Tencent Revenues Up in Q3 Despite Slowing Growth in Older Social Games

Chinese internet portal and social game platform Tencent announced an 11% increase in revenues for Q3 calendar 2011, up to 7.4 billion RMB (1.1 billion USD) from Q2. Year-on-year, this is a 43% from Q3 2010’s 5.2 billion.

The bulk of the growth comes from Tencent’s “internet value added services” segment, which accounts for many of the platform’s online and social games available via the platform’s five gaming portals — Pengyou, Tencent Microblog, QQ Games, Q-Zone and Q+. In particular, the company highlights the games Cross Fire, QQ Dancer, Dungeon and Fighter, QQ Game, QQ Speed and League of Legends. Tencent reports that revenue growth for the segment is slowing down as its long-running social games QQ Farm and QQ Ranch approach their traffic peaks and overall growth in Chinese internet users flags. Going forward, Tencent intends expand its open platform initiative by investing in social networking site Kaixin001, which offers a Friends for Sale social game as well as a farm sim.

In the last year, Tencent has been broadening its third party offerings through publishing partnerships with Zynga and other unannounced partners to bring popular Western social games to its portals. CityVille was the first of these games that we know about, arriving on Tencent’s Pengyou platform as Zynga City. The developer faces competition from other Chinese social networks looking to sign on Western developers like RenRen and its deal with PopCap Games to publishing a hyper-localized social network version of Plants vs. Zombies. There may also be challenges in connecting with Western developers due to misunderstanding around Tencent’s platform restrictions and rules.