Chinese Tencent continues to enhance its platform strength. Active QQ accounts, now 800m, still managed to edge up at a similar pace as the PC Internet accounts in China. Weixin continued to grow fast and gained high-end users as well as international users. Co has seen strong usage in wireless IM, Weixin (100m daily users), mobile Qzone SNS (50m), browser (20m), security (140m activated users), games, music and news. It has a much better start than most large online peers during the mobile transition.
On the corporate side, co also enriches its product offerings. It adds non-game apps to its targeted ad system, and enhances mobile game open platform as its PC casual and social game platforms have reached scale. We think co’s top priority in mobile is to gain traffic and add products in 2013, rather than fast monetization.
WeChat as an important tool for the company to retain its top online platform status amid the mobile transition. It mitigates the structural risk of losing user interactions. Its user base should hit 300m+ in 1Q13 and is closing the gap with its traditional SNS Qzone. However, we expect limited profit contribution in the near term as mobile games are still small in market size , and usage fees, if any, are likely passed to telcos given strong negotiation power of the latter.