Chinese tech giant Tencent is seeing a boost for its online gaming business, but the coronavirus pandemic is still expected to hit the company hard.
With people across the world staying indoors wherever possible, online gaming is experiencing an unprecedented boom. Now, tech giant Tencent – one of the world’s largest gaming and social media companies – has said this lockdown effect is breaking records.
According to Bloomberg, Tencent’s latest earnings report showed a 25pc increase in online gaming revenue, which is the fastest growth rate since the first quarter of 2018. This was bolstered by the addition of millions of new gamers.
Overall, however, its latest earnings have fallen below expectations as many other aspects of Tencent’s business have either taken a hit already or are facing decreased spending. The company recorded $3.1bn in quarterly revenue, which was lower than expected and was further impacted by costs increasing by 20pc. This was largely driven by its efforts to acquire new content as it looks to compete with ByteDance, the owner of the video sharing platform TikTok.
‘Tencent’s fight against gravity’
While Tencent has added millions of new gamers to its titles, there are no assurances that these users will keep playing its games and – more importantly – spending on in-game purchases. Long-established Tencent games such as Honor of Kings have seen a drop in users in recent weeks as people in China slowly return to work.
There are also issues with launching new titles in China – such as Call of Duty Mobile – where government regulation has increased, becoming stricter and slower to secure than before.
Michael Norris, a Shanghai-based analyst with AgencyChina, said: “Tencent’s fight against gravity will continue until it gets positive signals from China’s gaming regulators.
“Mobile titles like Dungeon & Fighter, League of Legends and Call of Duty Mobile could be a big boon for Tencent in 2020.”
Another element working in Tencent’s favour is its hugely popular messaging platform WeChat, which saw 8bn people search the platform for ‘health codes’ needed for travel in China during the lockdown.