Lei Feng network (search "Lei Feng network" public number attention) : Yin Sheng, the author of this article, Internet value researcher, former Forbes deputy chief editor.
Summary The Q2 financial report shows that Tencent in the golden age of PC has come back. It will make more money than Facebook. In essence, Tencent is a B2C e-commerce based on games, social networks, and a small number of time-consuming virtual services. The user's investment in time and money in these services is the ceiling of his business. The ceiling of Facebook is the user's online time. Technology that links time with the economic world.
The just-released second-quarter earnings report shows that Tencent's key indicators have clearly accelerated over the past few quarters. We can easily see that Tencent in the PC Internet Golden Age has come back: During the quarter, Tencent’s revenue growth. 52% (only 19% and 43% respectively in the same period of last year and Q1 this year), earnings increased by 47% (only 25% and 33% respectively in the same period last year and Q1 this year).
Specifically, the quarterly revenue growth is broken down as follows:
From the perspective of growth contribution, online games contributed 17.4 percentage points, social networking contributed 13.2 percentage points, advertisements 17.3 percentage points (where performance advertising contributed 8.7 percentage points, brand display advertising contributed 8.6 percentage points), payment and cloud services Other businesses contributed 3.95 percentage points; from the perspective of growth rate, payments and cloud services (275%), performance advertising (80%), social networks (57%), brand display advertising (41%) , Online games (32%).
Obviously, the game has again become the company's most important growth engine , and in the past few quarters, advertising has contributed much more than games . In the past few quarters, advertising has been Tencent's most important growth engine, but the growth rate has shown a quarter-to-quarter decline, from more than 100% growth for several quarters, to 60% in the past quarter. In contrast, game revenue, which accounted for 48% of company revenue, showed a recovery-like increase, with revenue rising 32% in the past quarter, compared with only 11% and 28% in the same period and last quarter respectively.
At the same time, Tencent’s second largest source of income—social network service revenue—has also experienced a strong rebound , which is a 57% increase from the same period of the previous year, compared to only 14% and 48% in the same period last year and this year. What's particularly noteworthy is that while the "other" business, including payments, cloud services, etc., currently accounts for only 9.7%, it is the fastest-growing of all businesses (up 275%).
What is even more rare is that this high-speed growth may have established sustainability in a certain period of time. For example, the game business mainly benefited from the high growth and proportion of mobile games. Q2 smart phone games contributed 9.6 billion yuan in revenue, an increase of 114% year-on-year, and accounted for 56% of overall game revenue. For several quarters, its performance in this area was much less than that of its main rival, NetEase, although it was almost a year earlier than NetEase's efforts in mobile games:
In 2014, Tencent’s revenue from mobile games accounted for 31% of all game revenue, and NetEase’s revenue from mobile games accounted for 14% of total game revenue in the fourth quarter of 2014; but last year, Tencent’s mobile games still accounted for only 37.6% of the total game revenue, while the proportion of Netease is more than 40%, of which Tencent accounted for 44% in the fourth quarter of last year, Netease was 57%, to the first quarter of this year, NetEase's share further increased to 63% .
The rapid growth of Tencent's mobile game business has benefited from the same factors in many ways as NetEase: the rapid expansion of users brought by smart phones, the mobilization of PC-end game IP, etc., but it is not exactly the same as NetEase, for example, it has powerful Many game distribution channels and diversified game operation advantages, but more importantly, may still be the company's attention and investment efforts , it can not be denied that NetEase's re-emergence of mobile games has greatly stimulated it.
The social network business is not only benefited from the same factors as the game, but also inseparable from Tencent’s layout in the content field in the past few years. It recently merged Tencent Music with the China Music Group. This may be its promotion model. In addition to the previous big investment in literature and other fields, Tencent has provided more payment options for its users. With the formation of user payment habits, Tencent will continue to benefit from it.
Of course, the influence of the low base cannot be ignored. The second quarter of last year was Tencent's slowest growth in the past few years . However, the continuity of growth will not stop at this quarter. In the recent giant Alibaba, which recently released its financial report, we have seen the same situation. Mobilization has become the main driving force for the company's unexpected growth. . Compared with the much higher user base in the PC era, the mobile mobility of the supply side and the mobilization of user behaviors, and the portable nature of mobile devices, the dividends of the mobile business era have come to an end after the dividend era of smart phones. Before our eyes.
But not all companies can benefit from this era. In the early days of commercial mobilization, revenue models closely related to the smartphone user base will directly benefit, such as advertising, but now the growth of the smartphone user base has come to an end, and the growth engine has shifted to those specific services and businesses. For example, shopping, entertainment, finance, business services, etc., which partly explain the decline in the growth of Tencent advertising, and games, social networking and payment, cloud services and other income growth.
However, it is not always true that Facebook’s advertising revenue still accounts for more than 97% of all revenues , but this does not prevent it from continuing to obtain much higher growth rates than Tencent. In the past quarter, Facebook’s revenue increased by 59% to 6.44 billion U.S. dollars, earnings increased by 186% to 2.055 billion U.S. dollars, and it has maintained such rapid growth for most of the past few years. However, if you look at the ability of each company to earn money from each user, Tencent clearly far exceeds Facebook, because Tencent's users are much less than the latter, but the two companies have almost the same revenue and profits. .
Yin Sheng believes that Tencent and Facebook are essentially two different profit models:
Tencent's business is essentially a proprietary B2C e-commerce based on games, social networks, and a few highly time-consuming virtual services, and Facebook is essentially an advertising model that links the user's specific time to a specific service; For the former, the user's time and money invested in these virtual services is the ceiling of his business. For the latter, the ceiling is derived from the user's overall online time and the overall performance of the world economy; the former competes with the product. It operates with users who compete for technologies that have users' online time and connect time with the economic world.
This is why I think in an earlier article that Tencent’s future is in advertising, and that in order to establish a robust advertising business model, more investment must be made in technology, first becoming a technology company, not a game company . In the short-to-medium term, Tencent will gain growth engines from the mobilization of games and the social networking of content investment, but in the medium to long term, its future will come from advertising, payment, cloud services and other services.
Therefore, I think Tencent's current reasonable valuation level should be between the NetEase and Facebook, giving it 12 to 15 times the dynamic market rate and 40 to 45 times the dynamic price-earnings ratio . In the past four quarters, Tencent’s total revenue was US$18.8 billion, and its profit was US$5.23 billion. The valuations corresponding to the market sales ratio and price-to-earnings ratio were respectively US$2256-28.2 billion and US$2092-223.40 billion. Overall, 2100-2800. The billion dollar range is relatively reasonable. If you combine the Supercell (last year's income was 2.36 billion US dollars, profits of 964 million US dollars, the reasonable range will be increased to between 250 million and 300 billion US dollars.
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