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

Tencent Holdings Ltd.'s standout first quarter was again dominated by its games, while developments in new areas such as video and Mini Programs  look positive as users increasingly connect via mobile devices.

On the Up
Tencent revenue beat estimates, with games a greater contributor
Source: Bloomberg

I've written before about the flip side: Mobile users spend more time on Tencent platforms, but less money on games. That's why the company behind QQ and WeChat is setting itself up to leverage that massive user base to secure more ad revenue as users go mobile.

Wise Move
QQ kept increasing its monthly active users by luring consumers off desktops and onto smart devices
Source: Tencent, Bloomberg

A few data points released by Tencent help tell the tale.

Peak concurrent users, or PCU, is not a perfect metric: Short-term incentives or a heavy campaign could easily spike the numbers for the brief period required to hit a high (I'm not suggesting Tencent did this). Yet looking at that gauge over an extended period can help us see a trend -- meaning that it's consistent, if not accurate.

All Rise
An increasing number of QQ users are logging on during each quarter's peak period as the product becomes more mobile
Source: Tencent

The most obvious point is that as mobile has grown, so has PCU. That's probably because users can log on and off more quickly when QQ is in their pocket (or hand) than when it's on a desktop.

Extending the analysis further and dividing PCU by monthly active users, another trend is apparent. PCU/MAU analysis, like the more common daily/monthly active user metric, has many inherent flaws, but once again we can see a bigger picture.

From 21 percent four years ago, a total of 31 percent of QQ's monthly users logged on during last quarter's peak. That could indicate a level of engagement that advertisers are looking for. How long those users stay, or why, would be far more useful metrics, but Tencent is balancing the need for providing transparency with the desire to not divulge its secret recipe.

The proportion of QQ monthly active users logged on at the time of its peak usage is rising
Source: Tencent, Bloomberg
Note: Shows peak concurrent users divided by monthly active users

Historically, Tencent's revenue has been driven by games and in-app purchases. While these are linked to the number of people logging on -- more customers generally results in more games or in-app purchases -- advertisers want to see not just user numbers, but also engagement.

Hence Tencent reclassifying how it accounts for ad revenue. Last quarter I pointed out that the company was probably sacrificing display for performance ads, which accrue revenue based on clicks. Such cannibalization probably will continue, but with attention turning to the platform rather than the revenue model , investors will have clarity on the underlying driver. It also allows Tencent to focus less on the what and more on the where.

As China's internet boom slows -- expect this to be a topic for Alibaba Group Holding Ltd. when it speaks with investors Thursday -- companies need to come up with strategies that focus on extracting more money per user. The Tencent report indicates it's setting itself up to do just that.

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

  1. Mini Programs are apps installed inside the main WeChat/Weixin app for a specific purpose, such as bicycle rental.

  2. Platform model: media vs. social.
    Revenue model: display vs. performance.

To contact the author of this story:
Tim Culpan in Taipei at

To contact the editor responsible for this story:
Paul Sillitoe at