2 Reasons Tencent’s Advertising Business Is Booming – Motley Fool

China’s online advertising market has either been a minefield or a goldmine over the past year, depending on which companies you’ve invested in.

For Baidu (NASDAQ:BIDU), which owns China’s top search engine, it was clearly a minefield. Baidu’s advertising revenue dropped year-over-year for six straight quarters; it broadly attributed its woes to China’s economic slowdown, the ongoing trade war, the pandemic, and intense competition.

But for Tencent (OTC:TCEHY), which owns China’s top mobile messaging platform WeChat, it was a goldmine. Tencent’s ad revenue rose 16% year over year in the third quarter, accelerating from its 13% growth in the previous quarter and leaving legacy players like Baidu in the dust.

Two young women take a selfie.

Image source: Getty Images.

So why is Tencent’s ad business flourishing while Baidu and other ad companies struggle? Let’s discuss the two main reasons.

1. WeChat is locking in mobile users

WeChat, known as Weixin in China, served 1.21 billion monthly active users last quarter. WeChat was originally a simple messaging app, but its introduction of mini programs in 2017 turned it into a mobile superpower.

Mini programs are lightweight apps that let WeChat users shop, order food, play games, hail rides, make payments, and more without ever leaving the main app. WeChat’s total number of mini programs rose from 2.3 million in 2018 to 3.2 million in the first half of 2020, according to Daxue Consulting.

Tencent also expanded WeChat as a social network with