Telecom Lead Asia: OTT giant Tencent Holdings has reported 228 percent growth in active users to 194 million in the first quarter of 2013.
Tencent is hoping to further monetize its Weixin, or WeChat, app. Weixin is similar to WhatsApp, Line or KakaoTalk, apps that allow users to swap messages, stickers, voice messages over a data connection.
Tripling the number of active users for its mobile chat application in the first quarter will be a boon to China’s online gaming and social networking firm as it tries to diversify its revenue stream, Reuters reported.
Tencent has invested in the app and e-commerce to stimulate revenue growth, as other Chinese Internet companies also try to broaden their business.
In May, Alibaba Group bought stakes in Sina Corp’s social-networking website Weibo and in navigation and maps firm AutoNavi.
Strong sales of online advertising and gaming helped Tencent report a 37 percent rise in first-quarter profit to 4.0 billion yuan ($645 million).
Major online gaming titles such as League of Legends and the newly released Legend of Yulong helped increase revenues by 40.4 percent to 13.5 billion yuan in the quarter.
Revenue from non-mobile online games was up 34 percent year-on-year to 7.1 billion yuan while sales from e-commerce transactions rose 14 percent from the previous quarter to 1.9 billion yuan.
Ovum recently said that the increased mobile broadband penetration in China, the availability of affordable smartphones, and WeChat’s blend of social messaging and push-to-talk features have combined to make WeChat the fastest-growing messaging platform in the world. It has already started to establish itself internationally, with over 40 million users spread across Indonesia, Thailand, India, and now the US.
At present, WeChat is free to use, although Tencent is exploring various monetization options. As Tencent experiments with monetizing the service there is no question that it has already had a significant impact on the messaging revenues of MNOs in China. Ovum estimates that they have already lost nearly $1.5 billion in SMS revenues due to a strong substitution effect.
Ovum believes there are four possible motives behind the telco push against Tencent. First, a successful move to force Tencent to charge for WeChat would likely cause users to desert the messaging service, slowing the decline of SMS revenues.
Second, many users of WeChat on China Mobile appear to still be on EDGE rather than TD-SCDMA; the greater signaling load of OTT apps such as WeChat on EDGE networks than 3G is to China Mobile’s disadvantage.
China Mobile could easily raise data tariffs to recoup some of the costs of this disproportionate signaling burden, but not without losing users to rival networks and thereby exacerbating the decline in its market share.
Third, China Mobile may be trying to buy time and space to allow its own Fetion messaging service to hold its own against WeChat.
Finally, and perhaps most importantly, China’s telcos are firing the first salvos against Tencent in the run-up to the launch of MVNO services, which will increase competition.
