Menu

Timesdelhi.com

June 16, 2019
Category archive

YouKu

Tencent’s mixed bag for Q1: record profit despite weakest revenue growth yet

in alibaba/alibaba group/Asia/Baidu/Companies/Delhi/earnings/Facebook/India/iQiyi/ma huateng/mobile game/Netflix/online advertising/Politics/sensor tower/social media/TC/Tencent/WeChat/weixin/YouKu by

Tencent, Asia’s largest tech firm, had a horrific 2018 on account of a country-wide freeze on new game monetization in China, but there’s evidence it has turned the corner.

The company’s new mobile gaming hit Game for Peace has yet to kickstart the company’s recovery from a few weakening quarters, but its booming financial technology division has helped to neutralize the brunt to some degree.

The Chinese social media and gaming titan ended the first quarter of 2019 with its slowest revenue growth since going public to $12.69 billion, a 16 percent increase year-over-year. On the other side, net profit came in at a record $4 billion, beating analyst estimates in the process.

Though most famous for WeChat, video games have fuelled Tencent’s earnings and stock prices for many years. The lucrative segment took a hit during a prolonged licensing freeze last year that prevented Tencent from monetizing a few blockbuster titles like PUBG, and the impact was still felt in the latest quarter.

Online games revenue for Q1 dropped to 28.51 billion yuan ($4.1 billion), compared to 28.78 billion yuan a year before. Still, it is a testament to the global appeal of PUBG and Fortnite that the revenue drop wasn’t precipitous despite the issues in China.

The sluggish period may end soon as Tencent recently secured the official green light to start charging for its PUGB substitute Game for Peace, a less violent version than its predecessor. The new game grossed $14 million within the first three days of release, beating the $4 million Fortnite — the widely-heralded global smash hit — pocketed in the same duration, according to data from Sensor Tower.

On top of that, Tencent said it is introducing ‘season passes’ — using the same monetization technique as PUBG and Fortnite — to popular games Cross Fire Mobile, Honour of Kings and QQ Speed Mobile which could also boost monetization in China.

Fintech and enterprise-facing services made up Tencent’s second-largest revenue bucket with 21.79 billion yuan ($3.16 billion), a 44 percent growth year-over-year. In recent quarters, the firm began to single out its earnings for its booming fintech unit that contains its popular payments service WeChat Pay.

Unlike Facebook, Tencent hasn’t aggressively monetized its social media empire for advertising inventory until recently. Online ad revenues grew 25 percent to 13.38 billion yuan ($1.94 billion), accounting for 15.7 percent of total revenues.

That’s thanks to increased ad revenues from Weixin. All told, WeChat and its Chinese version Weixin crossed the 1.1 billion monthly active user benchmark. Its 20-year-old QQ, a legacy chatting app from the Chinese PC era, continued to grow and reached 823 MAUs.

Tencent’s Netflix -style video streaming service also contributed to increased ad earnings. Tencent Video, which has poured vast sums of money to license content in a bid to outrace Baidu’s iQiyi and Alibaba’s Youku, reached 89 million subscribers in the season.

Alibaba’s growth slows to lowest in 3 years

in alibaba/alibaba group/Asia/Baidu/Companies/Delhi/e-commerce/earnings/eCommerce/Hangzhou/India/iQiyi/online marketplaces/Politics/search engine/Tencent/YouKu by

China’s Alibaba continues to see slowing expansion in the latest quarter, but the e-commerce giant’s effort to spur new growth from new arenas have started to bear fruit.

The Hangzhou-based firm rang up $17 billion in revenue during the third quarter of 2019. That’s a 41 percent increase from the previous year but it also marks the slowest pace of growth since early 2016. Revenue from the quarter was driven by growth in the firm’s core e-commerce unit, the newly formed local services business between Koubei and Ele.me, and its fledgling cloud business, which now commands more than half of the Chinese market, Alibaba executive Joe Tsai said (paywalled) this month.

Revenue growth to its lowest since early 2016 as Alibaba weathers saturation and an economic slowdown in China

Revenue from Alibaba’s core commerce, “new initiatives” including local services, and cloud computing was up 40 percent, 73 percent and 84 percent, respectively. The commerce arm is expected to kick up growth when the giant finally starts monetizing its revamped user recommendation system and search engine, features that the giant launched last quarter. Alibaba said there’s no exact timeline for the rollout but the redesigns have already boosted user engagement and purchase conversion.

Alibaba trimmed its forecasted annual revenue target by four to six percent last November as China confronted a weakening economy at home and trade tensions with the U.S. Nonetheless, Alibaba executives continue to remind investors that domestic spending remains robust as shoppers look to upgrade consumption and impact of trade tensions is limited as Alibaba’s business depends primarily on local sales.

One highlight from the past quarter is the 33 million new monthly active users added to Alibaba’s online marketplaces on mobile devices, bringing the overall mobile MAU number to 699 million. Many of the new users are from third-and-lower tier cities, a victory Alibaba attributes to “simpler interfaces for first-time or less frequent users.” The giant has long coveted the next billions of internet users with a two-sided strategy. Aside from hawking products at them, Alibaba also enables farmers to sell rural produce to shoppers across China.

Alibaba’s forays into new fronts, though holding promise, have also put a squeeze on profitability. Costs of revenue stood at 52 percent in the December quarter, compared to 42 percent last year. The spike was due to the Ele.me consolidation, inventory and logistics costs from Alibaba’s aggressive offline expansion and direct import businesses, as well as spending by video streaming unit Youku on original content and licensing.

Digital entertainment remains the more lackluster performer across Alibaba’s business units as it grew at only 20 percent year-over-year. Youku is besieged by Alibaba’s peers Tencent and Baidu which each has their own video streaming business. Youku’s daily subscribers grew 64 percent in the past quarter though it hasn’t announced the exact user base in recent quarters. Both Tencent Video and Baidu’s iQiyi recently claimed to have crossed the 80 million subscriber mark.

Update: The title has been corrected.

Alibaba sets new Singles’ Day record with $31B in sales, but growth is slowing

in alibaba/alibaba group/Asia/ceo/China/daniel zhang/Delhi/e-commerce/eCommerce/India/jack ma/JD.com/joe tsai/Lazada/Lazada Group/online marketplaces/Online retailer/Politics/rokid/singles/singles' day/TC/YouKu by

Alibaba scored another blockbuster Singles’ Day after customers around the world shopped in stores and online on the tenth edition of its November 11 shopping festival. That puts this year’s gross merchandise volume – a measure for the dollar value of total transactions – at a staggering $30.8 billion, although the company recorded its lowest-ever annual growth rate for the event.

The figure makes the spending bonanza more than twice the size of Cyber Monday and Black Friday combined in 2017.

This is by far the largest-ever Singles’ Day to date. Just 15 hours and 49 minutes into the spending spree, transactions leapfrogged that of 2017’s tally of $25 billion, the company announced on Twitter.

As the world anticipates when the supercharged shopping day will hit a ceiling, sales are already cooling. The final total of 2018 represents a 27 percent increase from last year. That’s the lowest Alibaba has seen in the history of Singles’ Day sales, and a drop from 36 percent in 2017 — still, it remains impressive given how large the target is each year.

The slowdown came on the heels of Alibaba’s weakest revenue growth since seven quarters ago and a cut in annual revenue forecast – though revenues were still increasing at a healthy rate of 54 percent year-over-year in its latest quarter.

New growth fuel

Consumers are expected to tighten their purse strings as an economic downturn hits China. The ecommerce giant is, however, unconcerned for it’s betting on the country’s rising middle class in the long run.

Shoppers “are looking for new ways to upgrade their lifestyles and make their lives better,” Alibaba executive chairman Joe Tsai said at a media event on Sunday. “This will really offset a lot of the short-term cyclical effects.”

More than 300 million of China’s 1.4 billion people have entered the middle-income bracket, according to the national statistics bureau. That means discretionary items will drive much of the growth in the Chinese retail titan – and the upmarket trend is already underway. Health supplements, small home appliances, and skincare items are among the fastest growing categories by GMV during Singles’ Day this year.

Alibaba has also tapped into physical stores. The online retailer is poised to “digitize the whole consumer retail market,” Daniel Zhang, current CEO and incoming chairman as Jack Ma hands over the helm next year, told media on Sunday. Over the past two years, Alibaba has been jostling with close rival JD.com to snap up strategic partnerships with brick-and-mortar retailers who remain keen to reach Chinese consumers.

Alibaba CEO Daniel Zhang started the Singles’ Day shopping festival in 2009 when he was in charge of the company’s Tmall business (Photo Vivek Prakash/Bloomberg via Getty Images)

There are nuances in the sheer size of GMV, however, as it doesn’t reflect final revenues. A slew of factors could boost the figure. For one, refunds cannot be processed on November 11. Many vendors run pre-sales weeks in advance, taking deposits for items at the time but only processing full payments on Singles’ Day.

Alibaba also aired a star-studded gala on the night of November 10 to drum up sales. It said that over 240 million people – that’s almost one in five people in China – watched the show and its Singles’ Day commercials through two of China’s top TV broadcasters and Alibaba’s own Youku video streaming site.

Next ten years

As Alibaba enters its 19th year, it’s turning to new channels to sell. “Voice will be an important entry point,” said Zhang. The firm’s efforts to brace for China’s transition from a mobile-first age into an AI-powered one include a tie-up with voice assistant startup Rokid.

Alibaba also has its sights set on international consumers. This year, merchants from over 200 countries participated in Singles’ Day, including those on Alibaba’s Southeast Asia-based Lazada platform. “From day one, our dream was to create a global shopping day,” suggested Zhang.

An 11.11 advertisement in New York

Alibaba celebrated another big milestone this year: over one billion packages were shipped throughout the shopping day. But the company is also under mounting pressure to address its packaging waste problem.

“We have to redefine packaging,” said Zhang. That means more than using recycled material. More important, the CEO wants items to travel at a closer distance. This is made possible by algorithms that optimize inventory management. Alibaba could also lean on Ele.me, which it acquired this year and runs a fleet of food delivery staff, to process neighborhood orders which may require less or no packaging at all.

Singles’ Day was first popularized as an antidote to Valentines’ Day for the way the date is written numerically: 11.11, which represents four single people. Nearly a decade after Zhang first turned it into a sales promotion for Tmall, Alibaba’s online sales platform for brands, the one-day event has swollen into the world’s largest online shopping festival.

“We created this day for people who are lonely. Today, we totally redefined the day for how people shop,” concluded Zhang.

Report: Smartphone usage set to overtake time spent watching TV in China

in alibaba/alibaba group/alipay/Ant Financial/Asia/Baidu/China/Delhi/emarketer/India/iQiyi/Media/Netflix/Politics/TC/Tencent/WeChat/YouKu/Youku Tudou by

2018 is the year that smartphone usage eclipses time spent watching TV in China and it’s all down to the growth of digital video platforms, according to a new report from eMarketer.

You’d be forgiven for thinking that this had already happened in China, which happens to be the world’s largest smartphone market, but eMarketer forecasts that the momentous moment is about to arrive.

According to the report, the average adult in China is set to spend 2 hours and 39 minutes per day on a mobile device this year, up 11.1 percent on 2017. Watching TV, meanwhile, is set to fall by two percent to reach 2 hours 32 minutes daily.

eMarketer said that the growth of digital video services is “a key driver” in this change. The company forecasts that online video time per day will leap 26 percent year-on-year to reach 58 minutes per adult on average. It is further predicting that by 2020 China’s adult population will spend one-third of their time online watching videos.

The signs have been pointing to digital media’s charge in China for some time, with the country’s top firms putting considerable cash behind the leading players.

Alibaba acquired Youku Tudou in a 2015 deal that valued the YouTube-like service at $4.6 billion, while rival Tencent has its own ‘Tencent Video’ service and Baidu — the third part of China’s traditional tech power trio — incubated video service iQiyi before taking it public in a U.S. IPO that raised $1.5 billion earlier this year. All three of these streaming platforms combine user-generated video with produced series, some of which comes from Netflix.

Beyond those three, there are also vertical focused video services which include animation platform Bilibili (which just went public in the U.S.), live-video platforms such as Tencent-backed Kuaishou, and Chushou, which focuses on e-sports and landed investment from Google earlier this year.

Video may be the key driver, but it is far from the only reason that keeps Chinese people glued to their phones. Chat app WeChat is the stickest of all mobile apps in China. It claims to have over 900 million active users who send 38 billion messages and over 205 million phone calls via the app each day.

WeChat also includes offline payments which are another major use for smartphones in China. Alongside WeChat Pay, Alibaba’s Alipay claims over 520 million users who use its service instead of cards or cash when paying for goods.

Ant Financial, Alipay’s parent company, is being tipped to raise $9 billion in new funding at a valuation that could reach as high as $150 billion.

Hat tip @sirsteven

Go to Top