Icons of messaging applications WhatsApp of Facebook (L), Laiwang of Alibaba Group (C), and WeChat (Weixin) of Tencent Group are seen on the screen of a smartphone. (Photo : REUTERS)
Tencent Holdings Ltd. should now focus on attracting more mobile advertising to further boost its profits after its online games did the trick last year, according to analysts.
Online games raised the company's net profits by 50 percent in the fourth quarter of last year to 5.86 billion yuan from 3.91 billion yuan a year earlier.
The Shenzhen-based company's revenue rose 24 percent to 20.98 billion yuan from 16.97 billion yuan a year ago.
Its revenue from online games, including those played on PCs as well as smartphones and tablets, rose 41 percent to 11.96 billion yuan.
"Mobile games' growth is already priced in. The upside (for Tencent shares) will likely depend on advertising revenue," Jefferies analyst Cynthia Meng said earlier this week.
Investors and analysts see a potential moneymaker in Tencent's WeChat, QQ messaging and social-networking services for advertisements.
Tencent has been gradually adding more advertising features to WeChat and QQ.
Earlier this year, the company added sponsored posts to WeChat's "Moments," a section similar to Facebook where users could share photos and other updates.
Meanwhile, QQ increased its active users on smartphones and tablets from 542 million in September to 576 million in December.
Barclays analyst Alicia Yap projected revenue from such advertisements to reach about 1.89 billion yuan this year and increase rapidly to 10.2 billion next year and account for 42 percent of Tencent's total advertising revenue.
Search provider Baidu, Inc. and e-commerce company Alibaba Group Holding Ltd. are expected to provide fierce competition to Tencent as the three firms continue to expand through acquisitions and step into each other's turf.
