the introduction of autochess spinoff Teamfight Tactics drew in more users who stayed active for longer periods every day.
To get an idea of how powerful Tencent in the global gaming sphere, Peacekeeper Elite alone has over 50 million daily active users just a few months after launch, the company also owns a stake in Fortnite developer Epic Games, not to mention its involvement as a publishing partner for PUBG Mobile.
Tencent still has reasons to worry about a global slowdown in mobile gaming, so it spent 26 percent less on marketing than it did on the same period a year ago. Nevertheless, the company made a big bet with its PUBG Mobile clone Peacekeeper Elite which is now starting to pay off, with mobile revenue up 26 percent year-over-year to over 22 billion yuan ($3.2 billion).
To get an idea of how powerful Tencent in the global gaming sphere, Peacekeeper Elite alone has over 50 million daily active users just a few months after launch, the company owns a stake in Fortnite developer Epic Games, not to mention its involvement as a publishing partner for PUBG Mobile.
Tencent is also working on forging partnerships with companies like Qualcomm – who make the processors found on a big percentage of smartphones – to ensure its games work on as many devices as possible, particularly those at the lower end. It's also making strategic investments to cover more niches, such as retro game streaming services.