Tencent’s online ad revenue in the second quarter fell 18% year-on-year to 18.6 billion yuan as macroeconomic issues in China led to brands cutting budgets
Tencent said advertising in its nascent short video platform could become a ‘substantial’ revenue source in the future, even as other areas of its business — such as gaming — face pressure.
The focus on this advertising product from one of China’s biggest technology giant puts it in direct competition with the country’s two leading short video players: ByteDance’s Douyin as well as Kuaishou.
On Wednesday, Tencent reported its first ever year-on-year quarterly revenue decline as its gaming business faced headwinds. Tighter tech regulation, Covid’s resurgence and the subsequent economic weakness in China weighed on the overall company.
Tencent runs China’s most popular messaging app called WeChat which has over one billion users. There is a short video platform built within WeChat. Users can scroll through different videos. In July, Tencent for the first time began serving ads to users in that service it calls video accounts.
The company said it will release more video ad inventory this month.
On Wednesday, Tencent spent a large part of the opening of the earnings call explaining the potential of video ads, underscoring how important the revenue stream could be.
Video accounts has become one of the most popular short video services in China with substantial user engagement, Martin Lau, president of Tencent, told analysts.
Strategically, they allow us to expand our ad market share. As advertisers have already been spending aggressively on multiple short-form video platforms, we should be able to capture more advertising budgets, he said.
Lau said it took five quarters for WeChat Moments, a social feature where users can post pictures, videos and status updates, to reach 1 billion yuan ($147.42 million) in quarterly advertising revenue. He said that Video accounts will reach that goal more quickly given the ‘current size of traffic and already strong advertiser demand for short form video ads.’
Video ads will eventually grow into a substantial revenue source for us over time, Lau said.
Tencent’s online ad revenue in the second quarter fell 18% year-on-year to 18.6 billion yuan as macroeconomic issues in China led to brands cutting budgets.
The Shenzhen-headquartered company is hoping video ads can help boost the division over the coming quarters.