Tech

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

Tencent's customers aren't spending enough time in Fairyland. They're also not taking as much time to chase either the Legend of Yulong or the Legend of Xuanyuan, plus they're doing a whole lot less Blade wielding.

More than half of Tencent's revenue comes from online games, and it's been particularly successful with the Massively Multiplayer Online Game genre, where thousands of users log on simultaneously to battle demons, monsters or each other. Its portfolio of more than 20 titles includes Journey to Fairyland, World of Fantasy, Blade & Soul, Blade & Sword II and Moonlight Blade.

Addictive may be an apt description for them, but for Asia’s biggest Internet company, lucrative is an even better adjective. Quarterly average spending per user of as much as 455 yuan ($70) means Tencent garners double the amount of money from each customer than its smartphone games and significantly more than its advanced casual games, which include racing, shooting and sports titles such as NBA2k Online and FIFA Online 3.

Money Game
Tencent's Massively Multiplayer Online Games garner as much as double the quarterly revenue per user of its smartphone game portfolio
Source: Tencent

Unluckily for Tencent, though, while casual and smartphone games are getting more popular, fewer and fewer of its gaming customers are spending time on these lucrative MMOG offerings. From an average 2.3 million users being logged on at any one time in the first quarter of 2014, that figure stood at 1.5 million in the first quarter of this year, Tencent's first-quarter financials released Wednesday show.

Attention, Please
Average concurrent user numbers of Massively Multiplayer Online Games, Tencent's most lucrative category, have been declining
Source: Tencent

A week ago, Gadfly wrote how NetEase, which gets almost all of its revenue from games, may be less affected by China's economic slowdown than other Internet players because its exposure to e-commerce and advertising is relatively low. The same might be said for Tencent, which posted quarter-on-quarter increases in revenue from its game and social businesses but was hit by an 18 percent drop in advertising sales thanks to China's ``challenging macroeconomic environment.''

It's not only games that could shelter Tencent from China's economic malaise. Its very sticky chat-app portfolio of QQ and Weixin (aka WeChat) also give it an arguably stronger position. Yet even revenue from social relies to a certain degree on advertising and e-commerce, which makes a solid game business almost as important to Tencent as it is to NetEase.

Right now, it would seem premature to sound the alarm bells on Tencent's gaming business. But investors better hope there's not trouble brewing in this World of Fantasy.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. On a year-on-year basis ad sales rose, but that's coming from a low base and was thanks to Tencent's strong positions in gaming and social.

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net