Business

Tencent looks to short video ads to boost revenue amid game slump


Tencent operates the popular Chinese messaging app WeChat. The company has an in-app short-form video feature and has begun monetizing that feature through in-feed video ads. Tencent said such ads could become a “significant” source of revenue in the future.

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Tencent says advertising on its fledgling short-video platform could become a “significant” source of revenue in the future, even as other areas of its business – such as games – face with pressure.

This focus on promotional product from one of China’s biggest tech giants puts it in direct competition with the country’s two top short-video players: ByteDance’s Douyin, a cousin of ByteDance. TikTok in China as well Kuaishou.

On Wednesday, Tencent reported their first annual quarterly revenue decline when its game business ran into difficulties. Tighter technology regulation, the resurgence of Covid, and the subsequent economic slowdown in China have weighed on the entire company.

Tencent runs China’s most popular messaging app called WeChat has over a billion users. There is a short video platform built into WeChat. Users can scroll through different videos. In July, Tencent first started serving ads to users in a service it called video accounts.

The company says it will release more video inventory this month.

Video advertising will eventually grow into a significant source of revenue for us over time.

Martin Lau

Chairman of Tencent

On Wednesday, Tencent spent a large portion of its opening earnings call explaining the potential of video advertising, emphasizing the importance of revenue streams.

“The video account has become one of the most popular short video services in China with significant user engagement,” Martin Lau, Tencent president, told analysts.

“Strategically, they allow us to expand our ad market share. Since advertisers are already spending heavily on many short-form video platforms, we should be able to capture a lot of ad budgets.” than.”

Lau said it took five quarters for WeChat Moments, a social feature where users can post photos, videos and status updates, to reach 1 billion yuan ($147.42 million) in ad revenue. Quarterly. He says Video accounts will reach that goal more quickly given “current traffic size and advertiser demand for short-form video ads.”

“Video advertising will eventually grow into a significant revenue stream for us over time,” says Lau.

Tencent’s online ad revenue in the second quarter fell 18% year-on-year to 18.6 billion Chinese yuan as macroeconomic problems in China forced brands to cut back. budget.

The Shenzhen-based company is hoping video ads can help boost the division in the coming quarters.

Increased competition

Tencent’s foray into short video is relatively new, and it’s currently looking to ramp up the challenge against TikTok’s Chinese version of Douyin as well as Kuaishou.

The market potential can be large.

Short-form video revenue accounts for about 39% of China’s total digital ad revenue, according to data from QuestMobile. This is the largest single ad revenue category before categories like social and news.

Many of China’s tech giants have switched to short video and live streaming to open up new revenue streams.

James Mitchell, Chief Strategy Officer of Tencent, said the revenue potential “per minute of time” on video accounts would be higher than Moments.

Companies like Alibaba tried to use live streaming and short-form video as a way to generate sales on its e-commerce platform. Influencers can promote products via video, and users can click on items in the video to purchase.

When asked by an analyst if Tencent is moving in this direction, Lau said e-commerce live streaming is an “opportunity” but it “will take some time.”

Lau said Tencent will need to raise awareness of the video product, followed by merchants and advertisers.

“We’ll try to do that on a phased basis,” Lau said, referring to the growth of video accounts.



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