March 18, 2020 / 2:56 AM / 15 days ago

China's Tencent sees WeChat usage surge on virus

BEIJING (Reuters) - China’s gaming and social media group Tencent Holdings Ltd said on Wednesday the coronavirus outbreak has driven up traffic to its WeChat platform and other services, though it has not yet seen any significant financial benefit.

FILE PHOTO: People visit Tencent's booth at the World 5G Exhibition in Beijing, China November 22, 2019. REUTERS/Jason Lee/File Photo

Tencent’s businesses are mainly online, positioning it uniquely against other tech giants such as Alibaba Group Holding Ltd that focus on e-commerce and whose supply chains have been severely disrupted by the outbreak which began in China.

In a fourth-quarter earnings report that struck a cautious tone over the impact the epidemic would have on its business, Tencent was more optimistic than most businesses have been.

Its gaming titles such as Honour of Kings and Peacekeeper Elite as well as video streaming services saw an uplift in downloads as China’s government urged millions of people to stay at home and away from crowded places to curb the virus’ spread.

“Mobile games are one of the very few entertainment options during the coronavirus outbreak,” said analyst Nan Lu at researcher Sensor Tower, who said downloads of Tencent games increased by 10.4% year-on-year in February, and revenue increased by 11.8%.

Overall, downloads of all Tencent apps for this February grew 32.3% month-on-month and 42.9% year-on-year, she said.

Tencent said the coronavirus drove 8 billion visits to its WeChat platform as users flocked to get “health codes” they need to show authorities in order to travel around the country.

It also saw traffic surge for its teleconferencing app Tencent Meeting, as well as Tencent Health which allows artificial intelligence-powered self-diagnosis.

SOME HEADWINDS

However, the epidemic is delaying customers’ implementation of cloud-related initiatives and will negatively impact cloud services revenues in the short-term, Tencent said.

In the longer term, more firms could adopt cloud-based solutions as the virus forces people to work from home.

China’s advertising industry will also likely be heavily impacted by the virus, with less demand from usual big spenders in the car and luxury sector, the company said. Advertising makes up about 20% of its revenue.

But Tencent’s President Martin Lau said the company would likely be able to maintain steady advertising revenue growth overall because although media advertising was hit hard, other companies had stepped up their campaigns on its social media platforms like WeChat moments, he said.

“When it’s dark in the east, it’s bright in the west,” he told journalists.

Tencent missed expectations with a 21.58 billion yuan ($3.07 billion) profit for the three months through December. That compared with a 22.85 billion yuan average from 15 analyst forecasts compiled by Refinitiv.

Revenue rose 25% to 105.8 billion yuan, versus the 102.9 billion yuan average estimate of 17 analysts.

Shares in Tencent closed 4.5% lower on Wednesday. Tencent’s shares have fallen 11.1% so far this year as the coronavrius roiled global markets, versus a 21% decline in the Hang Seng index

($1 = 7.0058 Chinese yuan renminbi)

Reporting by Pei Li and Brenda Goh; Editing Christopher Cushing and Elaine Hardcastle

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