Good evening. Welcome to our third quarter 2020 results conference call. I'm Wendy Huang from Tencent IR team. Before we start the presentation, we would like to remind you that it includes forward-looking statements, which are underlined by a number of risks and uncertainties, and it may not be realized in the future for various reasons. Information about general market conditions is coming from a variety of sources outside of Tencent. This presentation also contains some unaudited, non-IFRS financial measures that should be considered in addition to, but not as a substitute for, measures of the company's financial performance prepared in accordance with IFRS. Non-IFRS measures are intended to reflect our core earnings by excluding certain one-time and/or non-cash items. For a detailed discussion of risk factors in non-IFRS measures, please refer to our disclosure documents on the IR section of our website.
Let me introduce the management team on the call tonight. Our Chairman and CEO, Pony Ma, will kick off with a short overview. President Martin Lau and Chief Strategy Officer James Mitchell will provide a business review. Chief Financial Officer John Lo will conclude with financial review before we open the floor for questions. I will now turn the call over to Pony.
Thank you, Wendy. Good evening. Thank you for joining us today. This quarter marks the second anniversary of our strategic organization upgrade, which was intended to enhance our strength in consumer internet and extend our presence to industrial internet. While the upgrade was designed to bear fruit over the long run, we are already seeing initial benefits in areas such as consolidating our advertising services, rejuvenating our product and content platforms, growing our cloud and SaaS businesses, and building an internal open-source code base. In the face of public health, macroeconomic, and geopolitical challenges, we will seek to sharpen our focus, innovate, and collaborate with our partners in order to better serve our users, customers, and the society at large. I will highlight the results we achieved in the third quarter of 2020. Total revenue was RMB 125 billion, up 29% year-on-year and 9% quarter-on-quarter.
Gross profit was RMB 57 billion, up 33% year-on-year and 6% quarter-on-quarter. Our non-IFRS operating profit was RMB 38 billion, up 34% year-on-year and 1% quarter-on-quarter. Non-IFRS net profit attributable to equity holders was RMB 32 billion, up 32% year-on-year and 7% quarter-on-quarter. Moving to our online platforms. In social, combined MAU of Weixin and WeChat was 1.2 billion. Smart devices, MAU of QQ was 617 million. In games, we expand our leadership via extensive popularity of established franchises and success of new releases in both China and international markets. In media, video and music subscriptions increased as we released the top-tier content and added songs to the paid library. In fintech, commercial payment transactions maintained robust growth and our wealth management platforms expanded its aggregated customer assets.
In public cloud, we saw rising demand for PaaS solutions and upgraded our SaaS enterprise productivity toolkit to capture opportunities in emerging sectors. In utilities, we maintain our industry leadership in mobile security and mobile browser in China. I will invite Martin and James to discuss business review.
Thank you, Pony. Good evening and good morning. For the third quarter of 2020, our total revenue grew 29% year-on-year. VAS represented 56% of our total revenue, within which social networks was 23% and online games was 33%. Online advertising was 17% of total revenue. Fintech and business services represented 26% of our total revenue. For value-added services, segment revenue was RMB 70 billion in the third quarter, up 38% year-on-year and 7% quarter-on-quarter. Social networks revenue was RMB 28 billion, representing 29% year-on-year and 6% quarter-on-quarter growth, mainly driven by in-game item sales and live streaming services. Total VAS subscriptions grew 25% year-on-year to 213 million, benefiting from digital content subscriptions.
Total video subscriptions increased 20% year-on-year to 120 million, primarily due to our popular drama and animated series such as "Nothing But Thirty" and "The Land of Warriors Season Three." We successfully converted trial users acquired during summer promotions to regular video subscribers. Total music subscriptions grew 46% year-on-year to 52 million on an expanded paid library and a higher retention rate. Online games revenue increased 45% year-on-year and 8% quarter-on-quarter to RMB 41 billion, driven by growth in paying users and ARPU. Total smartphone games revenue grew 61% year-on-year to RMB 39 billion, benefiting from robust growth of existing titles, as well as recognition of deferred revenue from the stay-at-home period. Sequentially, revenue grew 9%, cash receipts slightly decreased as users returned to their offices and in-game activities normalized.
PC client games revenue was stable year-over-year at RMB 12 billion, as increased revenue from League of Legends globally and new game Valorant in Western markets offset decreased revenue from Dungeon & Fighter in China. Revenue increased 7% quarter-over-quarter due to CrossFire and full quarter contribution from Valorant. Now I talk more about our social networks. For Weixin, we are focused on delivering convenience and efficiency for users. To facilitate access to high-frequency services within the Weixin Pay interface, we grouped the list of services into four key verticals, namely financial services, daily services, transportation and travel, as well as shopping and entertainment. For the travel and transportation vertical, we expanded geographic coverage of mobility services to 10 provinces and municipalities in China.
Mobility services connect auto owners with car services such as car washes and car insurance, as well as general users with public transportation services, including transit codes and bus schedule checking. To enhance the efficiency of content and service delivery, we enable more cross-referencing within Weixin properties. For example, in the chat box, users can press to search words and phrases that appear in messages, after which Weixin will provide related content and services from Mini Programs, official accounts, Moments, and other sources. In Moments, we enable users to create hashtags in posts. Readers of the post who click these hashtags can then see related content from official accounts, video feeds, and H5 pages. Moving on to QQ. We keep on creating new experiences to strengthen stickiness of the youth community on the QQ platform. We enable more shared experiences among young users.
For example, we allow them to watch Tencent Video together while video chatting, to compete with friends in battle mode mini games, and to co-edit classwork via Tencent Docs. We have been testing Mini World, a video and image feed service within QQ since April. Contributors within Mini World can create images and videos shared beyond their existing friend circle, and users can explore content through recommendation. Mini World resonates well with young audience and has enjoyed increasing popularity. These initiatives and growing adoption of real-time video chatting drove daily time spent per user within QQ up by a teens% year-over-year. Now turning to our gaming business. For smartphone games, we leverage our industry expertise, user insight, and execution to deliver engaging experiences to large-scale audiences, enhancing the vitality and longevity of our existing titles, including blockbusters as well as the lesser-known games.
We recently celebrated the fifth anniversary of Honor of Kings, which exceeded 100 million average DAU for the first 10 months of 2020. We have expanded Honor of Kings' user base through constant innovation, user-centric operation, and robust technology infrastructure. We're realizing the potential of its IP by developing new games, animated series, and a live-action drama series. Investors are quite familiar with titles such as Honor of Kings and Peacekeeper Elite, but we apply similar capabilities to lesser-known vertically specialized titles as well. For example, our self-developed game, Naruto Mobile, despite being released four years ago, has recently achieved all-time high in DAU and revenue, driven by operational enhancements we have made over the years, such as an improved PVP mode. Naruto Mobile is now one of the most popular and revenue-generating games in the fighting genre in China.
With respect to PC games, we continue to view the sector fairly favorably. While the PC game market has not experienced the same revenue growth as the mobile game market, PC games are highly influential. There is plenty of room for IP and product innovation within the PC platform to drive direct revenue contributions or broader platform benefits. For example, League of Legends launched a major thematic event, Spirit Blossom Festival, in the quarter, coordinating the release of new champions, skins, and event pass, which was popular both with users as well as revenue generative. The recent League of Legends World Championship in Shanghai attracted a large and sizable global audience too. We adapted CrossFire into a highly rated drama series and released a tie-in new game mode and skins, reviving the game's popularity and monetization.
In addition, new game, Valorant, has become a breakout hit in the tactical shooter genre in Western markets with a wide audience on Twitch. Besides sustaining and extending existing game success, we continue releasing impactful new games. Moonlight Blade Mobile, a self-developed game based on the renowned novel, became the most successful MMORPG launch in China this year by iOS grossing. League of Legends: Wild Rift, a mobile battle arena game based on LOL IP, is currently among the most downloaded mobile games across its available markets in Asia. With that, I'll pass on to James to talk about the rest of the business review.
Thank you, Martin. Moving on to advertising, revenue increased 16% year-on-year and 15% quarter-on-quarter to RMB 21 billion. We believe that China advertising has now largely recovered from the COVID-19 shock. Advertiser categories that have been experiencing rapid secular growth, such as education, internet services, and e-commerce, continued to grow quickly year-on-year on our platform during the third quarter. Ad spend from some cyclical advertiser categories, such as automobiles and real estate, picked up year-on-year. Certain categories where ad spend dipped due to COVID, such as financial services and consumer staples, were flattish year-on-year in the quarter. Internally, we executed on initiatives including upgrading our algorithmic ad buying solutions, which delivered higher conversion for advertisers and attracted increased share of budgets towards our services. We also provided incremental advertising inventory in casual game apps, esports events, and live streaming platforms.
For social and other advertising, our properties achieved solid revenue growth year-on-year, driven by higher impressions than eCPM. Our mobile ad network revenue grew rapidly year-on-year as advertisers responded favorably to video formats such as our rewarded video ads. For media advertising, after four quarters of steep year-on-year revenue declines, the rate of revenue decrease moderated to -1% year-on-year. We captured sponsorship advertising demand via our self-commissioned variety shows, such as "The Coming One," season four, and drama series such as "Nothing But Thirty ." We upgraded the splash screen ads in Tencent Video, driving higher eCPMs and sequential revenue growth for our video advertising service. Looking now at Fintech and business services, segment revenue was RMB 33 billion, up 24% year-on-year and up 11% quarter-on-quarter.
Fintech services revenue grew healthily year-on-year and quarter-on-quarter, led by the continued robust expansion of our commercial payments and wealth management businesses, while our social payments and micro-lending activities grew at more moderate rates. For payment services, growth momentum continued through the quarter and total payment volume increased over 30% year-on-year. Our commercial payment daily active users and spending per user both increased at a rapid rate. Online transaction growth benefited from an accelerated shift from offline to online purchases due to the pandemic, as well as greater usage of Mini Programs for transactions in categories such as groceries and apparel. Payment operating margins remained stable. For our wealth management business, the number of active customers increased over 50% year-on-year, driving a similar growth rate in aggregated customer assets.
For business services, the year-on-year revenue growth rate slowed down due to the lingering impact from the pandemic on project deployments and new contract sign-ups, as well as non-recurring adjustments to certain Infrastructure as a Service contracts. However, we saw a rise in demand for Platform as a Service, in particular security PaaS from the financial, healthcare, and internet service clients. During the period, we upgraded our Software as a Service enterprise productivity toolkit, which consists of three signature products, WeCom, Tencent Meeting, and Tencent Docs. Customers increasingly adopt WeCom, previously known as Enterprise Weixin, for workplace communication and management. Despite most people returning to their workplaces, WeCom's DAU grew over 100% year-on-year during the quarter. Tencent Meeting now has over 100 million registered users. In September, we released an enterprise version of Tencent Meeting to meet growing needs for customization.
We integrated Tencent Docs, our cloud-based document processing tool, with other Tencent products, including QQ Browser, and our customer relationship management SaaS to further expand its use cases. With that, I'll pass to John to go through the financials.
Thank you, James. For the third quarter, total revenue was RMB 125.4 billion, increased 29% year-on-year or 9% quarter-on-quarter. Gross profit was RMB 56.6 billion, up 33% year-on-year or 6% quarter-on-quarter. Net other gains was RMB 11.6 billion. This was mainly due to non-IFRS adjustment items, representing increased valuations of certain investees in verticals such as electric vehicle, online games, and local services, as well as net gains on deemed disposal of certain investees. Operating profit was RMB 44 billion, up 17% year-on-year or 12% quarter-on-quarter. Net finance costs were RMB 1.9 billion, up 11% year-on-year or down 3% quarter-on-quarter. Year-on-year increase reflected recognition of foreign exchange loss during the quarter versus the foreign exchange gain a year ago. QoQ remained broadly stable. Share profit of associates and joint venture was RMB 2.6 billion.
Both year-on-year and quarter-on-quarter increased benefits from enhanced performance of certain investees in verticals such as e-commerce and online games. Year-on-year growth also reflected non-IFRS adjustment items of certain associates. On a non-IFRS basis, we recorded a share profit of RMB 3.2 billion for the quarter. The income tax expense was RMB 5.7 billion for quarter three 2020. Effective tax rate was 12.9%. IFRS net profit attributable to equity holders was RMB 38.5 billion, up 89% year-on-year or 16% quarter-on-quarter. Diluted EPS was RMB 3.964, up 86% year-on-year or 15% quarter-on-quarter. Now I'll share with you some of our non-IFRS financial figures. For the third quarter, operating profit was RMB 38.1 billion, up 34% year-on-year or 1% quarter-on-quarter. Net profit after NCI was RMB 32.3 billion, up 32% year-on-year or 7% quarter-on-quarter. Diluted EPS was RMB 3.314, up 30% year-on-year or 6% quarter-on-quarter. Moving to segment gross margins.
Gross margin for VAS was 52.6%, slightly up 0.8 percentage point year-on-year or down 1.1 percentage points quarter-on-quarter. On a year-on-year basis, we continue to benefit from the mix shift to higher margin self-developed platform gains. Sequentially, VAS margin decreased due to greater content costs associated with our online video business. Gross margin for online advertising was 50.9%, up 2.1 percentage points year-on-year and broadly stable quarter-on-quarter. Year-on-year increase was mainly contributed by the industry-wide exemption of cultural construction fee for this year. Gross margin for fintech and business services was 27.9%, largely stable year-on-year or down one percentage point quarter-on-quarter. Sequential decrease was mainly due to greater channel costs for payment-related services as offline merchants resumed their businesses amid the pandemic. On operating expenses, selling and marketing expenses were RMB 8.9 billion, up 56% year-on-year or 15% quarter-on-quarter.
On a year-on-year basis, marketing spending increased, particularly on online games, Weixin, as well as business services. Sequential increase was primarily driven by online games and business services. As a percentage of revenues, selling and marketing expense was 7.1% for the quarter. G&A expenses were RMB 17.2 billion, up 27% year-on-year or 4% quarter-on-quarter, mainly due to greater R&D and staff costs. Within G&A, R&D expenses were RMB 9.9 billion, up 25% year-on-year or stable quarter-on-quarter. G&A and R&D represented 13.7% and 7.9% of revenues respectively. As at quarter end, we had approximately 77,600 employees, up 27% year-on-year or 10% quarter-on-quarter. For the third quarter 2020, gross margin was 45.2%, up 1.5 percentage points year-on-year or down 1.1 percentage points quarter-on-quarter. On a year-on-year basis, segment gross margin improvement flowed through to increased blended gross margin, in particular from value-added services.
Sequentially, margin decreased mainly reflecting lower VAS gross margin compared to the last quarter. Non-IFRS operating margin was 30.4%, up 1 percentage point year-on-year or down 2.4 percentage points quarter-on-quarter. Non-IFRS net margin was 26.6%, up 0.8 percentage point year-on-year or down 0.6 percentage point quarter-on-quarter. Finally, let me share with you several key financial metrics before we close our remarks. Total CapEx was 8.7 billion RMB, up 31% year-on-year or down 8% quarter-on-quarter. Operating CapEx increased by 34% year-on-year to 7.8 billion RMB, reflecting more expenditures on servers and network equipment to underpin our business growth. Non-operating CapEx increased 12% year-on-year to 901 million RMB, driven by spending on data centers constructions. For the current quarter, free cash flow was 28.1 billion RMB, broadly stable both year-on-year and quarter-on-quarter.
Net cash position was at RMB 6.4 billion, which decreased sequentially due to payments for M&A initiatives, partly offset by operating cash flow generation. Fair value of our shareholdings and listed investees, excluding subsidiaries, was approximately RMB 891 billion or $131 billion as at the end of the quarter, compared to RMB 726 billion or $103 billion last quarter. Thank you.
Thank you, John. Operator, let's open the floor for questions now.
We will now begin the question-and-answer session. If you wish to ask question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Participants are allowed to ask one main question and one follow-up question at each time. The first question comes from the line of Kenneth Fong from Credit Suisse. Please go ahead.
Thank you. Congratulations on the very strong set of results, and thank you, management, for taking my question. I have two questions on the game, please. On game, we noticed that recent new games like Genshin Impact, Rise of Kingdoms are launching through some game community platform like Bilibili and TapTap to reach out to more target user base to avoid the high revenue sharing of Android. I remember that last year we said we have been negotiating with the Android platform to lower the channel fee on a game-by-game basis. Do you think the successful launch of these recent titles, as well as the more mobile cloud platform like Huya, Yowa, would open us up with more game distribution channel, and that would tilt the negotiating power towards us as a major game developer?
In other words, we will see more rooms for margin improvement by lowering the channel fee over time. Thank you.
Thank you for the question. We've commented in the past that we felt that the game industry economics were not ideal for the game studios, and that in many cases, the channels were capturing a bigger share of the profits than the studios themselves. We're a big enough company that we can survive that, but there are many smaller companies which couldn't survive. We have been advocates of resetting the revenue share with the channels to more reasonable levels. As you observed, there's a number of mid-size game studios in China that have recently bypassed some of the traditional channels altogether, and yet still brought their games to a high degree of popularity, which is impressive and commendable. For our part, as you know, we have been in the process of negotiating the channel revenue shares to what we think are more sustainable levels.
That has, and will continue to flow through over time into our game margins. We believe that there's room for many different participants to be successful, including small studios, large studios, as well as traditional channels and new channels. The fact that there are these different players experimenting with different channels is healthy for the industry. As far as we ourselves are concerned, we have a good relationship with the big traditional channels. Following some of the adjustments to the relationships with those big channels, we think that we're in a healthy and sustainable position.
One thing I do want to add is, I think it's not just in terms of one figure, in terms of the revenue share. I think the important thing is actually structuring in such a way that it's a fair relationship. At the same time, the channel is actually incentivized to provide value. I think that's the more important and slight intricate part of the negotiation. For example, if you really can deliver a promotion of new users, that's highly valued. If somebody else actually sort of is signing up users through other channels, but they were just going through an app store, then I think the value would be lower. I think we're moving to an industry in which there's going to be a more delicate division of the value brought by different parties.
I think, overall then, it's going to be fairer economics, and it's going to be more healthy for everybody.
Thank you. My follow-up question is on the overseas game. What is the revenue contribution by percentage now? Except for U.S., Japan, which our Chinese operator have been focusing on, which market you see have the biggest potential next? What are the challenge that we face so far that prevent us from replicating our success into these countries? Thank you.
Sure. We don't disclose that percentage on a quarter-by-quarter basis, but I believe the last quarter where we gave a point figure was the fourth quarter of last year, when we disclosed 23% of our game segment revenue with international. Because on the one hand, our international games have progressed very well in the last nine months, but on the other hand, our domestic game business has also grown nicely. The ratio in the third quarter was very similar to the ratio in the fourth quarter last year. In terms of geographies, the global game business is truly global, and that's certainly true of our portfolio. Meaning that aside from the U.S. and Japan and China, which you sort of called out, that there are very sizable game markets in other regions, and we have certain games that clearly over-perform in certain markets.
For example, the Supercell and Miniclip games tend to over-perform in Continental Europe. League of Legends and Brawl Stars, for example, have over-performed in Korea, that's a big Asian market. PUBG Mobile has over-performed in certain Middle East and in emerging markets. Call of Duty: Mobile has over-performed in South America. We're actually quite fortunate in that with the range of games in and around our portfolio, we have experience now of successful publishing or cooperation in many different geographies.
Got it. Very clear. Thank you, and congrats again.
Thank you.
Thank you. The next questions comes from the line of Alex Yao from JPMorgan. Please go ahead.
Thank you, management, for taking my question, and congratulations on a strong quarter. My question is regarding the change in the operating environment due to the policy introduction in the past one to two weeks, including both online micro-lenders and the guideline for anti-trust. What are the potential change in operation that you guys are likely to introduce in light of those policy introductions? My follow-up question is, can you give us an update on the fintech growth strategy in light of this regulatory environment change? Thank you.
Well, thank you for your question. I think with respect to fintech right now, I think the answer is there will not be a lot of changes in our strategy, right? What we have been doing is steadily driving our fintech business and this will be a strategy that will continue. If you look at the principles that we have adhered to in our fintech business, number one is really compliance with the regulations, and this is something that we have done very methodically in the past. If you look at the micro-loan regulation, it actually does not really impact our flagship micro-loan service, Weilidai, because Weilidai is actually offered by WeBank, which is a fully licensed bank. It has been in full compliance with the banking regulations, which is the regulated part of the entire industry.
We have a lot of respect for risk management, we prudently manage risk. That includes deliberately controlling the scale of some of our financial products, including loans, wealth management products, and insurance, so that we optimize for quality rather than just going for scale. We focus on collaborating with industry partners within the financial industry. For example, in the micro-loan business, we actually work with more than 60 banks so that we actually bring in our expertise in originating loans. At the same time, we actually work with them so that they bring in their expertise to the business, and together we have a win-win outcome. I think we also put a lot of focus on diversified revenue source.
If you look at our revenue, it's actually quite diversified between payment and the lending business, as well as wealth management, and the emerging part on the insurance. Finally, I would say we focus a lot on creating a unique value for users as well as for our industry partners. We bring in technology solutions so that we reduce the frictional cost. We increased in engagement for our industry partners with the users. As a result, we have been growing our fintech business at measured speed. Also we control the size while at the same time developing our capabilities and improving our value proposition for both our users and industry partners. If you look at this entire strategy, I think it actually fits very well with the current regulatory environment. I think we will be steadily continuing driving our fintech business forward.
Thank you. The next questions comes from the line of Gary Yu from Morgan Stanley. Please ask the question.
Hi. Thank you for the opportunity to ask questions, and congratulations on the strong set of results. I have one question related to the gaming business. Given the fact that we are currently under a normalization of COVID-19 from first half, which probably may see some slowdown in momentum. At the same time, we are also seeing quite strong in terms of new games in the pipeline. How should we look at the sustainability of the gaming revenue growth momentum going forward, particularly when we go into 2021? Thank you.
Thank you for the congratulations and the question. We mentioned in the prepared remarks that while our reported revenue from games increased quarter-on-quarter, that to some extent reflected the very conservative deferral and amortization policy of cash receipts. During the third quarter, we saw the full benefit of the surge in cash receipts that we experienced in the first half of 2020. However, our cash receipts did decline slightly quarter-on-quarter. Looking at the third quarter, we've already experienced a degree of normalization in the cash receipts. We assume that will continue going forward with implications for the rate of growth Reported revenue as well over time. More broadly, I would say that we remain optimistic about the game business on a short and medium and long-term perspective because first of all, we continue to enhance our live operations.
As we talked about in the prepared remarks, I think that many investors are now aware of some of the live operations initiatives we put into our really flagship, highest profile games like Honor of Kings, but they may be less aware of the extent to which we're also deploying those in more vertical niche or genre games such as Naruto. That's in terms of live operations of existing games. In terms of new games, we have a number of very high profile, widely discussed titles in the pipeline, some of which already have been developed and already have their Bǎn Hào and a pending launch, such as DNF Mobile and Call of Duty: Mobile, some of which have been developed and released in other markets but pending a Bǎn Hào and launch in China, such as Wild Rift and Valorant.
A large number of games, both our own IP and licensed IP from our big internal studios, including TiMi, Quantum, Morefun, and Aurora, that would generally attract less external attention until the time that they're launched. As you can see with the success of Moonlight Blade in the last few weeks, those games can be very impactful and successful as well. That's our view on the game business looking forward.
Okay, thank you. That's very clear. My follow-up question is related to your online video businesses. We have observed some of the industry players have announced an increase in the monthly fee. How do we look at the potential for further price hike from outside going forward? Broadly speaking, how should we look at competition? Thank you.
Well, I remember, this must have been seven or eight years ago, when we launched what at the time was called our Hollywood VIP video subscription service. It was called Hollywood VIP because 100% of the paid content was Hollywood movies. Literally every content was either Warner Bros. or Viacom or Disney. I thought it was one of the best products we'd ever launched, but the general user base didn't seem to agree with me. We set the price at RMB 20 per month, and we got to a certain subscriber base, but we realized that in order to grow the subscriber base, we should add more content. That's what we've been progressively doing. Initially adding drama series that were also available on terrestrial television, and then layering on domestic films, and then creating our own drama series.
More recently, creating our own variety shows, creating our own animated TV program, which have been very impactful. Anyway, the net result is that the amount we invest in content now for our subscription video service is many magnitudes greater than it was when we set the 20 RMB price point. The range of high-quality content that's available, and in many cases, uniquely available, is infinitely larger than it was when we set the 20 RMB price point. Of course, over time, consumer price inflation in China means that that 20 RMB price point has become steadily more and more affordable. We're very much of the view that the subscription video services in China are sort of underpriced.
At the right circumstances, then we're happy to look at the opportunity to adjust pricing in a way that is fair to consumers as well as to the content industry.
Thank you. The next question comes from the line of John Choi from Daiwa. Please go ahead.
Good evening. Thank you for taking my question. Congratulations on a very strong set of results this quarter. My question is on your online advertising. On your prepared remarks, management did mention that we're seeing gradually normalizing spending. You also mentioned that you're seeing some increasing adoption of some of your algorithm and buying solutions. I was wondering how much has this really helped us when it comes to capturing more ad dollars spending on our platform? Is this the primary reason why we're seeing the strong growth, or is it also a mix of the higher impressions on eCPM from the other inventories that you have? A quick follow-up here is on your cloud. We noticed that your cloud revenue growth was a little bit softer than expected. You mentioned IaaS has been delayed or postponed.
If you look at the industry-wide right now, we're seeing a bit of a still relatively healthy growth. I was wondering what are the challenges that we're facing and what kind of growth should we be expecting going forward? Thank you.
Why don't I answer on the advertising, and Dowson will pick up on the cloud. I think with the advertising industry, if you look globally, there's an enormous shift in how advertisers are spending online. Generally speaking, there's a shift toward video format, and there's a shift toward retargeting. If you look at, let's say, Google's results for the third quarter, then I think their search revenue grew one point something billion year- on- year, which is great. Their YouTube revenue also grew one point something billion year- on- year, which is amazing given YouTube is from a much smaller base than search. That speaks to both of those phenomena, that YouTube's a natural home for video advertising. In the last two years, Google has allowed advertisers to retarget from prior search queries and other sort of intent-based activities into advertising within YouTube.
If you think about it and look at our platforms, then I believe that we're in a good position to benefit from video advertising. You can see that very clearly in some of our feed products. You can see that very clearly in Tencent Video itself. You can see that particularly clearly in recent quarters in our ad network, where there's been a big shift to video. Then I think we're also well-positioned to benefit from retargeting. In the past, there was an enormous gulf between so-called intent-based advertising, eCPMs, versus every other eCPM. The emergence of retargeting has really converged those price points. We've not been a big beneficiary of that because we were structurally short intent-based advertising, intent-based opportunities versus some of our peers structurally long aggregate traffic. Of course, we're not the only company to benefit from those trends.
I think ByteDance has very clearly been a beneficiary as well. ByteDance and we are probably the two that most naturally benefit from the shift to video and the shift to retargeting.
Yeah. In terms of the cloud business right now, I would say there are a number of reasons for the softer quarter, especially compared to peers. One is actually more specific on a few projects and contracts. This is going to go away in the next quarter. It's more of a one-time, non-recurring event on the delay of certain projects and the restructuring of certain contracts. The second one is, I would say when we're playing catch up, we actually rely more on new projects. During the pandemic, some of these new projects get delayed, and as a result, the catch-up process was kind of disrupted. Another reason is, if you look at the growth that's driving the cloud business, especially during the pandemic and after that, it's quite a bit of short video as well as games.
I would say in games, since a lot of the games revenue is actually from our own games, right. Despite we're providing the cloud service to our own games, it's not booked as revenue. On the short video front, there is a competitive reason for that. These are all the factors why I think the growth is softer than peers. I think the one time adjustment would actually sort of end after this quarter. We're catching up in terms of new projects, too.
Operator, let's move to the next.
The next questions comes from the line of Hyunwoo Kim from Macquarie. Please ask the question.
Thank you. Great. Thank you for the opportunity to communicate with you guys today. I wanted to ask you guys about the Wild Rift for League of Legends and how that is interplaying with the PC version. What kind of dynamicism you're seeing in terms of kind of monetization on either sides or kind of user behavior, and how do we think about the eventual role, a commercial launch of it, official commercial launch of it from the current beta phase into a more commercial status and then the rollout into the other regions that it's not been released into? I'll have a follow-up question after that.
Thank you for the question. In terms of Wild Rift and the user behavior, then as you might expect, it's sort of a shorter, sharper experience than the full League of Legends. A full game takes roughly half as long as a full game on the PC League of Legends. The quality of the experience is extremely high. While, of course, Riot and we are biased, both Riot and we are extremely pleased. While it's taken a good amount of time to release a mobile incarnation of League of Legends, the final product is something that everyone is extremely satisfied with, at least internally. Based on the data we see from the previous beta tests in Philippines and Brazil, as well as the more recent full launches across Southeast Asia and Japan, it appears that the users feel the same way.
From a monetization perspective, as with League of Legends itself, and in fact, as with every Riot Games, the monetization is relatively back-end loaded. Meaning that I think there'll be a relatively lengthier period of time between Wild Rift aggregating users versus Wild Rift converting those users into monetization compared to a game such as Moonlight Blade, where the users and the monetization arrive simultaneously. That's fine. I think we have a broad portfolio of games, and it's healthy that different games have different monetization behaviors. We know that from League of Legends experience that over the long, long term, the monetization is not a problem for this kind of game.
Great. Thank you. In terms of just following up on that, in terms of the rollout into the other regions, how should we think about the phase introduction of just kind of global commercial release today?
I think that Riot has disclosed some of its intent. Clearly, for the China market, it depends on the Bǎn Hào issuance, but for other markets, it's under Riot's control. From what I recall, that they felt it was important to stagger the launches because this is the first time that Riot's released a major mobile game. Given the number of current League of Legends PC players, lapsed League of Legends PC players, people who want to play League of Legends but don't have a PC, then the initial and ongoing user surge for Wild Rift is quite substantial, and that puts enormous pressure on bandwidth and server capacity. It makes sense to stagger the launch in different geographies over time.
Having successfully launched the game in different parts of Asia in the last couple of weeks, Riot's now gearing up to launch the game in Europe, which is a very big market for League of Legends PC, and progressively in Korea and the Americas and elsewhere.
Got it. Selfishly, I do hope Hong Kong comes soon. My second question is really just on the fintech part. We talked about 30% plus growth on the TPV and 50% growth on the loan placements. I presume revenue growth is above that, and I just want to confirm that. As a function of that, I would presume that our profitability has improved as well. Perhaps some commentary on the profit improvement on the fintech part would be appreciated. Thank you.
Well, we don't give a lot of breakdown on that. We did say in the remarks I think if you look in the MD&A, we said that the revenue growth from fintech as a whole was quite similar to the previous quarter. The deceleration you saw in the segment was due to business services, not to fintech services. We did say that the profit margin on the payment business itself was relatively stable as well. No great change in growth rates or margins.
Yes. Also as we said, we have actually a pretty diversified streams of fintech revenue. It's probably not correct to tie the fintech revenue directly to the TPV. We don't separately disclose that, but just as an indication, I would like to point that out.
Thank you. The next questions comes from the line of Thomas Chong from Jefferies. Please go ahead.
Hi, good evening. Thanks, management, for taking my questions, and congratulations on a strong set of results. My question is about Mini Program. Given that we saw the GMV experience very strong growth momentum during the year, and with digitization is the key industry trend, what are our strategies in digitization across different industries such as smart retail and smart catering, and how our payments and cloud infrastructure can further speed up the migration? Thank you.
We are actually quite excited about the GMV growth on Mini Programs, we actually put as one of our strategic focus to increase our support within the Weixin ecosystem for transactions and for particularly Mini Program transactions. If you look at the kind of things that we are doing, one part is actually increasing our support within Weixin for Mini Programs. All the new content discovery as well as the rearranging of our wallet entry point as well as the launching of, for example, a live broadcast. All of them actually are the infrastructure that actually allows Mini Programs to be more powerful in facilitating transactions. That's within the Weixin ecosystem.
On the other hand I think the other part of the equation is really helping industry partners, helping different businesses to improve and upgrade their digitization, upgrade their tech infrastructure so that they can actually embrace the Mini Programs in a bigger way. On that front, we obviously have got our smart retail team. We have our cloud service team, sales team who are helping these industry partners. At the same time, we are also empowering a lot of ecosystem partners. For example, the SaaS providers, which can help these industry partners to embrace technology in a bigger way. I think it's a process that's ongoing. It's actually progressing nicely, and it's also speeding up by the fact that there was a pandemic.
Between improving our own ecosystem, between having our own team helping our industry partners, and also empowering ecosystem partners to help the industry partners, I think all of them would contribute to a continued growth in terms of the Mini Programs as a way for people to conduct transactions.
Thank you. My follow-up question is on social advertising, in particular for Moments and mobile advertising network. Should we expect there will be further increase in ad loads for Moments in coming quarters? How should we think about the competition with short-form video players in video advertising? Thank you.
In terms of ad load in Moments, I think that we have been increasing inventory at a gradual and measured rate, and that will remain true. As you're probably aware, WeChat Moments has a dramatically lower ad load percent than many other highly popular internet services in China, including the short video sites you alluded to. With regards to the competition between short video and some of our inventory, I think we've talked about this a little bit before, but in general, I would say that both the short video sites and much of our inventory benefit from the trend toward videoization. Both of them benefit from the trend toward retargeting. From a price point perspective, short video sort of aggregates around a mid-20s RMB eCPM. That is somewhat directly competitive with, for example, the Tencent video advertising.
That's part of the reason our media advertising was under pressure for four quarters. On the other hand, Weixin delivers a different, more affluent audience than short video and therefore commands a higher eCPM. Our ad network and many of our other properties offer a much lower eCPM than short video, which is disproportionately appealing to very performance-based direct response advertisers. We have a range of different products, some of which compete relatively head-on with short video from a price perspective, but most of which operate at different price points.
Thank you.
Just one point to add with respect to differentiated inventory on Weixin. I think it's actually quite connected to what your first question was. When you look at the Mini Programs and the GMV growth on Mini Programs, I would say our Weixin inventories are differentiated in such a way that it's actually because of the ecosystem benefits. It increases the conversion ratio for a lot of the services that advertise on the Weixin inventory. Two is, when advertisers think about advertising on Weixin, they also think about not only in terms of the direct conversion on transactions, but also think about how much users they can actually convert into their private domain user pool, and that is also valuable for them. That's part of the reason why the eCPM is actually higher for Weixin compared to other forms of performance-based advertising.
As we continue to grow the infrastructure to support transactions within Weixin, I think that trend and that differentiation will continue to improve.
Thank you.
Thank you. The next questions comes from the line of Gregory Zhao from Barclays. Please go ahead.
Hi, management. Thanks for taking my question, and congratulations on a strong quarter. I have only one question about your mobile gaming business. If you look at the top 10 mobile games ranking in the past two to three years ago, we can see actually Tencent and NetEase mostly dominated the top 10 games in China with about eight or nine games. Today, if we take a look at the top 10 games in China, actually several smaller studios were also launched some very successful games. Meanwhile, Tencent and NetEase, we see the top 10 games decline to around four to five games. The trend is a bit different from the street expectation of further market consolidation. I just want to understand how shall we think about this kind of the market dynamics and the market competition going forward. Thank you.
Yeah. Thank you for the question. How we think about the market dynamic is that it's a very healthy development. Our aspiration is not domination. While the number of studios represented in the top 10 has diversified, you can see from our results that despite that, we've been able to maintain very healthy revenue and earnings trends in our game business. We think that the diversification is good because it shows the market's becoming more dynamic and users are becoming more sophisticated, and there are new genres of games that are becoming popular and monetizable that Tencent historically didn't focus on, but we can now focus on, and that represent new opportunities for us. That's at a general level. If I try to get a degree more granular and look at individual games, then earlier in the call, someone brought up the miHoYo game, Genshin Impact's success.
I think that has many lessons for the industry as a whole, all of them positive. One being that China games are increasingly capable of expanding beyond China and capturing not only the wallets, but also the sort of malleable, flexible plastic the game industry still is in terms of different models. If you look at the Western world, One of the really big trends has been games that were built around a single-player campaign mode, like Call of Duty, moving over time into more of a multiplayer virtual item mode, like Call of Duty: Warzone. In China, we're seeing a progression in the opposite direction, where a game like Genshin Impact historically would have focused completely on the virtual item monetized end-game PVP experience.
miHoYo created a very attractive single-player campaign more akin to a traditional Japanese RPG that has the effect of drawing players in and preparing them for the end-game experience. In terms of lessons for Tencent, particularly for our big four domestic game studios, then we continue to seek to innovate. We continue to seek to develop new genres and to mix and match different genres, different business models to create something exciting and compelling. We continue to increase our investment in games because the player expectations for game quality are rising and to some extent converging globally. It's incumbent on us to really invest in the people, invest in the tools, to create games that can cut through the clutter through innovation and through quality. That's what we're seeking to do both for China and for the international markets as well.
Thanks. Very helpful.
Thank you. The next questions comes from the line of William Packer from Exane BNP Paribas. Please go ahead.
Hi, management. Thank you very much for taking my question, and congratulations on the very strong numbers. Regulatory news flow has been significant in recent weeks. Could you make any initial comments on the draft antitrust rules and how they could impact your business? Is it right to think that your video games and digital entertainment businesses are not likely to be a focus? Thank you.
Yeah, William, thanks for your question. As you have pointed out, the regulation, the consultation paper just came out not long ago. Obviously, we have reviewed the consultation paper regarding the platform economy. We would take some time to communicate with the regulatory authority to understand what they want to achieve fully. Our initial thoughts, I would like to share a few thoughts. Number one is, from our reading, the document emphasized the principles of fair competition and regulatory oversight, as well as the promotion of innovation and industry development, ensuring a balance of interests is achieved for all stakeholders. That's sort of the spirit of the paper. Secondly, our observation is that such regulation is not new and is also not unique to China. As technology companies become bigger and more important to the economy, I would say more regulations to reflect the new reality are needed.
It's not just the case for China, but it's also the case globally. Thirdly, we believe that the government is still supportive of the internet and technology industry, especially the innovation that's driven by the industry. The intention is to prevent misconduct and also ensure long-term healthy growth for the industries. Fourthly, I would like to reflect on Tencent's business and strategy and philosophy. I would say it actually fits very well with the spirit of the regulatory framework. As you can see, our platforms are open in nature. We work with a lot of partners. We focus on providing great products and user value rather than very calculated business operations as well as monetization. We also embrace competition. As a matter of fact, we thrive on competition and sometimes even internally we compete, have multiple products competing with each other.
Finally, I would say we'll work very constructively with the regulators to ensure our compliance with the paper. These are initial thoughts. Of course, as we interact with the regulators, we'll have more to add in the future, and we have more insights. With respect to the different sectors, I can't comment fully right now, but it looks like from the paper that it's more related to transaction platforms. For games, which are essentially individual products rather than platforms, I think they are less of the focus. In terms of the digital entertainment industry, I look at the video platform as an example, and as we talk about the video platform earlier, it's actually quite a bit of money-losing business right now.
It probably doesn't really fit into the focus of the regulator at this point in time as far as the consultation paper is concerned.
Thank you very much for the detailed answer. Just as my follow-up question, on a slightly different topic. You've got a significant and strong footprint in e-commerce via Mini Program and enterprise software via Tencent Meeting and related products. Thus far, it feels like monetization has lagged international peers. How should we think about the cadence of monetization going forward? Thank you.
Well, I think these are really businesses which are at the initial phase of development. We are really excited about the potential market that's ahead of us. As a result, it's actually quite a bit in the philosophy of Tencent. When there is a market potential, when there's a user need that has a lot of potential, we tend to focus a lot on unlocking that potential and providing amazing products and user value first, before moving into monetization. At this point of time, I think both through Mini Programs and for our enterprise software, at this point of time, I think the focus is really delivering great products to increase the user base and to unlock the potential in the user market first, before we really think about monetization.
On the Mini Programs, I think we do derive quite a bit of commercial benefit already, through the fact that the Mini Programs is actually enabling a lot of payment transactions within our system. The Mini Program owners, which want to get traffic, are also doing advertising in our Weixin ecosystem. That's part of the reason why our eCPM on Weixin advertising is actually higher than a lot of the industry standard. We are deriving the benefits, but somewhat indirectly.
Thank you. The next questions comes from the line of Zaihao He from Huatai Securities. Please go ahead.
Thank you, management, for taking my questions. My first question is on our Fintech business. I want to discuss from a pure payment perspective, as our transaction volume continues to rise in the offline channel. In the medium term, would that increase our pure payments costs going forward as a lot of payment expenses and service expense are going through in the offline channel? Also, in terms of monetization improvement on the pure payment business, in view of the current competition and also costs from the banking channels, could you give us some color in terms of the pure payments business margin in the medium to long term? Thanks.
Well, on the offline payment side, it's actually generating revenue. The major cost component is banking charges, as well as promotional expenses. I would say, when we look into the future, it should be relatively stable in the sense that it does generate revenue for us. The banking charges are relatively stable for now. Of course, it depends on our collaboration with the banks. It is an unknown, but so far it has been relatively stable. The promotional expenses have gone through ups and downs through the years. A big part of it is really about how much the industry peers are excited about the opportunity and how much money they are putting into the system. A lot of times we are the market follower in terms of promotional resources spending.
So far, it looks like this year, it has normalized to a more rational level compared to previous periods where some of the spending are very, very high.
Okay. I have a follow-up question on our Fintech business. We have seen 50% wealth management consumer growth this quarter, 50% year-over-year growth. Yet our Li Cai user base penetration rate versus our payment user base is still very low. Can you share with us what other new features led to such a strong growth in our wealth management and consumer base? What other strategies we're implementing to ensure they will still maintain a very rapid growth in terms of Li Cai consumers versus penetration rate versus our payment users?
Well, I think we want to grow this penetration steadily, right? Typically, wealth management business is a long-term business. You try to establish a relationship for the long run with the users. What we typically do is the Ling Qian Tong. When people deposit certain money into money market funds, that's actually sort of the lead-in of a relationship. Over time, we offer more wealth management products to the users. I think so far we have been, again, consistent with our prudent and measured way of growing our Fintech business. We have been quite a bit in self-constraint in terms of offering wealth management products that carries a slightly higher risk, because we do want to make sure that the consumers, the users are actually well-educated first before they know exactly what they are buying in terms of the wealth management products.
Again, this will be a longer-term cultivation of user education, and over time, we will start offering more differentiated wealth management products to our users. We are not in a rush to sell a lot of wealth management products to users because we felt that it has to come along with the education of the users with the further development of the financial markets, so that there are good wealth management products that we actually would choose and offer to our users. It would take a process through which it would grow. I think the fact that we have the payment platform actually really help us to establish the initial relationship. As we continue to build our expertise in choosing products and educating our users, then this will also grow naturally.
We have reached the end of question- and- answer session. I would like to hand the conference back to Ms. Huang for closing remarks.
Thank you, operator. We are closing the call now. If you wish to check out press release and other financial information, please visit the IR section of our company website at www.tencent.com. The replay of this webcast will also be available in a few hours. Thank you, and see you next quarter.
That does conclude our conference for today. Thank you for participating. Tencent Holdings Limited 2020 third quarter results announcement conference call. You may all disconnect.