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Tencent's WeChat popularity grows as revenue, profit jumps

Chinese Internet giant Tencent Holdings reports strong second-quarter earnings as online advertising and smartphone gaming revenues grow.


Chinese Internet giant Tencent Holdings, which operates online games and the WeChat messaging service, said Wednesday its profit grew 42 percent as smartphone gaming revenues continue to rise.

Tencent reported second-quarter earnings (PDF) of 5.83 billion yuan ($949 million) and revenue of 19.74 billion yuan for the three months ended June 30. Earnings excluding some items were 5.87 billion yuan.

Wall Street predicted the company would post earnings of 5.73 billion yuan and revenue of 19.20 billion yuan.

Tencent's growth came in part from online advertising, as revenue jumped 75 percent quarter over quarter. Online games revenue increased 7 percent from the previous quarter, driven mainly by revenue from smartphone games integrated with its QQ social network and Wexin messaging app, the Chinese version of WeChat. Social network revenue also increased 15 percent quarter over quarter.

WeChat, which competes with the likes of BlackBerry Messenger and Facebook's WhatsApp, is a key component to Tencent's success. WeChat and Weixin have a combined 438 million monthly active users. That figure is up 57 percent compared to the same period last year.

Tencent doesn't get much attention in the US, but it's a powerhouse in the mobile and digital space. The company's QQ social network, which also includes instant-messaging features, has 829 million monthly active users, including 521 million people that use the mobile version of the service. Tencent also plays a prominent role in gaming through its many services, including QQ Games, and has one of the largest user bases of any China-based company.

In an earnings call on Wednesday, Tencent Chief Strategy Officer James Mitchell focused much of his attention on gaming, saying that he expects revenues from that important division to stay stable through the rest of the year. According to Reuters, which earlier reported on his comments, Tencent is focusing its gaming services on the "user experience" in the next several months. After that effort is completed, the company hopes gaming revenue will jump considerably in 2015.

CNET has contacted Tencent for additional comment on the earnings report. We will update this story when we have more information.