WeChat's 438 Million Users Mean Big Profits For China-Based Tencent Holdings

Tencent Holdings Ltd. (OTC:TCEHY) posted a 59 percent jump in its second-quarter net profit, in no small part because of the explosive growth of WeChat, China's most widely used mobile instant-messaging service.

The number of WeChat users has skyrocketed by 57 percent from a year earlier to 438.2 million users, the company said Wednesday. The mobile text and voice messaging app, which has helped drive users to Tencent's mobile games and paid services, is available on Android, iPhone, BlackBerry, Windows Phone and Symbian products. When the Shenzhen-based company reported 300 million users last year, it stipulated that 70 million were located outside China.

For the three months ended June 30, Tencent said its net profit rose to 5.84 billion yuan ($947 million) from 3.68 billion yuan a year earlier. Revenue rose 37 percent to 19.75 billion yuan. The company's strong results beat analysts' expectations and further signal that it has positioned itself as a chief rival to Chinese e-commerce giant Alibaba Group Holding Ltd., which is preparing to unveil a huge initial public offering this fall. While the two companies began in different sectors, they have been increasingly battling for dominance in the world's largest Internet market by users, the Wall Street Journal noted.

Tencent's robust growth hasn’t gone unnoticed by the Chinese government, which has issued a new rule forcing all messaging app companies to require users to register with their real names. The rule has been portrayed as a direct reaction to WeChat, which has morphed into an all-encompassing juggernaut that provides gaming, mobile payments, and an array of services along with voice and chat messaging.

The State Internet Information Office said Thursday that the real-name registration is being instilled to “further promote the healthy and orderly development of public information services, protect the legitimate rights and interests of citizens, legal persons and other organizations, and safeguard national security and public interests,” according to Public Radio International.