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Tencent looks to short video ads to spice up revenue amid gaming slump

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Tencent runs the ever present Chinese messaging app WeChat. The corporate has a brief form video feature with within the app and has began to monetize that through video ads within the feed. Tencent said such ads could develop into a “substantial” income in the longer term.

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Tencent said promoting in its nascent short video platform could develop into a “substantial” revenue source in the longer term, whilst other areas of its business — comparable to gaming — face pressure.

The concentrate on this promoting product from certainly one of China’s biggest technology giant puts it in direct competition with the country’s two leading short video players: ByteDance’s Douyin, the Chinese cousin of TikTok in addition to Kuaishou.

On Wednesday, Tencent reported its first ever year-on-year quarterly revenue decline as its gaming business faced headwinds. Tighter tech regulation, Covid’s resurgence and the next economic weakness in China weighed on the general company.

Tencent runs China’s hottest messaging app called WeChat which has over one billion users. There may be a brief video platform built inside WeChat. Users can scroll through different videos. In July, Tencent for the primary time began serving ads to users in that service it calls video accounts.

The corporate said it’ll release more video ad inventory this month.

Video ads will eventually grow into a considerable revenue source for us over time.

Martin Lau

President, Tencent

On Wednesday, Tencent spent a big a part of the opening of the earnings call explaining the potential of video ads, underscoring how essential the revenue stream might be.

“Video accounts has develop into one of the vital popular short video services in China with substantial user engagement,” Martin Lau, president of Tencent, told analysts.

“Strategically, they allow us to expand our ad market share. As advertisers have already been spending aggressively on multiple short-form video platforms, we should always give you the option to capture more promoting budgets.”

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

“Video ads will eventually grow into a considerable revenue source for us over time,” Lau said.

Tencent’s online ad revenue within the second quarter fell 18% year-on-year to 18.6 billion Chinese yuan as macroeconomic issues in China led to brands cutting budgets.

The Shenzhen-headquartered company is hoping video ads might help boost the division over the approaching quarters.

Competition rises

Tencent’s foray into short video is comparatively recent and it it’s now trying to step up the challenge to TikTok’s Chinese version Douyin in addition to Kuaishou.

The market potential might be big.

Revenue from short form video accounts for around 39% of China’s total digital ad revenue, in response to data from QuestMobile. It’s the largest single ad revenue category ahead of categories like social networking and news.

A lot of China’s technology giants have turned toward short video and livestreaming to unlock recent revenue streams.

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

Corporations like Alibaba have tried to make use of livestreaming and short-form video as a way of generating sales on its e-commerce platform. An influencer might advertise products via video and users can click items within the video to purchase.

When asked by one analyst if Tencent will move on this direction, Lau said e-commerce livestreaming is an “opportunity” nevertheless it “will take a while.”

Lau said Tencent might want to construct up awareness of the video product, then onboard merchants and advertisers.

“We’ll attempt to do it on a stage-by-stage basis,” Lau said, referring to the event of video accounts.

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