How Tencent Makes Money

Tencent is one of China's largest technology companies. Founded in 1998, the corporation is based in Shenzhen with offices across Asia, including Tokyo and Seoul, Europe, including Amsterdam, Berlin, Istanbul, London, and Paris, North America, including Palo Alto, Los Angeles, New York, and Toronto, and the Middle East and Africa, including Cairo and Dubai. The company's mission is to promote sustainability and innovation while helping shape the digital future of industries within the economy.

The company functions in a series of technology-related spheres, including video gaming, social media, entertainment, streaming and cloud services, fintech, and tools. Some of its most popular offerings include its instant messaging platform QQ, digital content like Tencent Games and Tencent Pictures, and fintech offerings Weixin Pay and Credit Card Repayment. Tencent also focuses on AI and aims to be a leader in retail, healthcare, education, and transport.

Interested in learning more about this company? In this article, we discuss Tencent's financials, key businesses, and recent developments.

Tencent's Financials

Tencent reports its financials in renminbi (RMB), the national currency of China. It released its first quarter results for fiscal year (FY) 2023 in May 2023, for the period ending March 31, 2023.

For Q1 2023, the company had revenues of RMB 150 billion, a year-over-year (YOY) increase of 10.7%. The company had a net profit attributed to equity holders of RMB 32.5 billion; a YOY increase of 27.4%. Revenue growth can be attributed to growth in all the primary segments, including Value Added Services, Online Advertising, and FinTech and Business Services.

Value Added Services include the segments of Social Networks, Domestic Games, and International Games, which all saw increases in revenue. The Social Network segment saw increases in revenue from increases in music subscriptions and in-game item sales. Online Advertising saw a boost from the Beijing Winter Olympics. FinTech and Business Services saw growth due to the recovery of payment activities as well as the stabilization of the company's cloud services.

Tencent's Business Segments

Tencent reports revenues in the following business segments: Value Added Services, Online Advertising, FinTech and Business Services, and Other.

Value Added Services

The Value Added Services (VAS) segment breaks down revenue further into the following categories: Social Networks, Domestic Games, and International Games. This business segment consists of all of the social network platforms the company has to offer, which include Weixin/WeChat, QQ, and Qzone, as well as music subscriptions and all of the video games the company offers.

VAS saw revenues grow by 9.07% to RMB 79.3 billion. The segment makes up 52.9% of Tencent's revenues. Within VAS, each segment contributes the following amount of revenue: Social Networks (39%), Domestic Games (44.3%), and International Games (16.6%).

Online Advertising

The Online Advertising segment includes all of the advertising income the company makes from companies that choose to advertise across Tencent's various platforms, including Weixin/WeChat, video games, mobile services, and music. The biggest driver for growth in online advertising was Weixin/WeChat.

The Online Advertising segment saw revenues grow by 16.5% to RMB 21 billion. The segment makes up 14% of Tencent's revenues.

FinTech and Business Services

Tencent's FinTech and Business Services segment seeks to provide consumers with financial services solutions and various business services, including payment services, wealth management, cloud services, transportation solutions, and loans.

The FinTech and Business Services segment saw revenues grow by 13.9% to RMB 48.7 billion. The segment makes up 32.5% of Tencent's revenues.

Other

The company also has a business segment named "Other" but it does not provide detail on what it encompasses. The segment is a small contributor to revenue, bringing in Q1 2023 revenue of RMB 984 million, a decrease of 50%. This segment makes up 0.66% of total revenue.

Tencent's Recent Developments

In Dec. 2022, Tencent launched a new platform called "TanLIVE" that connects stakeholders of low-carbon technologies in order to accelerate the implementation of climate solutions. These stakeholders include entrepreneurs, investors, and research institutions.

In April 2023, Tencent's Weixin Pay inked a three-year deal with the Singapore Tourism Board (STB) with the goal of bringing a smarter and more convenient traveling experience to Chinese tourists. This includes merchants in Singapore using the Weixin payment system to easily facilitate transactions with Chinese tourists, as well as new channels on the platform to promote Singapore's tourism sector.