Video advertising sales in China are expected to cool sharply this year as the market peaks, according to Tencent Holdings.
As of March, the operation had 89 million subscribers, but Sun Zhonghuai, chief executive of the social media and entertainment giant’s video streaming business, said there are signs the market has matured and is nearing its high point.
“It took us a year to expand our user base from 43 million people to 82 million people,” Sun told a conference in Kunming. However, only seven million new users have been added in the past six months, Nikkei Asian Review reported.
“We also expect that for the whole of 2019, the growth rate of advertising sales on [China’s] video platforms will decrease from 37% previously to 19%,” he continued, referencing a recent study by eMarketer.
“All these factors have led to the conclusion that China’s streaming market is about to mature.”
Tencent was hit by its first quarterly profit dip in 13 years last year following a decision by the Chinese government to freeze the issuance of new game licences; revenue from its streaming was a large factor in helping the company out of financial difficulties.
The government has since restarted issuing licences and Tencent’s gaming business is expected to pick up.
Online advertising made up $1.94 billion – or almost 16% – of Tencent’s revenue in the first quarter of this year, but growth in online ad sales slowed. An analyst quoted by Nikkei Asian Review blamed China’s stuttering property and car markets, which represent two key sources of online ads, and said the sluggish growth was expected to continue.
Analysts suggest this slowdown could be the reason for Tencent’s push into industrial services. Last year it announced a restructuring and said its “mission is to become a digital assistant for all industries”.
The company says it has used its instant messaging app, WeChat, which has 1.1 billion users, to help connect corporate clients with customers, and has moved into sectors ranging from retail to healthcare and transportation.
As of March, the operation had 89 million subscribers, but Sun Zhonghuai, chief executive of the social media and entertainment giant’s video streaming business, said there are signs the market has matured and is nearing its high point.
“It took us a year to expand our user base from 43 million people to 82 million people,” Sun told a conference in Kunming. However, only seven million new users have been added in the past six months, Nikkei Asian Review reported.
“We also expect that for the whole of 2019, the growth rate of advertising sales on [China’s] video platforms will decrease from 37% previously to 19%,” he continued, referencing a recent study by eMarketer.
“All these factors have led to the conclusion that China’s streaming market is about to mature.”
Tencent was hit by its first quarterly profit dip in 13 years last year following a decision by the Chinese government to freeze the issuance of new game licences; revenue from its streaming was a large factor in helping the company out of financial difficulties.
The government has since restarted issuing licences and Tencent’s gaming business is expected to pick up.
Online advertising made up $1.94 billion – or almost 16% – of Tencent’s revenue in the first quarter of this year, but growth in online ad sales slowed. An analyst quoted by Nikkei Asian Review blamed China’s stuttering property and car markets, which represent two key sources of online ads, and said the sluggish growth was expected to continue.
Analysts suggest this slowdown could be the reason for Tencent’s push into industrial services. Last year it announced a restructuring and said its “mission is to become a digital assistant for all industries”.
The company says it has used its instant messaging app, WeChat, which has 1.1 billion users, to help connect corporate clients with customers, and has moved into sectors ranging from retail to healthcare and transportation.
Sourced from Nikkei Asian Review; additional content by WARC staff
