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Tencent's mobile games revenues drop, but daily users are on the rise

Smartphone titles still generate almost a quarter of Chinese giant's $11.1 billion revenue in Q2 2018

Tencent has released its financial results for second quarter and first half of 2018, which shows a marked increase in revenues across the board.

For the three months ended June 30th, Tencent reports revenues of 73.6 billion yuan ($11.1 billion) - a year-on-year increase of 30 per cent. First half revenues fared even better, with a 39% boost year-on-year to 147.2 billion yuan ($22.2 billion).

Meanwhile, operating profit for Q2 actually dipped by 3% year-on-year to 21.8 billion ($3.3 billion) - but for the six month period this increased by 25% to 52.5 billion yuan ($7.9 billion).

Looking at the firm's online games sector, smartphone titles continue to be the main driver of revenue with 17.6 billion yuan ($2.54 billion ) generated over the quarter - just short of 25% of the company's total revenues. This is also a 19% improvement compared to the same quarter last year, but a 19% drop from the previous three-month period.

Tencent attributed this to the "non-monetisation of popular tactical tournament games" and the fact that five of the seven new games launched towards the end of the quarter.

The shift of users to playing these non-monetised games is also behind a drop in monetisation per user, although Tencent notes that the number of daily active users did actually rise year-on-year "at a double-digit rate". Going forward, the company intends to find ways to monetise these titles, as well as launch a broader range of games in categories with a higher Average Revenue Per User, such as RPGs.

Tencent observes that these plans "will require several months to take effect" but is encouraged by "the ongoing growth in the number of DAUs playing our mobile games."

It also plans to improve on its monetisation for games outside its home market - specifically Arena of Valor and PUBG Mobile, which it deems "highly suitable for expansion to gamers outside China."

Arena of Valor has more than 13 million DAUs and generated over $30 million per month outside China for the first half of the financial year. Meanwhile, the mobile version of PlayerUnknown's Battlegrounds has 14 million DAUs (excluding Japan and Korea) and generated over $20m in July outside China.

PC games revenues came in at 12.9 billion yuan ($1.87 billion), but this was down 5% year-on-year due to the ongoing shift towards mobile, and down 8% from the previous quarter due to "weak seasonality". Again, the growth in audiences was an encouraging sign, with League of Legends' Chinese DAUs actually up over the previous quarter.

Tencent chairman and CEO Ma Huateng said: "During the second quarter of 2018, we deepened user engagement with increased daily active users and time spent across our social, games and media platforms... While our mobile game revenue was impacted by transient factors, we saw healthy growth in the number of people playing our mobile games each day in China and overseas."

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