China’s Tencent Announces a Hot ad Trend it is Betting on while Gaming Sales Decline.

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Tencent’s concentration on this advertising offering puts them in rivalry with Kuaishou and ByteDance’s Douyin, the two most popular short video players in the nation and the Chinese equivalent of TikTok.

Tencent started displaying advertising to users of the service it calls Video Accounts within its WeChat messaging platform for the first time in July.

Tencent stated that as competition intensifies in other parts of its company, like as gaming, advertising might eventually become a “substantial” source of revenue.

Even though other parts of its company, including gaming, are under pressure, Tencent said advertising in its embryonic short video platform might become a “significant” revenue source in the future.

The emphasis on this advertising product from one of China’s largest technology companies puts it in direct rivalry with the two most popular short video players in the nation: Kuaishou and ByteDance’s Douyin, the Chinese equivalent of TikTok.

Tencent released its first-ever year-over-year quarterly revenue fall on Wednesday due to challenges facing its gaming sector. Covid’s recovery, tighter tech regulations, and China’s following economic downturn all had an impact on the company as a whole.

WeChat, the most widely used messaging service in China, is operated by Tencent and has over one billion users. Within WeChat, there is a platform for quick videos. Users can browse a variety of videos. Tencent started showing users adverts in their “video accounts” for the first time in July.

More video ad inventory will be made available this month, according to the business.

According to Martin Lau, president of Tencent, “Video accounts has become one of the most well-liked short video services in China with significant user engagement.

They help us strategically increase our market share for advertising. We should be able to take more advertising dollars as advertisers have already been investing heavily in a number of short-form video channels.

WeChat Moments, a social feature where users can share images, videos, and status updates, took five quarters, according to Lau, to earn 1 billion yuan ($147.42 million) in quarterly advertising revenue. Considering the “current level of traffic and the already high advertiser desire for short form video ads,” he claimed that video accounts will achieve that goal more swiftly.

Video ads will eventually develop into a sizable source of income for us, according to Lau.

Tencent’s online ad revenue in the second quarter decreased 18% year over year to 18.6 billion Chinese yuan as a result of brands’ budget cuts brought on by China’s macroeconomic problems.

The company, which has its Shenzhen headquarters, is hopeful that video ads will help the division grow over the ensuing quarters.

Rise in competition

Tencent recently entered the short-form video market, and it is now seeking to increase the competition for Kuaishou and Douyin, the Chinese versions of TikTok.

There may be significant commercial potential.

According to data from QuestMobile, short form video revenue makes up about 39% of all digital ad revenue in China. It outpaces categories like social networking and news as the most lucrative single source of advertising revenue.

In order to open up new revenue streams, several of China’s IT behemoths have turned to short videos and livestreaming.

The revenue potential “per minute of time spent” on video accounts will be larger than Moments, according to Tencent’s chief strategy officer James Mitchell.

Livestreaming and short-form video have been used by businesses like Alibaba to boost sales on their e-commerce platform. Users can click on the products in a video that an influencer is promoting to make purchases.

Lau responded that e-commerce livestreaming is a opportunity but that it will take some time” when questioned by an analyst whether Tencent will go in this manner.

According to Lau, Tencent must first increase awareness of the video offering before enlisting retailers and advertising.

Regarding the creation of video accounts, Lau stated, “We will strive to achieve it on a stage-by-stage basis.

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