QQ announces 2007 earnings | Facebook should look carefully

There are some numbers you should notice. All of them are about Tencent’s QQ, China’s leading online community (270 million accounts, 400 million USD in revenues in 2007).

Here is the pdf version  of TENCENT ANNOUNCES 2007 FOURTH QUARTER AND ANNUAL RESULTS from it’s offcial site.

From plus8star.com:

QQ’s 2007 figures

• Active accounts: 300 million
  • This is 50% more than the number of Internet users in China (many have multiple accounts)
  • This is about the size of the US population
• Revenues: 523 million USD
  • This is close to 4x Facebook, at 150 million USD
  • This is real money from IM/SNS. Something even serious companies like The Economist who just wrote an article titled “Everywhere and nowhere” seem to not believe is possible. We hope they will look outside of Silicon Valley next time.
• Operating profit: 224 million USD
  • Facebook recorded a 50 million loss last year. How sad.

Though this should already be enough to raise a bit of interest, the most interesting is the split of revenues:

• Internet services (digital goods, games…): 344 million USD (66%)
• Mobile services: 110 million USD (21%)
• Online ads: 67 million USD (13%)

Yes, ladies and gentlemen: QQ gets only 13% of its revenues from online ads! (vs. close to 100% for MySpace, Facebook and the like). All the rest is Internet and mobile digital goods (we stopped calling them “virtual goods” as they are as real as the money in your bank account: digital).

Some interesting conclusions on those figures

• QQ is big and still growing. Notably, the ad market is largely untapped – mostly due to the misunderstanding of IM and SNS by ad agencies and brands. Lots of work to convince those folks that a service that attracts so many millions is – maybe – a media in its own right! QQ has been beefing up its ad team and is preparing a roadshow for its new MIND platform – maybe some good news in a quarter or two?
• Facebook / MySpace and others also have a largely untapped market: digital goods. We estimate that with the US strong GDP/capita, Facebook could generate 5 times more revenues per user than QQ, which has 5 times more users. So about 300~400 million USD per year. And this only on Internet.
• On mobile, QQ is underdelivering due to terrible market conditions in China – with tough policies from operators. Facebook could generate easily 100 MUSD with mobile thanks to various personalization services (please, do not mention messaging, this is so 2003… right, 2003 in Europe, not in US).

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