Tencent Opens the WeChat Spigot, Just a Little

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(Bloomberg) -- A momentous thing happened at Tencent Holdings Ltd. last quarter. The details were buried in its 44-page earnings statement late Wednesday:

To cater to the strong demand for social advertising on our platforms, Weixin Moments increased its maximum ad load to two advertisements per user day in late March.

When two is an increase you know that the earlier number wasn’t very high.

Weixin Moments is is like a user's Facebook or Twitter feed, and the ubiquity of Weixin —  aka WeChat — makes it a powerful tool for reaching consumers. But with great power comes … yadda, yadda.

In fact, Tencent has wielded that power with great discipline by not spamming feeds in order to avoid annoying consumers. Such a savvy strategy helped it keep attracting users while avoiding the negative feedback we often hear from users of Facebook or Twitter.

Even at just one ad per day in the Moments feed, Tencent’s social media platform has climbed to account for almost 70 percent of ad revenue.

With the two-per-day limit coming late March, we won’t have seen it reflected much in that quarter’s results. Expect a stronger figure in the June period. But that’s just the start:

Given our ad loads for social and feeds products are only small fractions of those of industry peers, we believe there is a long runway for continued growth of our social and others advertising.

Advertisers and investors are clamoring for Tencent to open up that spigot. But its management knows that a slow drip will be far more valuable than a flash flood.

©2018 Bloomberg L.P.

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