Virtual Goods News

This week Tencent Holdings announced its results for Q3 2009, with $493.3 million in revenue. This figure is up 17% quarter-over-quarter and up 66.4% year-over-year. The company's revenue from value-added services in its online offerings, a category that includes virtual goods and microtransactions, was $384 million. Mobile value-added services brought in $65.3 million. The remainder of revenue was generated by advertising. 

Tencent's online value-added revenue was up 21.6% quarter-over-quarter and 87.3% year-over-year. Mobile value-added services actually declined 5.1% quarter-over-quarter, but were up 19.8% year-over-year. Gross profit for the company was $343 million, up 20.6% quarter-over-quarter and 70.1% year-over-year. Tencent reports gross margins of 69.6%. 

Tencent's core service, its QQ instant messenger, grew its total number of accounts to over 1 billion, an increase of 6.8% quarter-over-quarter. Peak concurrency for QQ IM was roughly 75.5 million users, up 23.2% quarter-over-quarter. Peak concurrency at its QQ Games casual gaming portal had declined to 5.7 million, down 8.1% quarter-over-quarter. 

The company attributes its tremendous Q3 online growth to seasonality, as summer holidays meant that many users were home from school or work. Young users home from school boosted the monetization of many of Tencent's online games, including Cross Fire, Dungeon and Fighter, QQ Dancer and QQ Speed. Cross Fire reached a new record high peak concurrency of $1.6 million, with QQ Dancer achieving one million and Dungeon and Fighter achieving 2 million.  

Online advertising revenue for the quarter was believed to be up due to seasonality and a recovering Chinese economy. Mobile revenues were down due to simple decline in demand for certain key value-added services, such as special ringback tones. QQ Games revenue was down due to increased competition and an aging suite of games.