Tencent’s Mobile Revenues Rise 2% Quarter-Over-Quarter to $123.7M

As revenue growth from traditional paid mobile services like SMS slows down, China’s Tencent plans to spend more on developing its own in-house mobile games and apps (like the Instagram clone pictured above).

Mobile revenue rose 2.1 percent quarter-over-quarter to $123.7 million, the company said in its earnings statement today. Tencent said mobile social networking and gaming was mostly responsible for that increase as revenue from bundled text-message plans held steady. Growth slowed in part because carrier China Mobile introduced a new service cancellation policy, which will continue to have a dampening effect for the “foreseeable future,” the company said in a statement today.

To jumpstart growth, Tencent said it’s investing heavily in creating suites of apps and games that will have broad appeal to Chinese consumers. “Although these mobile platforms generally do not generate revenue at the moment, they are highly popular among users, and we believe business models will emerge in the future,” the company said.

Tencent already has its own take on many of the best-known app and gaming genres in the West on the iPhone and Android devices. Considering its roots and reach with its instant messaging client, QQ unsurprisingly has a group messaging app (shown below). It’s the most popular free iOS app in China at the moment and it also has at least 1 million installs in Android Market.


Tencent also makes casual social-mobile games like QQ Restaurant (pictured below) which should be familiar to anyone who has played Storm8’s Restaurant Story, Playfish’s Restaurant City or TinyCo’s Tiny Chef.

But compared to games, basic utility apps like Tencent’s Kindle-like Reader or group messaging are by far the company’s most popular creations. The company’s also trying to reach deeper into the Android platform, which may see north of 15 million shipments in the country this year. It paired with Huawei last year to launch a series of Android-based HiQQ phones that came preloaded with more than a dozen Tencent applications. Today’s earnings statement made no mention of those devices so it’s hard to gauge their actual performance in sales. 

Tencent’s shift in strategy is happening as access to the mobile web in the country becomes commonplace. There are an estimated 317.7 million wireless Internet users in the country, according to the government agency Chinese Internet Network Information Center. But the market is quickly becoming saturated; the number of mobile Internet users is up by only 14.8 percent from a year ago compared to a 78 percent growth rate the year before.

Overall, Tencent’s second-quarter net income rose 21.3 percent to 2.34 billion yuan or $365.2 million. Revenues rose 44.3 percent year-over-year to 6.74 billion yuan or $1.05 billion. Shares rose 3.7 percent to 190.90 Hong Kong dollars or $24.46, giving the company a market capitalization of $44.9 billion.