Tencent coining it in mobile gaming market

TENCENT looks to have cracked mobile gaming. The Chinese web giant raked in almost $500m in revenue in the second quarter from users who went wild for games like Timi Run Everyday and Thunder Fighter.

The worry is that Tencent will suffer the same fate as King Digital, which is struggling to repeat the Candy Crush Saga craze. But the social media and gaming group’s not-so-secret weapon is its chat app WeChat. This should give its lucrative business more lives.

Mobile games did not figure in Tencent’s results a year ago, but accounted for 15% of the group’s $3.2bn in total revenue in the most recent quarter.

While still a small part of its overall gaming and social-networking business, the 67% quarter-on-quarter jump in mobile revenue means handset games are an increasingly big part of the $161bn group’s value.

China’s online gaming market is expected to expand by 26% a year for the next three years, with revenue hitting 225-billion yuan ($36.6bn) in 2017, according to iResearch.

Of that, mobile gaming is expected to grow at an annual rate of 48% to surpass 70-billion yuan by 2017.

Tencent has proven skilled at pushing out games that are both lucrative and addictive: it has seven of the top 10 daily grossing mobile games on Apple’s Chinese app store, according to Barclays.

The worry is that the bonanza will be short-lived as players lose interest in hits like Everybody’s Marble and National Aircraft War. But WeChat gives Tencent a platform to launch in-house games, as well as those developed by others. The messaging and social-networking app had 438-million monthly active users at the end of June, up 11% in the quarter.

Tencent has already warned that growth from handset games will likely slow in the second half of the year.

Perhaps taking a cue from King Digital — which at one point generated 80% of its revenue from its hit game — Tencent is looking to outside developers to launch more games on WeChat. A slowdown in this case would not mean game over.

Gaming and social-media group Tencent reported revenue of 19.7-billion yuan ($3.2bn) for the second quarter of this year, a 37% increase from the same quarter last year. Earnings increased 58% year-on-year to 5.8-billion yuan.

Revenue from online games and social networking, known as “valued-added services”, accounted for 80% of Tencent’s total revenue for the second quarter.

Revenue from mobile games alone jumped to 3-billion yuan in the second quarter from 1.8-billion yuan in the first quarter. Total revenue from gaming on both desktops and mobile devices reached 11.1-billion yuan, a 46% increase from the same period last year.

WeChat, the company said, had 438million monthly active users at the end of June, up from 396-million three months earlier.