Social network coming into play

The ability to monetize social networking services has begun to influence the financial performance of China's leading Internet companies, as shown in their latest quarterly earnings announcements.

China's largest Internet company, Tencent Holdings Ltd, recorded the slowest revenue growth in years, as it struggles to convert its vast user base into a diversified stream of income.

The company, which runs the WeChat mobile app, said in a filing to the Hong Kong stock exchange that third-quarter net profit was up 20 percent year-on-year at 3.87 billion yuan ($635.3 million).

Revenue stood at 15.54 billion yuan, up 34.3 percent, the slowest growth pace since 2007, the statement said on Wednesday. Revenue from online advertising and e-commerce transactions remained robust, expanding 37 percent and 108 percent, respectively.

But revenue from instant messaging services, including WeChat and predecessor QQ, edged up just 3.7 percent, even as the number of active users was up 124 percent.

The effort to cash in on social networking sites began to bear fruit for the Nasdaq-listed Sina Corp, whose profit more than doubled from a year earlier, thanks to strong earnings growth from its micro-blogging service.

Quarterly advertising sales from Sina Weibo, which has some users in common with WeChat, advanced 125 percent to $43.7 million, Sina said in an earlier statement on Wednesday.

Merchants' growing use of Weibo as an effective marketing tool pushed net income up 157 percent to $25.4 million.

Sina Weibo's value-added services pushed the micro-blogging service's total revenues to more than $53 million, 29 percent of total revenues.

The growth was facilitated by a strategic investment by Alibaba Group Holding Ltd in May, when the country's top e-commerce platform encouraged its partner vendors to utilize the Weibo platform for ads and promotions.

Since Tencent drives the use of WeChat in research and marketing, that may hinder its profits for now, said Dong Xu, senior analyst at IT consultancy Analysys International.

The user base has grown in part as a result of expanded overseas marketing, the company said. "By adding new games and features such as online payment, WeChat is poised to march into the digital commerce arena now firmly held by Alibaba," said Dong.

Competition between Tencent and Alibaba has intensified since August, when Alibaba's Taobao marketplace announced it would block Web links that redirect users to other Internet transactions, denoting that of WeChat's payment services.

The quick response codes, a two-dimensional barcode and a longstanding feature of WeChat, may help shoppers skirt Alibaba's payment system and guide users to complete a transaction via the likes of WeChat.

But the next big opportunity for WeChat lies in the mobile sector, when Tencent anchors on portable devices to stimulate revenue growth, said Xu Zhen, a researcher with d1net, an information technology portal in Shanghai.

"We see the 'going mobile' trend in almost every endeavor of Tencent, from the growth of active users on Mobile QQ and the development of smartphone games to the mobilization of its media platforms," Xu said.