A sign of its increasing power on the net is that over 50% of websters are getting the latest Beijing Olympic news from Tencent, in competition with Sohu, an official sponsor of Beijing Olympics, with all the privileges that entails, and Sina, another major portal.
Tencent’s first half income for 2008 totaled 3.033 billion yuan, an increase of a handsome 84.8% over last year’s first half, with earnings per share of 0.66 yuan. And in the second quarter, the company’s income of 1.599 billion yuan was a leap of 11.6% over the first quarter, and an 84.3% vault over last year’s 2Q growth. Net profit in the second quarter was 644 million yuan, 20.5% over the first quarter and 92.5% over the same period last year.
Value-added Internet services are still the main source of Tencent’s income, running to 2.036 billion yuan, an increase of 94.2% over the same period last year and accounting for 67% of the company’s total income. Tencent’s first half income from online advertisement also increased dramatically by 94.7%, or 367 million yuan.
Tencent’s second quarter income, 99% higher than Baidu’s and 128% higher than Sohu’s, was the highest among Chinese dot com companies. Its net profit was 136% higher than Sohu’s, and 146% higher than Baidu’s. Due, however, to China’s economic slowdown, Tencent is being very cagey over expectations for its performance in the second half of the year.
Tencent’s increased income stems mainly from existing online games and the launch of new games, but income from its mobile and value-added telecoms service has also largely increased. The company’s second quarter take from these areas increased by 17.4% over the first quarter, 338 million yuan in the second month, accounting for 21.1% of the company’s total income. This is mainly because of the growth of its 2.5G business, especially the WAP business service, and in mobile game service with its superior quality.
Second quarter advertising income increased by 54.1% over the first quarter to 223 million yuan, accounting for 13.9% of the company’s total income.
Tencent’s performance has overshot analysts�expectations. Earlier, six Dow Jones analysts estimated Tencent’s net profit growth in the second quarter would be 70%. Morgan Stanley analyst Richard Ji believes Tencent’s performance growth is mainly led by its front position in the Internet industry and its huge legion of instant messaging users.
Tencent Chairman and CEO Ma Huateng said the third quarter would be a peak season for the company’s value-added internet service. But he added that during the Olympics, users might spend more of their time watching the games, a negative for the company’s internet service.
By the end of June, registered users of QQ, Tencent’s instant messaging service, had reached 822.2 milllion, 5.0% over the second quarter of 2007. Active accounts increased by 7.6% over the same period to 341.9 million.
An analyst from Morgan Stanley thinks QQ has become a "cultural phenomenon" in China. A QQ number is a virtual identity for Chinese young people, as important as a cell phone number or an email address. Internet users have transferred their interest from reading news to building personal space, participating in online society, and establishing online social relations, a business opportunity Tencent has seized.
But Tencent has also expanded its influence by the reporting about big events such as the Wenchuan earthquake and the Olympic Games, which it is able to support with its income growth in online advertisement.
Ma Huateng swore to be No. 1 in Olympic reports. According to an AC Nielsen survey, 51% of netizens aged 18 to 30 got the news of China’s first gold metal from Tencent. Tencent’s own figures show that since the opening ceremonies, the number of people visiting its Olympic channel has increased by 10 times, totaling tens of millions of people every day.
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