Dynamic Marketing Communiqué

“Enriching people’s lives through technology.” ― Find out what this company does in terms of digital marketing! [Monday: Marketing Marvels]

March 8, 2021

League of Legends.

Call of Duty.

Fortnite.

We can agree that for some people, these video games provide the entertainment they need, especially in times when they want to have a bit of fun or need a break from their daily routines.

These games were originally designed by their studio creators to be played on a PC (personal computer). It was only until one company acquired these makers that a mobile counterpart for the games were developed.

Have you ever wondered what tech giant is behind these successful mobile gaming apps?

It’s none other than…

Tencent!

Tencent Holdings Limited is a Chinese multinational technology company that markets Internet-related services and products in the entertainment and artificial intelligence (AI) sectors.

As of 2020, the company has become the world’s largest video game vendor through tactics of investing in or acquiring major game makers such as:

  • Riot Games (the studio responsible for the creation of “League of Legends” and “Teamfight Tactics”)
  • Epic Games (the company behind “Fortnite”)
  • Supercell (the mobile gaming powerhouse behind “Clash of Clans,” “Clash Royale,” and “Brawl Stars”)

Aside from gaming, Tencent also has shares (a co-producer) in some of Hollywood’s blockbuster films like “Men In Black: International,” “Top Gun: Maverick,” and “Terminator: Dark Fate.”

An entertainment powerhouse indeed!

Here are 2 strategies the company uses to connect not only with its Chinese target market, but also with other people across the globe:

  1. The Tencent Social Ad

    Tencent enjoys a strong reputation as one of the leading businesses in terms of digital marketing.

    To maintain that status, the company launched the Tencent Social Ad (social networking platforms) to enhance the efficiency of marketing.

    DMC%23100-7.png

    Just a brief background about the creation of the social platform…

    According to data website ARI, Chinese users spend an average of 3 hours a day engaging in different Internet-based activities.

    Based on these insights, Tencent designed the Social Ad to identify consumers’ demands.

    How?

    By using technology that combines the Average Directional Index (ADX) and Data Management Platforms (DMP)!

    This enables the company to keep track of users’ online activities.

    The Tencent Social Ad has 3 main functions:

    • Creating detailed profiles. The company collects users’ habits through their online records. This function will easily facilitate Tencent’s study of trends and will provide valuable information to establish a concrete targeting strategy.

    • Tag customization. By coordinating with vertical markets, Tencent integrates data and tags to create an effective media strategy.

      [Vertical Market: A market in which vendors offer goods and services specific to an industry, trade, profession, or other group of customers with specialized needs.]

    • Cross-Screen identification. With the help of the Tencent User Identify System, the company helps clients and business partners extend the life cycles of their “cookies”―small pieces of data stored on a user’s computer by a certain web browser.

      This function operates by targeting customers via cross-screen and cross-media platforms, identifying long-term customers, integrating fragmented data, and highlighting users’ profiles.

    At present, Tencent’s products and services reach almost 90% of Internet users. As stated in the company’s financial report in 2019, the total number of active accounts on mobile apps QQ and QQ Zone  are 806 million and 500 million.

  2. The Tencent Alliance Ecosystem

    This online ecosystem expands across so many industries that almost half of Chinese consumers’ mobile Internet usage comes from Tencent alone!

    In case you’re not aware, the Tencent Alliance Ecosystem is the name the company uses to refer to its advertising network.

    Allow us to elaborate further…

    Tencent’s advertising ecosystem connects over 100,000 apps, with different marketing campaigns shown to more than 500,000 users per month.

    DMC%23100-7.png

    These ads usually record high engagement rates, considering that they focus more on mobile advertising. Some of Tencent’s advertising methods include:

    • Interstitial Advertising

    • Native Advertising

    • Open Advertising

    • Banner Advertising

    • Incentive Video Advertising

    Another good thing about this Alliance Ecosystem is that it is not only Tencent that advertises in these platforms―the company also allows other brands or businesses to promote their products and services through the apps!

    DMC%23100-7.png

    If you’re wondering about the social media platforms where you can advertise your brand with the help of Tencent, take a look at this list:

    • WeChat

    • Tencent Video

    • QQ

    • Tencent News

    • Tencent Feed Advertising

    • Tencent Music Ads

    Through these online channels, the company is able to also help other businesses connect with their target markets.

In the past five years, Tencent Holdings Limited has recorded revenues of:

  • HKD 126.9 billion in 2015
  • HKD 177.5 billion in 2016
  • HKD 274.2 billion in 2017
  • HKD 370.4 billion in 2018
  • HKD 427.8 billion in 2019

Clearly, the Social Ad and Alliance Ecosystem help strengthen Tencent’s position as one of the leading corporations in the world.

Tencent Holdings Limited’s Earning Power: Valens Research vs. As-reported numbers

Tencent Holdings Limited (700:HKG) makes for a great case study that we come back to regularly. One great reason?

The company has proven itself to be a better earning power generator than investors might think.

So, how well has Tencent been growing its business in the past years?

The research doesn’t lie—nor do the results. Earning power (the blue bars) continues to show results higher on average than what traditional databases show.

The blue bars in the chart above represent Tencent’s earning power (Uniform Return On Assets). Tencent has generated incredibly robust profitability levels. Despite falling from 141% in 2004 to 75%-109% levels from 2005-2008, Uniform ROA rebounded to 27%-154% levels in 2009-2010, before falling to 74%-82% levels from 2011-2013. Thereafter, Uniform ROA gradually expanded until it reached a peak of 271% in 2017. However, it declined again to 124% levels in 2019.

The global ROA is just 6%.

The orange bars are the company’s as-reported financial information. If you relied on these numbers, you will see a company with terribly understated profitability. As-reported ROA (return on assets, a measure of earning power) only ranged from 7% to 27% in the past sixteen years. Its ROA in 2019 was only at 7%, roughly eighteen times lower than its Uniform ROA in 2019.

That’s what you’ll see in Yahoo Finance, Google Finance, and most other databases.

The company’s stock price also performed better than the rest of the stock market over the decade, which we can see in the blue line in the chart below. Its returns have been well above the market.

The numbers show that Tencent has been doing well and making a profit.

Part of the company’s goal is to enrich the lives of Internet users through technology.

By investing heavily in talent and technological innovation, Tencent creates its own communications, social, and advertising platforms to connect with consumers.

Not just that!

The company is also able to help other brands and marketers reach out to their target markets around the world.

According to Pony Ma, Tencent’s founder and chairman, the company will continue to strive for the BEST, which means…

As a leading corporation, Tencent will always make sure to promote social vitality, while showcasing its core values―integrity, proactivity, collaboration, and creativity.

About The Dynamic Marketing Communiqué’s
“Monday Marketing Marvels”

Too often, industry experts and the marketing press sing the praises of some company’s marketing strategy.

…Only for the audience to later find out that their product was a flop, or worse, that the company went bankrupt.

The true ROI in marketing can’t be separated from the business as a whole.

What good is a marketing case study if one can’t prove that the company’s efforts actually paid off?

At the end of the day, either the entire business is successful or it isn’t. And the role of marketing is always paramount to that success.

Every Monday, we publish a case study that highlights the world’s greatest marketing strategies.

However, the difference between our case studies and the numerous ones out there, is that we will always make certain that the firm really did generate and demonstrate earning power worthy of study in the first place (compliments of Valens Research’s finance group).

By looking at the true earnings of a company, we can now rely on those successful businesses to get tips and insights on what they did right.

We’ll also study the greatest marketing fails and analyze what they did wrong, or what they needed to improve on. We all make our mistakes, but better we learn from others’ mistakes—and earlier, rather than later.

Hope you found this week’s marketing marvel interesting and helpful.

Stay tuned for next week’s Monday Marketing Marvels!

Cheers,

Kyle Yu
Head of Marketing
Valens Dynamic Marketing Capabilities
Powered by Valens Research
www.valens-research.com