The company, a leading internet and technology conglomerate in China, has reported substantial improvements in gross profit and net profit, reflecting its strategic focus on high-quality revenue streams and innovative technological advancements.

Strategic Initiatives and Business Review

Tencent’s latest quarterly results highlight the company’s dynamic approach to growth and innovation. The tech giant has focused on enhancing its core business segments while venturing into new revenue streams, leveraging its technological prowess and market leadership.

In the gaming sector, Tencent continues to solidify its dominance both domestically and internationally. Several flagship titles, including “Fight of the Golden Spatula” and “CrossFire Mobile,” achieved record-high gross receipts. Meanwhile, international hits like “PUBG Mobile” and Supercell’s “Brawl Stars” reported impressive gains in user engagement and revenue, underscoring Tencent’s global appeal in the gaming industry.

The company has also made significant strides in digital content. WeChat Video Accounts saw a dramatic increase in user engagement, with total user time spent rising by over 80% year-over-year.

Similarly, Mini Programs, a staple feature of WeChat, reported a 20% increase in user engagement, reflecting Tencent’s ability to continuously innovate and expand its ecosystem.

Tencent’s advertising sector has benefited greatly from its advancements in AI technology. The introduction of generative AI-powered tools has revolutionized its advertising platform, resulting in higher engagement and more effective ad campaigns. This innovation has been particularly impactful for Video Accounts and Mini Programs, driving substantial growth in advertising revenue.

In the FinTech arena, Tencent’s wealth management business has shown robust growth, marked by a surge in user numbers and average fund investments. Tencent Cloud Media Services, a leader in the media and entertainment sectors, has maintained its strong market position, further demonstrating the company’s diverse and resilient business model.

Operating Metrics

• Combined MAU of Weixin and WeChat: 1,359 million, a 3% YoY increase.
• Mobile Device MAU of QQ: 553 million, a 7% YoY decrease.
• Fee-based VAS Registered Subscriptions: 260 million, a 12% YoY increase.
• Video Accounts Total User Time Spent: Increased over 80% YoY.
• Mini Programs Total User Time Spent: Increased over 20% YoY.

Financial Highlights

Tencent’s financial performance in Q1 2024 reflects its strategic focus and operational efficiency:

• Total Revenues: RMB 159.5 billion ($22.5 billion), a 6% year-over-year (YoY) increase.
• Gross Profit: RMB 83.9 billion ($11.8 billion), up 23% YoY.
• Non-IFRS Operating Profit: RMB 58.6 billion ($8.3 billion), a 30% YoY increase.
• Net Profit Attributable to Equity Holders: RMB 50.3 billion ($7.1 billion), up 54% YoY.

Segment Performance

• Value-Added Services (VAS): Revenue slightly decreased by 0.9% YoY to RMB 78.6 billion, with social networks and domestic games experiencing minor declines, while international games revenue grew by 3%.
• Online Advertising: Revenue surged by 26% YoY to RMB 26.5 billion, driven by increased engagement and enhanced AI-powered ad targeting.
• FinTech and Business Services: Revenue increased by 7% YoY to RMB 52.3 billion, with solid growth in cloud services and wealth management.

Tencent’s first-quarter results highlight its resilient business model and strategic adaptability. The company’s revenue growth, though moderate, is accompanied by a substantial increase in gross profit and operating margin, indicating improved operational efficiency.

Comparing these results with previous quarters and industry peers, Tencent stands out for its balanced growth across diverse revenue streams. The company’s focus on high-margin businesses, such as cloud services and digital content, is a strategic move that is paying off well.

Financial Highlights: A Glimpse into Growth

Tencent’s fiscal narrative for 2023 is one of notable achievements, underscored by a 10% year-over-year growth in total revenues, reaching an impressive RMB609.0 billion (USD86.0 billion).

This expansion is further emphasized by a 23% increase in gross profit, showcasing the company’s enhanced profitability in a fiercely competitive digital marketplace. Furthermore, the non-IFRS profit attributable to equity holders witnessed a substantial 36% increase from the previous year, indicating strong core earnings performance .

The final quarter of 2023 continued this trend, with revenues escalating by 7% year-over-year to RMB155.2 billion (USD21.9 billion), and gross profit and non-IFRS profit attributable to equity holders of the company experiencing significant increases of 25% and 44% respectively.

In 2023, Tencent’s revenue breakdown highlighted the diversity of its business portfolio, with significant contributions from various segments.

The FinTech and Business Services sector emerged as the largest revenue source, representing 31% of the total revenue and amounting to RMB189.0 billion. This segment’s leading position underscores Tencent’s stronghold in the FinTech industry and its successful foray into comprehensive business services.

Following the FinTech and Business Services sector, the Online Games segment was the second-largest contributor to Tencent’s revenue, accounting for 29% and totaling RMB177.0 billion. This demonstrates the continued vitality of online gaming within Tencent’s business model.

The fastest-growing segment in 2023 was Tencent’s Cloud Computing business, which experienced a remarkable 30% year-over-year revenue increase, reaching RMB109.0 billion. This growth outpaced the other segments, notably the Social Networks segment, and underscored Tencent’s effective strategy and execution in the competitive cloud services market.

Overall, Tencent’s 2023 financial performance showcased the strength of its FinTech and Business Services as the leading revenue generator, with the Cloud Computing segment leading in growth, reflecting the company’s adaptability and strategic positioning in China’s evolving digital landscape.

Strategic Endeavors and Innovation

2023 saw Tencent advance through strategic milestones:

Enhancing User Experience: Tencent’s WeChat Video Accounts doubled in user time spent, thanks to improved algorithms and creator support. Additionally, the Mini Games platform’s gross receipts soared by over 50%, reinforcing Tencent’s leadership in China’s casual gaming sphere .

Pioneering in AI: The launch of Tencent Hunyuan, an AI model of a trillion-parameter scale, marks a leap in Tencent’s technological prowess, solidifying its commitment to spearheading digital innovation .

Commitment to Society and Environment: Tencent’s digital philanthropy platform set a new record with RMB3.8 billion raised during the 99 Giving Day campaign, while its New Cornerstone Investigator Program supported 104 scientists, promoting scientific research .

As of the end of 2023, Tencent Music Entertainment Group (TME) reported a notable increase in its music subscribers. The total number of online music paying subscribers reached 90 million, marking an 18% year-over-year growth.

Market Engagement and User Dynamics

Tencent’s operational statistics reveal evolving trends in user engagement:

• The MAUs of Weixin and WeChat stood at 1,343 million by December 2023, a 2% increase year-over-year, highlighting the platforms’ expanding influence in social media .
• Despite a marginal decline in VAS revenues, Tencent’s strategic emphasis on content diversity and innovative services positions it for sustained growth amidst market challenges .

Tencent’s 2023 saga is one of strategic brilliance and financial vigor, positioning it at the forefront of China’s digital transformation. With its commitment to innovation, user-centricity, and societal impact, Tencent is poised to continue shaping the contours of China’s digital future.

Mobile reach in China: Tencent, Alibaba, Baidu, ByteDance, vs. Kuaishou

According to WeChat, search ads will support six promotion goals, including WeChat Official Account promotion, sales lead collection, products promotion, branding events promotion, app promotion, and WeChat Mini Games promotion.

It supports three landing page types, namely, native promotion page, WeChat Mini Program, and custom link. And, based on the search ability of WeChat, WeChat search advertising can support the sale of brand keywords, keywords words, generic keywords, and generic keywords.

At present, Tencent’s mobile search advertising scenarios mainly include WeChat Search and QQ Browser search. In these scenarios, advertisers can do brand and performance marketing.

Since the launch of search feature on WeChat in 2017, it has been at the top of the main interface.

However, after five years of iteration, it has now become a “global search” that includes WeChat Moments, Official Account, and Mini Programs from the early days when it could only search local chat records and contacts.

At the same time, the search scope has also expanded to all content and services related to search queries in WeChat.

WeChat Mini Programs Insights

Among non-internet companies, the top three advertisers are L’Oreal, Unilever, and P&G in 2021 with a total ad spend of 3.35 billion yuan, 2.97 bn yuan, and 2.04 bn yuan respectively.

Total ad spend in display advertising decreased further in 2021 by 7.6% YoY.

Read more on China’s digital advertising insights here.

Tencent Music’s Paying ratio increased to 9.9%, up from 8.0% and 9.0% in the third and fourth quarters of 2020, respectively. Its mobile MAU for online music platforms saw a decrease of 6.4% YoY in Q1 2021 to 615 million.

Tencent Music upgraded its products to be more social, personalized, and visually appealing during the first quarter of 2021:

• Putong Community has continued to gain popularity, growing in user penetration and retention rate quarter-over-quarter, and has become one of the leading channels for fan-idol interaction and content promotion.
• Kugou Fans Club has also drawn many leading artists, labels and content IPs to interact with their fans live, resulting in an increasing proportion of young users in this community, as well as sequential increases in penetration and time spent per user.

For long-form audio, it made noteworthy progress in both integrated and standalone approaches, as well as its monetization during the first quarter of 2021:

• After exceeding 100 million MAUs at the end of 2020, MAU penetration reached 20.0% compared to 5.5% in the first quarter of 2020.
• Significantly enriched long-form audio content offering with the number of licensed titles more than quadrupled year-over-year.
• Accelerated the addition of PUGC and UGC long-form audio content. QQ Music launched the Ground Zero Podcast program, which offers financial resources and tools that enable original podcast content creation.
• In March 2021, it completed the acquisition of Lazy Audio and started consolidation. It also integrated Kuwo Changting with Lazy Audio to form Lanren Changting in April, a new brand for Tencent Music’s long-form audio business
• It recently started its foray into ad-based monetization giving users easy access to a vast amount of high-quality audio content.

China online entertainment market overview 2021

Financial Highlights

Total revenues were RMB7.82 billion (US$1.19 billion), representing an increase of 24.0% year-over-year.

• Online music services revenues grew by 34.5% year-over-year.
• Revenues from music subscriptions were RMB1.69 billion (US$258 million), representing 40.2% year-over-year growth.
• Revenues from advertising services recorded over 100% year-over-year growth.

Net profit was RMB979 million (US$149 million) and net profit attributable to equity holders was RMB926 million (US$141 million). Non-IFRS net profit was RMB1.24 billion (US$188 million) and Non-IFRS net profit attributable to equity holders was RMB1.18 billion (US$180 million).

The purchaser is Science City (Guangzhou) Investment Group Co., Ltd., with a project valued of nearly 460 million yuan, which has become the largest bidding project order in the field of intelligent transportation in China this year.

The order includes the construction of vehicle road network infrastructure, intelligent intersection, Internet of vehicles, and other related application systems, which is expected to accelerate the construction of Guangzhou Development Zone and Guangdong Hong Kong Macao Bay Area Intelligent Network.

Baidu Performance in Q2 2020

Baidu App daily active users (“DAUs”) reached 204 million in June 2020, adding 16 million users in the last 12 months but 18 million less from March 2020, according to its financial results.

Over 800 sessions of topical live streaming were broadcasted in the second quarter of 2020 on Baidu’s platform, with sessions like Baidu Wiki Virtual Zoo, Summer Art Festival, and Wandering through Civilization Season 2, attracting over 40 million views.

Baijiahao (“BJH”) publisher accounts reached 3.4 million, up 52% year over year, in June 2020. The large scale of Baidu’s platform is drawing more original content creators to join BJH, which allows easy sharing of content across Baidu App, short-video app Haokan, Quanmin, and Baidu’s knowledge products.

Baidu Smart Mini Program’s monthly active users on Baidu App reaching 339 million, up 25% year over year or down over 4% from March 2020.

Revenue from Baidu Managed Page increased to approximately 30% of Baidu Core’s online marketing services revenue in the second quarter of 2020. Merchants with HTML5 websites across many industries are switching to Managed Page, as the landing page for their search results.

Baidu’s new AI businesses, including cloud, smart devices, and smart transportation, saw double-digit growth in the second quarter and stand to become an important revenue driver in the years to come.

Baidu is also diversifying its revenue streams through membership, online games, and others to increase the ARPU of the existing traffic according to Herman Yu, CFO of Baidu. The growth of Baidu App and new AI businesses have enabled Baidu Core’s adjusted EBITDA margin to reach 41% in the second quarter.

Baidu returned US$540 million to shareholders under the 2020 Share Repurchase Program in the second quarter, bringing the Company’s cumulative repurchase for the last two years to approximately US$1.9 billion.

Baidu’s board of directors recently approved a change to the 2020 Share Repurchase Program, increasing the repurchase authorization from US$1 billion to US$3 billion, which is effective through December 31, 2022.

DuerOS

In June 2020, Baidu’s DuerOS monthly voice queries on Xiaodu devices (its smart speakers) reached 2.8 billion, nearly doubling from last year, and DuerOS total monthly voice queries reached 5.8 billion, up 57% from last year.

DuerOS skills store now offers 4,000 skills in wide-ranging genres, including education, video, online game, and live streaming. DuerOS developer community has grown to over 42,000 members.

JD.com announced that Xiaodu series of smart displays and smart speakers were the best-selling in the smart speaker category on its platform during this year’s June 18 Shopping Festival.

Cloud, AI Services & AI Platform.

Baidu formed a strategic partnership with China National Building Materials Group (CNBM Group), the parent of 13 listed companies.

CNBM Group plans to use Baidu AI PaaS, equipped with big data and IoT edge computing capabilities, to provide intelligent logistics, intelligent factory and industrial autonomous driving.

For example, CNBM Group plans to use Baidu AI PaaS paired with Baidu intelligent map to improve the routing efficiency of its logistics vehicles and track the vehicles whereabouts to optimize operational costs and increase traffic safety.

Baidu’s AI open platform, built on top of Baidu Cloud, offers over 260 AI capabilities, which are tapped by over 2.1 million developers.

Apollo

The Apollo robotaxi operations in Beijing, Changsha and Cangzhou have expanded into larger networks and more complex road conditions, such as downtown streets.

In May 2020, Baidu completed the 145,000 square feet Apollo Park in Beijing, an autonomous driving and V2X testing facility that supports testing, operational command center, cloud control system, vehicle warehousing, maintenance, and calibration.

iQIYI

One of the top online video platforms iQIYI’s subscribers reached 104.9 million, up 4% year over year, in June 2020, and membership revenue was up 19% year over year.

Financial Results

Total revenues reached RMB 26.0 billion ($3.69 billion), decreasing 1% year over year.

• Online marketing revenues were RMB 17.7 billion ($2.50 billion), decreasing 8% year over year.
• Other revenues were RMB 8.3 billion ($1.18 billion), increasing 18% year over year, driven by the strong growth of iQIYI membership and Baidu’s cloud and smart transportation solutions.
  • Revenue from iQIYI reached RMB 7.4 billion ($1.05 billion), up 4% year over year.

Its share price fell more than 6% in the extended session Thursday.

Revenue from Baidu Core reached RMB 18.9 billion ($2.68 billion), decreasing 3% year over year.  iQIYI membership revenue grew 19% year over year, partially offset by online advertising revenue declining 28% year over year.

Cost of revenues was RMB 13.1 billion ($1.86 billion), decreasing 19% year over year, primarily due to a decrease in traffic acquisition costs, sales tax and surcharges, and costs of goods sold. The decrease in traffic acquisition costs reflected decreasing union revenues, as Baidu focused on optimizing profitability over revenue growth.

Selling, general and administrative expenses were RMB 4.4 billion ($625 million), decreasing 16% year over year, primarily due to decreased marketing spending and personnel-related expenses.

Research and development expenses were RMB 4.8 billion ($685 million), increasing 2% year over year.

Operating income was RMB 3.6 billion ($516 million) and operating margin was 14%. Baidu Core operating income was RMB 5.0 billion ($703 million) and Baidu Core operating margin was 26%.

Non-GAAP operating income was RMB 5.6 billion ($793 million), and non-GAAP operating margin was 22%. Non-GAAP Baidu Core operating income was RMB 6.5 billion ($917 million), and non-GAAP Baidu Core operating margin was 34%.

Total other income was RMB 366 million ($53 million), decreasing 70% year over year, primarily due to loss from equity method investments, which is booked a quarter in arrears and reflects the impact of COVID-19 on its investees.

Income tax expense was RMB 1.2 billion ($174 million), which included tax withholding accrual for dividend distribution to offshore entities, compared to RMB 416 million in Q2 2019.

Net income attributable to Baidu was RMB 3.6 billion ($507 million), and diluted earnings per ADS was RMB 10.31 ($1.46). Net income attributable to Baidu Core was RMB 4.4 billion ($626 million).

Non-GAAP net income attributable to Baidu was RMB 5.1 billion ($719 million), and non-GAAP net margin was 20%. Non-GAAP diluted earnings per ADS amounted to RMB 14.73 ($ 2.08). Non-GAAP net income attributable to Baidu Core was RMB 5.7 billion ($801 million), and non-GAAP net margin for Baidu Core was 30%.

Adjusted EBITDA was RMB 7.0 billion ($993 million) and adjusted EBITDA margin was 27%. Adjusted EBITDA for Baidu Core was RMB 7.8 billion ($1.1 billion) and the adjusted EBITDA margin for Baidu Core was 41%.

As of June 30, 2020, cash, cash equivalents, restricted cash, and short-term investments were RMB 154.1 billion ($21.80 billion), and cash, cash equivalents, restricted cash and short-term investments excluding iQIYI were RMB 144.6 billion ($20.46 billion).

Free cash flow was RMB 7.3 billion ($1.04 billion). Free cash flow excluding iQIYI was RMB 8.8 billion ($1.24 billion).

Baidu may spin off its online storage business

Baidu recently plans to split multiple internal businesses, which may be listed independently, according to Business Data.

Baidu declined to comment on the news.

If spun off, Baidu online storage business can benchmark the US cloud storage company Dropbox for its valuation. The market value of Dropbox has exceeded $9.016 billion at the intraday price on July 28.

After 360 Cloud disk, Kingsoft Online Disk, Xunlei Express Disk, Netease Cloud Disk, and other similar products stopped services, Baidu Online Disk, launched in February 2012, continues its service with a large storage capacity of 100G and clean interface.

According to 36Kr, in November 2019, the number of MAU (monthly active users) in China’s personal online storage industry was 107 million, with a penetration rate of 22.1% for mobile Internet users nationwide. Baidu Online Disk market share is 82.9%, followed by Tencent Weiyun, about 8% market share.

Questmobile’s data show Baidu Online Disk has a market share of over 85% with 600 registered users and over 100 million MAU. It currently generates revenues from users, advertising, information, mini programs, and etc.

Baidu starts offering Microsoft’s MSN ad inventory on a new ad platform

Baidu announced on 8 July 2020 that it is providing advertisers direct access to Microsoft’s MSN native desktop inventory via Baidu’s MediaGo advertising platform. The agreement enables advertisers around the world to reach consumers in the United States through premium placements on multiple MSN properties.

Rather than requiring advertisers to purchase bulk inventory, as is standard practice for many digital ad companies, this collaboration allows advertisers to secure the placements that fit their goals and budget on MSN’s desktop site.

As part of Baidu’s ongoing effort to bridge the gap between Eastern and Western markets, Baidu works with Microsoft to offer their premium MSN placements to its advertising partners in China, the U.S. and beyond. It will continue to explore meaningful ways to provide mutual growth opportunities to global advertisers and U.S. media.

The cooperation allows advertisers worldwide to access high-visibility, native placements on the MSN homepage, as well as other sister pages throughout the MSN site, via Baidu’s MediaGo ad platform.

With MediaGo, advertisers can upload assets, select placements on top-tier MSN properties and measure campaign success on a single centralized platform. MediaGo also offers 24/7 local language account management services.

“Baidu’s MediaGo platform streamlines the process for global advertisers to purchase high-visibility ad placements on MSN, helping them reach new customers,” said David Carkeek, Principal PM Lead at Microsoft.

Baidu International launched MediaGo overseas advertising platform last year when it had established cooperation with Snapchat, Reddit, Pinterest, etc., which will provide a very good channel for China’s domestic small and medium-sized enterprise owners to promote overseas.

Mobile reach in Q1 2020: Tencent, Alibaba, Baidu, ByteDance

It connects the advertisers’ accounts with their WeChat Work (enterprise version of WeChat) accounts in order to better reach out to target groups and to increase customer management efficiency. This, in turn, can help improve customer services and conversion rates.

Making the connecting more efficient

The customer acquisition solution combining WeChat Advertising with WeChat Work can provide advertisers with tools for building landing pages, automatic deployment of multiple customer services and smart optimization.

These tools allow advertisers to acquire customers in a new way and significantly simplify the process of customer reach-out and acquisition. With these tools, advertisers can manage their traffic volume at a more granular level and maximize customer value.

Tools for Building Landing Pages

In order to help advertisers achieve high efficiency in reaching out and acquiring customers, new follow-widgets and pages for WeChat Work are added to the native promotion pages and landing pages.

In this way, WeChat users can quickly and easily follow the advertisers’ WeChat Work account. Advertisers can quickly achieve conversion and track their landing pages on WeChat Work based on the characteristics of the sector they are in.

Advertisers can monitor the number of their followers on their Tencent Ads back-end dashboard or WeChat Work in the process of advertising campaigns.

Automatic Deployment of Multiple Customer Service Staffs

This solution provides advertisers with the ability to automatically deploy customer service staff in order to make their services more efficient.

Advertisers can authorize WeChat Work via the Tool Box in the back-end. After authorization, they can add departments or employees within their organization to create customer service groups.

In the process of advertisement deployment, unique QR codes will be generated automatically for each customer service group. When the user scans the QR code, the system will automatically deploy a customer service staff within the group. The user can then enjoy 1-1 service after adding the operator as a friend on their WeChat.

Smart Optimization

With the new solution and oCPM bidding, it can help to optimize the “Follow WeChat Work customer service account” process, and in turn, can improve the conversion rates for customer acquisition.

Advertisers can rate the process and identify target groups that are more likely to follow, then optimize their advertisements with better conversions.

The new solution makes the process of customer acquisition significantly shorter and improves the conversion rate, allowing them to effectively lower the costs of customer acquisition.

In the meanwhile, the new process fully leverages on the connection between advertisers and users to build a direct communication channel between users and customer service operators. This can allow advertisers to offer users efficient, high-quality, and real-time services.

In addition, advertisers can achieve high-conversion and retain target users in their WeChat Work. These users can be reached and engaged again through WeChat Moments (WeChat’s social networking section) and community management (WeChat Group) in order to maximize their user value.

Currently, this solution supports an omnichannel deployment through WeChat Moments Ads, Official Account Ad, and Mini Program Ads.

Thanks to the 1.15 billion users, the highly efficient smart deployment technology, and the targeted reach ability, advertisers can retain users in their WeChat Work in a highly efficient way. They can then provide these users with more personalized professional service, increase the user value, and achieve business growth.

Helping eCommerce to Capture Long-term Value

With the increasing cost of traffic, the marketing-to-sales eCommerce business model starts to encounter its bottleneck. The difficulty to retain users, together with the long sales cycle for high premium products makes it very difficult to guide users with high-quality products and services in the long term.

Therefore, the operational advantage of being able to constantly increase user value proves to be of great value.

With the new process, users can follow the advertisers’ WeChat Work account and interact directly with customer service staff after seeing the ad, allowing higher effective and real-time services.

At the same time, advertisers can also introduce their products and content directly to users and keep them engaged. Combining with e-commerce promotions such as Double Eleven, advertisers can keep the push marketing content effective.

In addition, thanks to WeChat Work accounts’ ability to post on WeChat Moments, advertisers can timely update users on their products, professional knowledge, and maintain customer relationships in a non-intrusive way.

Targeting users with a certain level of knowledge on the products, advertisers can manage the community through groups in WeChat Work too.

In this way they can efficiently reach out to their customers afterward and provide them with more professional and customized services, therefore improving user engagement and increase their re-purchasing frequency.

Combining with the ability to connect to WeChat mini-programs, advertisers can integrate the online shopping function of the mini-programs into their WeChat Work, providing multiple service windows to customers.

A fashion brand ALFA has successfully reduced the time from acquisition to conversion and its user acquisition cost by 50% with the help of the new WeChat Advertising + WeChat Work solution.

At the same time, their operation efficiency increases significantly thanks to the integration of WeChat Moments and various promotional campaigns in WeChat community. Users in the WeChat groups are highly engaged and frequently re-purchase.

Helping the Travel Sector by Converting Target customers Online

Travel related products usually feature high price and long decision process. Its target customers have high conversion barriers and diverse needs. In order to boost conversion, advertisers from the travel sectors usually need 1-on-1 real-time communication to fulfill the customer’s different needs.

In the future, by converting offline customers online and integrating operation and management online, the travel sector can effectively benefit from this new solution.

In the new process, advertisers from the travel sector can exhibit their brands and promote their products on their native promotion page, in order to attract target customers and retain them on their WeChat Work accounts.

At the same time, with the personalized welcome display, advertisers can send useful content such as product information to their new users in a faster manner, encouraging better user engagement.

WeChat Work provides advertisers with a more convenient online communication tool, enabling real-time communication, and facilitating the delivery of personalized services.

Corporate images are clearer on the WeChat official account, effectively building trust and awareness of the brand. At the same time, advertisers can manage users based on various tags such as destination, travel time and wiliness, and provide users with more customized services.

They can also roll out different promotional information in the WeChat groups and constantly reach out and convert users, allowing a more granular service.

Yunnan Kunming Travel Agency, focusing on Leisure Family Trip, has significantly shortened leads engagement time and reduced their costs with the help of the new process and oCPM model.

Within the trial period, the cost of acquiring a new follower for WeChat Work is near the cost of their mature conversion funnels. In addition, it has profiled their users using tags and promoted limited time offers, group purchase offers in their WeChat groups in order to guide users and achieve better conversions.

With the help of WeChat group promotions, the deposit conversion rate increase by 60%.

The integration between WeChat Advertising and WeChat Work effectively could meet various advertisers’ needs, helping them shorten the acquisition path, reach out, and convert targeted audiences.

WeChat Work allows advertisers to get closer to their users and lower the conversion barrier. At the same time, WeChat Advertising helps advertisers to reach out, convert, and retain target users in multiple ways.

In 2019, mobile continues to lead China internet. The top mobile apps in China by total MAUs are still led by WeChat, Alipay, QQ, Taobao, iQiyi, and Tencent Video while TikTok continues fast growth and ranks the 7th. Tencent has the highest internet user penetration of 97.3% in China in September 2019, followed by Alibaba, Baidu, and ByteDance. Find a comparison of the four here.

Leading Chinese internet companies are building their own mini-program ecosystem; Tencent’s WeChat, Alibaba’s Alipay, and Baidu’s smart program in the leading positions. ByteDance’s also building on its own ecosystem on TikTok and Toutiao.

China has issued new regulations banning online video and audio providers from using artificial intelligence (AI) and virtual reality technologies to create fake news and content.

The shipment of China’s smartphone market was about 98.9 million units in Q3 2019, down 3.6% year-on-year. Huawei leads China’s smartphone market in Q3 2019 with 41.5 million units in shipment, an increase of 64.6% YoY. Vivo, Oppo, Xiaomi and Apple rank the second to the fifth.

Awareness of Chinese brands in international markets has declined over the past three years. The “Brand Power” of leading Chinese brands is up 15% year-on-year, compared with 5% growth last year. “Brand Power” is rising fastest in Japan, France, and Spain, representing emerging hubs of growth, according to the BrandZ™ Top 50 Chinese Brand Builders 2019 report.

Alibaba has been crowned the most valuable brand in China for the first time in the annual BrandZ™ Top 100 Most Valuable Chinese Brands ranking, having grown its brand value by 59% year-on-year to US$141 billion.

The total value of the Top 100 Most Valuable Chinese Brands increased by 30% to US$889.7 billion, the highest annual rise since the ranking launched in the year 2011.

By 2030, 58% of Chinese households are expected to be in or above the mass-affluent class, exceeding today’s 55% South Korean share according to McKinsey. Urban Chinese consumers’ spending profile converges with their counterparts’ spending profile in cities around the world.

Top articles on Chinese consumers include:

• Men’s beauty market in China looks to be more promising
• Chinese post-95s spent 80% more buying overseas
• Consumption habits of China’s post-90s generation
• 22 FMCG companies reaching over 100 million urban Chinese households in 2019
• China Generation Z overview 2019

Digital Media

Vlog has become the new theme of user growth competition on several video platforms in China. Vlog can be regarded as a kind of “video log” with popular themes of travel, food, pets and etc. Its production is relatively simple, the creator uses the camera to record what he sees and thinks in his daily life, and then through later editing, with music, text or stickers, can produce a Vlog.

China’s search engine companies’ revenue is estimated to reach 158.08 billion yuan (US$22.98 bn) in 2019 and 183.17 billion yuan (US$26.63 bn) next year. But Baidu fell to the third by digital advertising revenues following Alibaba and ByteDance.

Tencent launched several different social ads formats including the Nearby Ads for SME retailers on WeChat Moments.

China Social Media

As of Q3 2019, WeChat’s monthly active users reached 1.15 billion and Weibo’s were 497 million.

In 2019, the top rising social media is no doubt ByteDance’s short video leader TikTok. Short video penetration exceeded 70% in 2019 with 810 million active users in Sep.

WeChat launched its own version of “Facebook Stories”. WeChat launched two new sections -“Time Capsule” and “Top Stories”- and several news features for WeChat iOS 7.0 on December 21, 2018. That’s the biggest upgrade since version 6 four years ago and one big move into the short video market.

Xiaohongshu received most attention in 2018 but faced a rough year in 2019 with its app removed from every major app store” in July. It will launch live broadcasting feature next year. Read our latest insights on how Xiaohongshu successfully pivoted its growth and product strategies.

The most popular articles on social media:

1. Stories behind China’s super app WeChat, told by its founder
2. ByteDance: A Chinese Mobile App Factory
3. Audi used competitor Infiniti’s creative in a video ad on WeChat Moments
4. Top short video apps compared: Tik Tok vs. Kwai – Part 1 Platforms
5. China social media users compared: Weibo vs WeChat vs Momo

China E-commerce & Retail

Taobao, Tmall, and JD have the broadest user reach than other e-commerce platforms in China. Nevertheless, Pinduoduo is the only platform with more low education background users. Both Amazon and Dangdang are much less popular among users with middle school education or lower. Read our online shopper trends for 2019 here.

In 2019, Pinduoduo has beat JD and become the second-largest e-commerce platform in China. Meituan also did very well.

This year’s Tmall 618, there were hundreds of domestic and foreign brands whose sales exceeded last year’s Double 11, with the highest growth rate exceeding 40 times.

Alibaba set a new record of Double 11 in 2019 again with full-day sales on Tmall of 268.4 billion yuan (US$38 billion), the largest annual shopping festival in China. There were 299 brands who reached RMB 100 million in GMV, including Apple, Nike, Estee Lauder and Giorgio Armani. Find out the best-selling brands here.

The number of mobile payment users has reached a saturation point in 2019, and the growth is drawing to a close. The penetration rate is 95.1%. The annual transaction volume of third-party mobile payments reached 183.79 trillion Yuan, an increase of about 20.3% over the previous period. The annual number of transactions reached 1.17 trillion, an increase of about 12.8%.

Following the adoption and popularity of mobile payment, China supermarkets are growingly more intelligent with technologies such as face recognition, IA, AR, O2O, etc. WeChat recently shared a vision of its technology integration with supermarkets in the future.

Live Broadcast for E-Commerce

Live broadcasting has become an important channel for e-commerce sales in 2019 and will continue to grow. A total number of 81 live rooms on Taobao Live reached 100 million yuan sales; a total of 5 organizations broke 1 billion yuan sales. Taobao Live aims to deliver 500 billion yuan sales in the next three years.

Tencent launched a live broadcasting tool for WeChat Official Account (OA) in March 2019, currently supporting audio and video broadcast. Influencing WeChat OA can utilize their fanbase on WeChat, in combination with quality live broadcasts, to drive e-commerce sales.

Though still in the testing phase, Tencent Live integrates live streaming with its mini program. Brands can embed HTML5 based products on its mini program as an entry to its live streaming. Followers and fans can click to open Tencent Live to watch live streaming.

Kuaishou, also known as Kwai, announced its daily active live broadcasting users exceeded 100 million. 56% of Kuaishou anchors are post-90s.

Social E-commerce & Mini Programs

Social e-commerce GMV reached 626.85 billion yuan in 2018 with an increase of 255.8%. It’s expected to continue the fast growth and exceed 1.3 trillion yuan in 2019 and 2.86 trillion in 2021.

Social e-commerce in China has much higher conversion rates than traditional ones. Social e-commerce providers recharge their trust through social currency, which means that product recommendations from WeChat friends naturally have a social trust foundation.

The number of e-commerce transactions on WeChat mini-programs increased by 27 times year-on-year in the first half of 2019,

In Becky’s initial WeChat e-commerce mini-program launch in December 2017, the transactions exceeded one million yuan in 7 minutes and nearly 3 million yuan sales in 113 minutes according to WeChat Advertising. Since then, it has been able to maintain a million transactions in the first minute of new product launches. Read her story here.

Short Video for E-Commerce

TikTok signed a 7-billion yuan agreement with Taobao including 6 billion yuan ads and 1 billion yuan commission according to leaked news online. TikTok denied the accuracy of those numbers but the news got the attention of many in the e-commerce market.

During China’s mid-year shopping festival 618, active TikTok shopping cart user ratio exceeded 68%. The top 30 users referred over 400 million yuan worth of products sales.

Top articles in e-commerce and retail:

1. How Tmall played a vital role in China’slargest wool and textile enterprise
2. Taobao to enable farmers to find new markets and customers
3. Introduction to Xiaomi’s e-commerce platform Youpin
4. Alibaba’s Hema penetrating low-tier cities with Hema Mini supermarket
5. Huawei turning its smartphones to POS machines
6. China’s cross-border e-commerce users overview 2019

Chinese travelers

The total number of online travel agency (OTA) users in China reached 145.6 million. Tier-2 cities in total saw the most number of OTA users (56.68 million), followed by tier-3 group and tier-1.

On average an outbound Chinese tourist plans to spend US$6,706 traveling overseas in 2019, up 15% from 2018. Product quality became the second most important factor to consider when shopping abroad. 69% of outbound Chinese tourists made purchases on their mobile phones in 2018.

China’s emerging Gen-Y’s complete travel experience journey has five stages: dream, plan, book, experience, and share. Get an overview of emerging Gen-Ys’ power, how they re-shape China’s travel market, stages of their travel journey, and how to get ready here.

Sightseeing (around 50%) and vacation (over 40%) were the two main driving force for traveling. Self-guided travelers spend less compared with travelers with guided tours. Self-guided (free and easy trips) travelers spend more on transportation and accommodation than those with guided tours.

Top articles in tourism:

1. China Golden Week Tourism Trends & Insights 2019
2. The emerging Gen-Y for China’s travel market
3. Outbound Chinese tourists mobile payment usage 2019; average spend US$6,706
4. Rising outbound travelers from lower tier cities in China
5. China outbound tourism insights 2019

Annual subscribers can download McKinsey Consumer Trends Report 2020 here.

WeChat recently launched the “Nearby Ads” marketing solution to solve marketing problems of small and medium-sized merchants. Nearby Ads can accurately display the advertisements in WeChat Moments to reach customers within the 3km distance.

As one of the most frequent social scenes for consumers, WeChat Moments has become an important way for everyone to receive and share information, and the influence of acquaintances on consumers has become more apparent.

Related: Top Mini-Programs in Oct 2019

Through “Nearby Ads”, merchants can place advertisements in WeChat Moments and get social scene exposure.

Through “Nearby Ads”, merchants can place advertisements to users near the store, which can accurately cover potential visitors to the store within 3 kilometers away from the storefront, and meet the marketing demands of SMEs with small budget, low cost, simple operation and continuous traffic to the store.

If the number of people covered is small, the system will automatically expand to 5 km area around the store.

In other words, if you pass through a nearby business who has placed nearby ads, it’s highly likely that you’ll see its ads in WeChat Moments.

The program offers three packages, with a minimum of 2,000 yuan (about US$285) for 30 days, 5,000 yuan for 90 days, or 9,000 yuan for 180 days. Officials claim that the number of reached audiences in Beijing and Shanghai can exceed 25,000, over 35,000 in key cities, and over 70,000 in other cities.

The ad placement is easier than regular ads on Tencent social networks. Merchants can start advertising through the mobile phone “WeChat Ad Assistant” Mini Program. After the merchant has been verified, the advertisement can be created in just 3 steps, saving time and effort.

Tencent’s social media platform WeChat’s monthly active users grew to 1.15 billion as of Q3 2019.

3 popular models of social e-commerce in China

Average daily active users (“DAUs”) on Weibo were 216 million in September 2019, a net addition of approximately 21 million users year-over-year.

Weibo Financial Results in Q3 2019

For the third quarter of 2019, Weibo’s total net revenues were $467.8 million, an increase of 2% compared to $460.2 million for Q3 2018 according to its financial results.

Advertising and marketing revenues for the third quarter of 2019 were $412.5million, an increase of 1% compared to $409.3 million for the same period last year.

Advertising and marketing revenues from key accounts and small & medium-sized enterprises were $393.3 million, representing an increase of 3% compared to $380.7 million for the same period last year.

VAS revenues for the third quarter of 2019 were $55.3 million, an increase of 9% year-over-year compared to $50.9 million for the same period last year. The increase was mainly attributable to the revenues derived from Weibo live streaming business acquired in Q4 2018.

Costs and expenses for Q3 2019 totaled $295.2 million, compared to $298.2 million for Q3 2018. Non-GAAP costs and expenses were $277.5 million, compared to $272.2 million for Q3 2018.

Income from operations for the third quarter of 2019 was $172.5 million, compared to $162.0 million for the same period last year. Non-GAAP income from operations was $190.2 million, compared to $188.0 million for the same period last year.

Non-operating income for Q3 2019 was $5.3 million, compared to an income of $42.9 million for Q3 2018. The decrease was mainly due to the recognition of a $41.9 million investment related fair value mark to market gain in Q3 2018.

Income tax expenses for the third quarter were $31.4 million, compared to $37.9 million for the same period last year.

Net income attributable to Weibo for the third quarter of 2019 was $146.2 million, compared to $165.3 million for the same period last year.

Diluted net income per share attributable to Weibo for the third quarter of 2019 was $0.64, compared to $0.73 for the same period last year.

Non-GAAP net income attributable to Weibo for the third quarter of 2019 was $176.1 million, compared to $171.8 million for the same period last year. Non-GAAP diluted net income per share attributable to Weibo for the third quarter of 2019 was $0.77, compared to $0.75 for the same period last year.

As of September 30, 2019, Weibo’s cash, cash equivalents and short-term investments totaled $2.37 billion. For the third quarter of 2019, cash provided by operating activities was $164.8 million, capital expenditures totaled $4.4 million, and depreciation and amortization expenses amounted to $6.3 million.

Audi launched its video ad campaign on WeChat Moments earlier today. What’s interesting is that the video played is an Infiniti ad.

Based on discussion from a WeChat Group of advertising professionals, Audi’s spending 30 million yuan working with Tencent Social Ads.

Tencent Ads has issued an apology and shared that the wrong ad creative launched at 9 am today was taken offline at 10:30 am. It was caused by an automobile service company’s careless mistake.

The ad generated 3,959 impressions with a total spend of 202 yuan according to Tencent. But the media coverage about this incident is growing; good news for both Audi and Infiniti.

Based on the provided figure, the CPM is roughly 51 yuan (US$7.2) and Audi’s campaign most likely targets lower-tier cities. As Beijing and Shanghai targeted video ads on WeChat Moments cost about 100-300 yuan on CPM.

And, some influencers are making fun of Audi on China’s social media, which drives more free coverage.

Shuangye, a Weibo influencer with over 1 million followers, published a post, “Audi is indeed a generous company, spending money in WeChat Moments for Infiniti China…”

Some companies are taking advantage of this incident, like Volvo:

#Audi Infiniti# has become a hot topic on Weibo with over 3.4 million views as of writing this post. But neither Audi nor Infiniti has responded yet. It’s a good opportunity for Audi to generate good awareness for its Q8 though the value from from the incident far exceeds Audi’s 200 yuan spent.

Fake fans and manipulations on China social media

Update: Infiniti responded in the evening via its Weibo account: