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Last month, we looked at the 2019 performance of six of the west’s largest online companies, analysed the numbers and tried to define what it meant for them heading into 2020.
We promised that we’d do the same for some of the largest online companies in the east. So, what do Q3 2019’s reports tell us about how China’s internet giants are performing, how much they’re earning, the trends they’re investing in, and the decisions they may make in the year ahead?
Baidu
Baidu has been going through a tough time thanks to a combination of increased competition from rivals, slowing revenue growth, and other factors. To its credit, Baidu has worked to diversify the business to boost investor confidence – and its Q3 2019 earnings report suggest that the strategy is working.
One area that the search giant diversified into was streaming through its video platform, iQiyi. It’s working; iQiyi revenue hit 7.4 billion yuan ($1.05B), up 7% year-on-year (YOY), while subscribers over the same period increased by 31%.
Baidu has also worked to improve its mobile offering to capture customers who are investing an increasing amount of time in ‘super apps’. The Baidu app – providing users with search, videos and news – saw its daily active users grow 25% YOY in September to 189 million.
To boost further future growth, Baidu is investing in artificial intelligence and driverless cars. Overall, while Baidu’s 28 billion yuan ($4B) is flat when compared YOY, that it’s 6% higher than Q2 2019 shows that they’re heading in the right direction.
Alibaba
Conversely, Alibaba managed to beat revenue estimates, reporting a 40% surge in revenue for the September quarter. China’s largest corporation credits better shopping recommendations, better services for groceries, the growth of live streaming platforms and more for its impressive revenue growth.
Alibaba’s projected 119 billion yuan ($17B) of revenue shows the strength of Alibaba’s core e-commerce offerings in China, and also vindicates the company’s ‘aggressive’ strategy according to Vice Chairman, Joseph Tsai.
“We can afford to be aggressive,” he told analysts on a conference call. “We have the luxury.” The 119 billion yuan is up YOY from 85.15 billion yuan ($12B); Alibaba’s diverse offerings in areas such as cloud computing, rising 64% in revenue to 9.29 billion yuan ($1.3B), has been a major factor.
Alibaba’s goal after these results is to make sure that it keeps pace and doesn’t slow down. To do that, they’re reaching out to second- and third-tier cities across China, and is offering bargains to those consumers through its range of apps.
Alibaba is also continuing to diversify into areas such as entertainment and meal delivery.
Tencent
Tencent’s Q3 2019 showing wasn’t its best. While its Q3 revenue was 97.2 billion yuan ($13.9B), YOY growth of 21%, the company managed to miss its earning expectations of 99.044 billion yuan ($14.1B).
Overall, Tencent’s net profit was down 13% YOY to 20.4 billion yuan ($2.9B), and also 16% from the last quarter. Q3 2019 represents Tencent’s lowest quarterly profit this year and its first profit fall since Q4 2018.
The results are said to be down to the company’s poor performance across both the gaming and advertising sectors, as well as a wider adjustment of the company’s revenue structure. While games published by Tencent account for more than half of the Chinese gaming market, Q3 2019’s game revenue of 28.6 billion yuan ($4B) represents just 30% of total revenue.
In previous quarters, it may have been closer to 60%. Tencent also highlighted that an update of Dungeon & Fighter, one of its PC games, attracted less in the way of paying users. PC games revenue fell 7% in Q3 2019.
It’s not all bad for Tencent though; its games Honour of Kings, Perfect World Mobile and Peacekeeper Elite saw a rise in revenue of 25% to 24.3 billion yuan. Tencent will be hoping for a stronger 2020, and will likely look to invest in new advertising initiatives and fintech.
ByteDance
Another reason for Tencent’s poor showing has been down to strong competition from ByteDance. The incredible global performance of TikTok (known as Douyin in China) has helped it to exceed revenue expectations and attract Tencent’s audience.
After gaining 50-60 billion yuan of revenue in the first half of the year, ByteDance has revised its H2 2019 targets up from 100 billion yuan to 120 billion yuan ($17B). The majority of ByteDance’s revenue currently comes from China; with ads for TikTok now rolling out across western territories, ByteDance will be confident that the app will help its future revenues soar.
SensorTower analytics show that TikTok surpassed 1.5 billion global downloads over 2019, making it the third most downloaded non-gaming app of the year. In-app spending on TikTok hit $115.3 million over the course of 2019, with Chinese users accounting for approximately $84.5 million of that figure.
It’s hard to know properly as ByteDance isn’t a public company, but the performance of TikTok at home and abroad suggests that they’re confident of this being a successful year. So, what’s next for ByteDance?
As well as looking to keep the app popular, continue its upward trajectory and simplify the ad-buying process for international advertisers, ByteDance is aggressively investing in new apps to diversify the business.
These include a new music-streaming social media service, its own search engine, a work efficiency app could Lark, and more.
Weibo
Weibo’s Q3 2019 results show that the company is making small strides on the right path. Total net revenues stood at $467.8 million (¥3.3B), up 2% YOY from $460.2 million.
Advertising and marketing revenues were up 1% YOY to $412.5million (¥2.9B) from $409.3 million; its biggest results came from VAS revenues which increased 9% YOY to $55.3 million (¥386M). The increase here comes mostly from Weibo’s live streaming business, which the company purchased in Q4 2018.
Costs and expenses were down YOY; $295.2 million (¥2B) compared to $298.2 million in Q3 2019. Its biggest cost – a $41.9 million (¥293M) investment-related fair value mark to market gain in Q3 2018 – saw non-operating income for Q3 2019 stand at $5.3 million (¥37M), compared to $42.9 million in Q3 2018.
Overall, Weibo saw a YOY increase of monthly active users in September 2019 of 51 million, up to 497 million. Mobile MAUs represented approximately 94% of MAUs.
Everybody at Mobvista wishes you a Merry Christmas and a Happy New Year! If you’d like to learn more about the largest online companies across APAC and how you can partner with them to reach out to new audiences, speak to our team today.