Exclusive: Tencent to step up efforts in advertising, projecting it would contribute up to 40% of total revenue

A recent update on its super app WeChat revealed Tencent’s ambition in advertising. On June 20, Tencent changed its WeChat official accounts updates to a feed.

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China’s social networking and gaming giant Tencent looks to generate more money from its advertising business.

The Shenzhen-based tech giant plans to lift its revenue in advertising to account for 30%-40% of the company’s total revenue in a few years while keeping it under 50% to maintain a good user experience, a senior executive at Tencent’s advertising department told 36Kr, China’s biztech media and also KrASIA parent.

In Q1 2018, revenue from its online advertising business was RMB10.7 billion (USD 1.6 billion), accounting for 14.5% of the company’s total revenue, far less than Baidu’s over 80% and Facebook’s 90%.

Another Chinese rival, the operator of China’s largest news aggregator Toutiao, aims to generate as much as RMB 50 billion (USD 7.7 billion) in revenue from advertising in 2018, according to local media Yicai.

Small and medium business owners contributed 30% of the total revenue generated from Tencent’s social advertising business, and the company seeks to raise that number to 50%, according to the abovementioned Tencent senior executive, adding that currently, 70% of the total revenue comes from brand advertising.

 

Tencent’s advertising business

Tencent’s online advertising business includes social/others advertising and media advertising. Social/others advertising business allows customers to display ads in Tencent social apps including WeChat and QQ, while media advertising puts ads on its news portal Tencent News and video streaming platform Tencent Video.

In Q1 2018, the social/others advertising business saw a 69% increase YoY to reach RMB 7.39 billion (USD 1.14 billion), driven by an expanded advertiser base boosting ad fill rates in Weixin Moments and higher CPC for its Mobile Ad Network.

For Tencent’s media advertising business, revenues grew by 31% YoY to RMB 3.299 billion (USD 507 million) during the same period, thanks to the growth in video views and improved ability to embed creative ads in original content.

 

In-feed ads

On June 20, Tencent made a significant change to its super app WeChat, delivering articles from WeChat official accounts in a feed instead, which are set up by individuals and businesses to push updates to WeChat followers.

Left: Original WeChat Official accounts updates. Right: Current WeChat Official accounts updates.

The move may come as part of Tencent’s plan to integrate in-feed ads into content to monetize the huge WeChat traffic. In-feed ads are believed to be less annoying for users and have better click rates.

“Given our ad loads for social and feeds products are only small fractions of those of industry peers, we believe there is a long runway for the continued growth of our social and others advertising,” stated Tencent in its Q1 earnings report.

 

Editor: Jason Zheng