Tencent is looking at short video ads to boost revenue amid declining gaming

Tencent is looking at short video ads to boost revenue amid declining gaming
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Tencent operates WeChat, the ubiquitous Chinese messaging app. The company has a short-form video feature in the app and has started monetizing it through in-feed video ads. Tencent said such ads could become a “substantial” source of revenue in the future.

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ten cents has said advertising could become a “significant” source of revenue in the future on its fledgling short-form video platform, even as other areas of its business – such as gaming – face pressure.

The focus on this ad product from one of China’s biggest tech giants puts it in direct competition with the country’s two leading short video players: ByteDance’s Douyin, TikTok’s Chinese cousin. Kuaishou.

on wednesday Tencent reported its first annual quarterly revenue decline as his gaming business faced headwinds. Tighter tech regulation, a resurgence of Covid and subsequent economic weakness in China weighed on the overall company.

Tencent operates China’s most popular messaging app, WeChat has more than one billion users. WeChat has a short video platform built into it. Users can scroll between different videos. In July, Tencent began serving ads to users for the first time in a service it calls video accounts.

The company said it will release more video ad inventory this month.

Video ads will become a significant revenue stream for usage over time.

Martin Lau

President, Tencent

Tencent spent a large portion of its opening earnings call on Wednesday explaining the potential of video ads, underscoring how important the revenue stream can be.

“Video accounts have become one of the most popular short video services in China with significant user attraction,” Martin Lau, president of Tencent, told analysts.

“Strategically, they allow us to expand our ad market share. Advertisers are already spending aggressively on several short-form video platforms, and we should be able to capture more ad budgets.”

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

“Video ads will become a significant revenue stream for us over time,” Lau said.

Tencent’s online advertising revenue fell 18% year-on-year to 18.6 billion Chinese yuan in the second quarter as macroeconomic problems in China caused brands to cut budgets.

The Shenzhen-headquartered company hopes video ads will help boost its distribution over the coming quarters.

competition is rising

Tencent’s foray into short video is relatively new, and now it’s looking to step up its fight against Douyin and Kuaishou, China’s version of TikTok.

The market potential could be huge.

According to QuestMobile, short-form video revenue accounts for about 39% of China’s total digital ad revenue. It is the largest single ad revenue category, ahead of categories such as social networks and news.

China has many tech giants turned to short video and live streaming to unlock new revenue streams.

James Mitchell, Tencent’s chief strategy officer, said the revenue potential per minute of time spent on video accounts would be higher than Moments.

companies like alibaba They tried to use live streaming and short form videos to generate sales on their e-commerce platform. An influencer can promote a product through a video, and users can click on the items in the video to make a purchase.

When asked by an analyst whether Tencent would move in that direction, Lau said live streaming of e-commerce was an “opportunity” but that it would “take some time.”

Lau said Tencent will need to build awareness of the video product, then merchants and advertisers.

“We will try to do it gradually,” Lau said, referring to the development of video accounts.

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