A growing Chinese mobile ad market and China’s booming outbound tourism are growth drivers that Tencent’s popular messaging platform WeChat is well positioned to capitalize on.
Apart from mobile gaming, online advertising is a major growth driver for Tencent. Tencent’s latest earnings report showed that online advertising revenue rose 55% to 10.15 billion yuan, helped by a 61% rise in “social and others advertising” revenue, mainly from WeChat advertisements. There is plenty of scope for Tencent to grow this area of its business.
Ad revenues drive most tech companies’ revenues; however, for Tencent, the opportunity is still relatively untapped. Despite having 963 million monthly active users, approaching half of Facebook’s (NASDAQ:FB) 2 billion, Tencent is forecast to rake in just US$7 billion in ad revenue compared to Facebook which is forecast to earn US$36 billion, according to eMarketer.
China is the world’s second-largest advertising market and 57.2% of that expenditure will go towards online advertising – a significant increase from 5 years ago when online advertising accounted for just 19.4% of overall ad spend in China.