Tencent’s second-quarter earnings result was a mixed bag. On one hand, sales at its core smartphone games business slowed down. On the other hand, the Chinese Internet giant’s online advertising revenue soared as it sold more video spots and ads in WeChat. Tencent also announced that WeChat, the country’s most popular messaging app, now has more than 600 million users.
The company reported that second-quarter revenue rose 19 percent year-over-year to 23.43 billion RMB ($3.8 million). This just missed the 24.12 billion RMB analysts polled by Thomson Reuters expected. Net income rose 25 percent year-over-year to 7.31 billion RMB ($1.2 million).
WeChat hit the 600 million user mark at the end of June, representing a 9.2 percent increase from the previous quarter.
Revenue from Tencent’s gaming unit, one of its most important businesses, grew 17 percent year-over-year to 12.9 billion RMB, but that was a dramatic drop from the 29 percent growth it reported last quarter. Smartphone gaming revenue inched up a paltry 11 percent.
In a much more promising sign, online advertising revenue nearly doubled as Tencent sold more lucrative video spots, as well as ads in WeChat’s Moment section (which is similar to Facebook’s News Feed). Total advertising revenue was 4.1 billion RMB.
In its earnings release, Tencent said it will continue to build its online ecosystem, which includes WeChat and all its connected online-to-offline services, mobile games, its advertising business, and other verticals.
During the second quarter, Tencent disclosed investments in health search portal Practo as well as mobile gaming company Pocket Gems. It also wants to build a larger stake in China’s lucrative online travel business by buying all remaining shares of Elong.