Thank you for standing by, and welcome to the Tencent Holdings Limited 2015 fourth quarter and annual results announcement conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press star one on the telephone to join the question queue. Your name will be announced when it is your turn to ask a question. If you wish to cancel your question, please press the pound or hash key. I must advise you that this conference is being recorded today. I would now like to turn the conference over to your host today, Ms. Catherine Chan from Tencent. Please go ahead, Ms. Chan.
Thank you very much, operator. Good evening. Welcome to our annual results conference call for the year of 2015. I'm Catherine Chan from the IR team of Tencent. Before we start the presentation, we would like to remind you that it includes forward-looking statements which underlie a number of risks and uncertainties and may not be realized in 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-GAAP 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. For a detailed discussion of the risk factors and non-GAAP measures, please refer to our disclosure documents on www.tencent.com/ir. Let me introduce the management team on the call tonight.
We have our Chairman and CEO, Pony Ma, President Martin Lau, Chief Strategy Officer James Mitchell, and Financial Officer John Lo. Pony will kick off with a short overview. Martin will discuss strategic highlights. James will stick to business review. John will go through the financials before we take your questions. I'll now turn the call over to Pony.
Okay. Thank you, Catherine. Good evening, everyone. Thank you for joining us. In 2015, we made good progress in executing our connection strategy, which positioned us to capture market opportunities brought by mobile Internet. I shall walk through four strategic areas that are shaping Tencent's businesses over the long run. In social, we've seen rapid growth users and connected to a wide portfolio of online and offline services. QQ maintained year-on-year user growth, particularly among the youth segments. Both products serve as a strong distribution platform for our games and digital content offerings. Both generate massive volume of traffic to feed our social advertising business, which doubled its revenues year-on-year. In games, we sustained rapid revenue growth for smartphone games. We maintain leadership in key PC game designs. We are also developing esports tournaments, which help to build fan communities and reinforce gamers' loyalty.
In media and content, digital consumption via smartphone, especially of news, sports, and video content, strengthened the traffic leadership of our platforms. We began to monetize our mobile news service via in-feed ads, and we are building our subscription businesses for premium content served on our leading video, literature, and music platforms. Looking at our broader ecosystem, we further developed our partner network via official accounts system and grew our mobile payment monthly active users seven times year-on-year. For our Internet finance business, we worked with select partners to broaden our wealth management product portfolio on Licaitong and introduced micro loans through WeBank. Financially, we delivered a strong set of results for the fourth quarter and full year of 2015. Let me highlight a few numbers for you.
For the fourth quarter of 2015, total revenue was CNY 30.4 billion, up 45% year-on-year and 14% quarter-on-quarter. Non-GAAP operating profit was CNY 11.5 billion, up 43% year-on-year and 10% quarter-on-quarter. Non-GAAP net profit to shareholders was CNY 9.0 billion, up 28% year-on-year and 8% quarter-on-quarter. For the full year of 2015, total revenue was CNY 103 billion, up 30% year-on-year. Non-GAAP operating profit was CNY 42 billion, up 37% year-on-year. Non-GAAP net profit to shareholders was CNY 32 billion, up 31% year-on-year. Operationally, our key platforms retained sector leadership. Total MAU for QQ increased 5% year-on-year to 853 million, within which smart devices MAU was 642 million, up 11% year-on-year. Weixin and WeChat reached combined MAU of 697 million, up 39% year-on-year.
For Qzone, smart devices MAU rose 6% year-on-year to 573 million. We maintained our leadership as the largest operator and publishing platform for PC client games and established clear leadership in several genres of smartphone games. Our media business continued to grow, supported by increasing traffic from our user base, deep user insight, and our expanding catalog of exclusively licensed and in-house content. Our new services continue to lead by daily active users and video platforms by mobile video views. In mobile utilities, we expand market leadership in mobile security, mobile browser, and Android-based app store in China. I now invite Martin to discuss strategic highlights.
Thank you, Pony. Good evening and good morning. Our connection strategy has really extended WeChat and Mobile QQ from being social communication tools to becoming platforms for games publishing, social advertising, and premium content distribution, and provisioning of other online services. I'll discuss in my section our strategies to build out each one of these businesses. In games publishing, we're leveraging our PC game expertise and mobile traffic to deliver high-performing mobile games across different genres. In shooter and mobile genres, we extended our leadership from PC to mobile with new releases, including CrossFire Mobile and We MOBA. In RPG, we achieved initial success with The Legend of Mir 2, as developed by our partner developer. We're able to attract new gamers to our mobile platform, and we observe limited average impact on users and revenue due to cannibalization on our PC similar titles.
We are fostering partnerships with game developers globally to bring best-in-class mobile games to our users. Game developers typically prefer to work with us because we can leverage a large user base and social graph to distribute games to a broad audience and run user-targeted marketing campaigns. Many leading PC game developers view Tencent as the partner of choice for publishing their next mobile title in China. These partnerships will enrich our existing pipeline, which include games we developed based on popular game titles, as well as comic IPs. Running a well-diversified portfolio of game titles is important in our view because the life cycles of mobile games tend to be shorter than PC games. As it relates to social advertising opportunities, during 2015, we made progress in building our social advertising business, which is becoming a mainstream, sizable market opportunity globally.
Compared with traditional online advertising, social advertising is less intrusive and, if done properly, can trigger viral sharing in our social platforms. We're growing this business in four ways. Firstly, we're developing advanced data mining, lookalike, and retargeting technologies that support enhanced audience profiling and targeting capabilities to drive ads, engagement, and conversion. Secondly, to attract a bigger share of top advertisers' online ad spend, we're creating new ad formats that support brand storytelling. We've also formed dedicated sales teams to serve key accounts with customized solutions. Thirdly, to serve a growing base of long-tail advertisers, we're developing new audience targeting solutions for specific industries and increasing the types of ads sold through our self-service platform. Last but not least, we're gradually releasing inventories while balancing user experience with ad load performance.
We view social advertising as a long-term opportunity, and we'll build it with patience to make sure that we're getting this right. Moving on to digital content services, the increasing user demand for quality content and on-demand content access, as well as improving copyright protection in the digital environment, are creating a market for paid premium content in China. As pirate activities diminish, content suppliers are making new content available online sooner. App stores and standalone apps offer better mechanism for copyright protection as opposed to the previous web page architecture. We're also cultivating this market environment via paid services for premium content served on our video, music, and literature platforms. While all of these businesses are still in investment mode financially for us, we believe premium content paid services will help us cope with the increasing content costs over the longer run.
For premium movies and video programs, we charge either a monthly subscription or a pay-per-view fee. During 2015, we made heavy investments that expanded our library of exclusive premium videos, which led to a six-fold increase in our video subscriptions year-on-year. In music, we're in the early stage of moving the industry toward a free basic plus subscription premium model. We're the leading master licensor of music copyrights in China in terms of number of songs. In the second half of 2015, we started sublicensing the content to key online music providers to support an industry-wide transition towards paid package. For online literature, we're currently the largest digital publisher by user and by revenue, and we publish over 80% of the most popular online literature in China. We are also cultivating the commercial value of our vast IP library through participating in game, drama, movie, and animation productions.
I'm going to round up my section with an update on our Internet Plus strategy. Connecting more digital content and broader types of offline to online services is helping our social apps to make users' life more convenient. Users are gaining broader access to e-commerce and O2O services as we support our strategic partners to grow their product offering and service level. We're making local public services such as healthcare, transportation, utilities, and municipal government services more accessible to users. We are also adding functionalities that facilitate online bookings, purchases, order tracking, and other transactional services through official accounts and our mobile payment solutions. We believe creating a vibrant ecosystem will help us drive payment adoption and transaction volume. This in turn will position our payment platform as a launchpad for online financial transactions such as wealth management and consumer lending over the longer run.
With that, I'll pass to James to talk about business review.
Thank you, Martin. In the fourth quarter of 2015, our revenue grew 45% year-on-year. Value-added services represented 76% of our revenue, within which online games contributed 53% and social networks 23%. Online advertising was 19% of our revenue, up from 12% last year. For the full year, our revenue grew 30% year-on-year, or 38% excluding e-commerce transactions. Value-added service revenue was CNY 23.1 billion, up 35% year-on-year and up 12% quarter-on-quarter. Our social networks revenue was CNY 7.1 billion, up 37% year-on-year and up 14% quarter-on-quarter. Monthly subscriptions increased, notably through our digital content offerings. Paid music downloads boosted growth in our premium music subscriptions and the drama series, "Country Romance," Season 8, drove premium video subscriptions. Online game revenue was CNY 16 billion, up 33% year-on-year and up 11% quarter-on-quarter. Mobile and PC game revenue each increased both year-on-year and sequentially.
For the full year 2015, VAS revenue was up 27% on a reported basis and up 24% on a gross-to-gross basis. Looking at social networks, we took several initiatives to deepen engagement within the QQ community during the quarter. For example, a revenue-sharing scheme that incentivized QQ group activity. Under this scheme, group organizers receive a share of in-group spending and gifting. Also, facilitating third parties to share video content within the Qzone newsfeed more effectively. For Weixin, we continue to develop our official account ecosystem and expand use cases. The number of official accounts doubled year-on-year to approximately 20 million, and enterprise accounts allowed us to penetrate new verticals such as logistics, real estate, and store management. On social payment, red envelope gifting over mobile QQ and Weixin has become a widespread component of holiday greetings in China.
Leveraging user activity on our social platforms, we ran a successful Chinese New Year campaign in February. The total number of red envelopes exchanged via mobile QQ was 6 billion and via Weixin was 32 billion. Moving to PC client games, average concurrent users for our advanced casual games grew 7% year-on-year to 7.8 million, primarily due to existing games. While average concurrent users for massively multiplayer games grew 3% year-on-year to 1.7 million, primarily due to new titles. In battle arena games, "League of Legends" ran several highly popular eSports events, deepening user engagement, and we increased paying user activity through in-game promotions. In shooter games, we released new items in "Assault Fire," which drove up ARPU, and new content for "Call of Duty Online," which boosted usage. In role-playing games, our recently launched titles such as "Moonlight Blade" and "ArcheAge" contributed to growth in paying users and revenue.
We believe we possess a rich PC game pipeline, including titles such as "Master X Master," a battle arena game; "MapleStory 2," a side-scrolling RPG; "Orcs Must Die!," a tower defense game; and "War Thunder," a combat game. For smartphone games, in the fourth quarter, our smartphone game portfolio generated CNY 7.1 billion revenue, up 72% year-on-year and up 33% quarter-on-quarter. We're the market leader in many popular genres, including shooter games, mobile games, ARPG, card RPG, and puzzle games. We're seeking to enrich our smartphone gamer experience, first, by lining up a diversified portfolio of strong IPs based on PC games and comics that provide inspiration for new mobile games. For example, we have published mobile games based on the "CrossFire" PC game and on the "Naruto" animated series, to good consumer response.
Secondly, by expanding into new game genres, and thirdly, by developing community and eSports cultures around mobile games. In our recent Game Center upgrade, we bundled video replays into the game apps themselves and enhanced the community management tools for the in-game tribes and guilds. Given our operating strengths and proven ability to grow communities and revenue, we believe we're the China publishing partner of choice for game developers locally and globally. For example, we have mobile game publishing relationships with Shanda, Kingsoft, Giant, and a range of international game developers. Moving on to online advertising, segment revenue was CNY 5.7 billion, up 118% year-on-year and up 16% sequentially. Brand advertising revenue was CNY 2.8 billion, up 89% year-on-year and 10% sequentially. We increased sell-through of mobile news inventory via paid feeds, driving the sequential revenue growth during what's historically a seasonally weak quarter for our brand ad business.
Our video ad revenues more than doubled year-on-year. They were down slightly Q on Q due to the high base from "The Voice of China" fall program last quarter. Our performance advertising revenue was CNY 2.9 billion, up 157% year-on-year and up 22% quarter-on-quarter. New ad formats and increased mobile impressions volume delivered the year-on-year revenue growth. Also, we selectively increased ad loads in the Qzone and Moments to coincide with the eCommerce peak season during the fourth quarter. For the full year 2015, our advertising revenue was CNY 17.5 billion, up 110% year-on-year. Looking into 2016, we assume a tougher macro environment may have some negative impact on the overall advertising industry, including our business within it. Reviewing some of our leading ad properties, in news, we shifted mobile inventory from banner into paid feeds, which boosted average CPM and improved sell-through rate.
In video, our mobile daily video views nearly doubled year-on-year, thanks to our expanding catalog of popular content. As the NBA's exclusive partner in China, we helped launch the season in October with several high-profile events. We estimate the average online viewership per NBA game, aggregating all platforms across the industry, has doubled year-on-year since we became exclusive partner. In social, we enhanced our audience profiling capability via lookalike, the Qzone, and LBS targeting technology from Weixin. Our official accounts grew impression volume and gained wallet share from top advertisers. With that, I'll pass on to John to discuss the financials.
Thanks, James. Hello, everyone. For the fourth quarter of 2015, our total revenue was RMB30.4 billion, up 45% year-on-year and 14% quarter-on-quarter. Gross profit was RMB17.8 billion, up 41% year-on-year or 14% sequentially. Net other gains was RMB249 million in the quarter. Operating profit was RMB10.9 billion, up 47% year-on-year or 5% quarter-on-quarter. Share of losses of associates and joint ventures was RMB1.3 billion for the quarter. The year-on-year increase mainly reflected higher losses from associates. On a non-GAAP basis, share of losses of associates and joint ventures was RMB164 million. Income tax expenses were RMB2 billion, up 124% year-on-year or 28% quarter-on-quarter. The effective tax rate was 21.7% for the fourth quarter and 19.6% for the full year 2015. Net profit attributable to shareholders was RMB7.2 billion, up 22% year-on-year or down 4% quarter-on-quarter. GAAP diluted EPS was RMB0.759. Non-GAAP diluted EPS was RMB0.949.
For the full year 2015, total revenue was RMB102.9 billion, up 30% from 2014. Gross profit was RMB61.2 billion, up 27% from 2014. Operating profit was RMB40.6 billion, up 33% from 2014. Net profit attributable to shareholders was RMB28.8 billion, up 21% from 2014. After adjustments to non-GAAP, operating profit for the fourth quarter was RMB11.5 billion, up 43% year-on-year or 10% quarter-on-quarter. Net profit attributable to shareholders was RMB9 billion, up 28% year-on-year or up 8% quarter-on-quarter. Operating margin was 38%, stable year-on-year or down two percentage points quarter-on-quarter. Net margin was 30%, down four percentage points year-on-year or two percentage points quarter-on-quarter. For the full year 2015, non-GAAP operating profit was RMB41.8 billion, up 37% from 2014. Non-GAAP operating margin was 41%, up two percentage points. Non-GAAP net profit attributable to shareholders was RMB32.4 billion, up 31%. Non-GAAP net margin was 32% and stable compared to last year.
Let's turn to segment gross margin. For the fourth quarter, gross margin for value-added services was 64%, stable year-on-year and quarter-on-quarter. Gross margin for online advertising was 51%, up 11 percentage points year-on-year and two percentage points quarter-on-quarter. Social advertising revenue, especially from mobile, contributed to that margin. For the full year 2015, gross margin for VAS was 65%. On a gross-to-gross basis, it was down one percentage point from last year. Gross margin for online advertising increased five percentage points to 49%. Moving on to operating expenses. In the fourth quarter, selling and marketing expenses was RMB3 billion, up 47% year-on-year and up 48% quarter-on-quarter. Higher marketing and promotion spending on platform games, literature, mobile news services contributed to both year-on-year and quarter-on-quarter increase. The quarter-on-quarter increase was primarily affected by seasonality. Selling and marketing expense was 10% of quarterly revenue.
Included under G&A, R&D expense was CNY 2.5 billion, up 15% year-on-year, 1% quarter-on-quarter. Total G&A expense was CNY 4.8 billion, up 20% year-on-year up 9% quarter-on-quarter. R&D represented 8% of quarterly revenue. Total G&A was up 16%. Share-based compensation is around 3% of quarterly revenue. On a full year basis, selling and marketing expense was CNY 8 billion, up 3% from 2014 represented 8% of revenue. R&D expense was CNY 9 billion, up 19% from 2014 represented 9% of revenue. Total G&A was CNY 16.8 billion, up 19% over 2014 represented 16% of revenue. As of quarter end, we had about 30,600 employees, up 11% year-on-year or 2% quarter-on-quarter. Let's go through our margin ratios for the fourth quarter.
Gross margin dipped 1.9 percentage points year-on-year to 58.4%, mainly due to increasing bank handling fees in C2C money transfer in our mobile payment platforms. Gross margin was stable sequentially. Non-GAAP operating margin was 37.9%, which was hardly stable year-on-year. Sequentially, it dipped 1.6 percentage points primarily due to higher selling and marketing expenses, partially offset by lower G&A expenses. Non-GAAP net margin was 29.6%, which decreased 4.2 percentage points year-on-year 2.2 percentage points quarter-on-quarter. The year-to-year decrease was due to higher income tax expenses and higher share of loss from associates. The sequential dip was mainly due to higher selling and marketing expenses. Turning to earnings per share and proposed dividend for 2015. GAAP basic EPS was CNY 3.097 diluted was CNY 3.055. Non-GAAP basic EPS was CNY 3.485 diluted was CNY 3.437.
Subject to the approval of shareholders at the AGM to be held on 18th of May 2016, we are proposing an annual dividend of HKD 0.47 per share. Finally, let me share a few key financial metrics with you. Total CapEx was CNY 1.9 billion for the fourth quarter, up 17% year-on-year or 14% quarter-on-quarter. Operating CapEx was CNY 1.3 billion Non-operating CapEx was CNY 586 million. Free cash flow for the fourth quarter reached CNY 16.2 billion, up 76% year-on-year or 144% quarter-on-quarter, which was mainly attributable to the increase of operating cash flow from our games and advertising businesses. At year end, our net cash position was CNY 19.1 billion, down 16% year-on-year or 10% quarter-on-quarter. The negative year-to-year comparison was mainly due to payments for licensed content, dividends, and M&A, partially offset by free cash flow generated during the year.
The valuation of our US dollar denominated debts also contributed to the decrease. The fair market value of our listed associates and available-for-sale financial assets were approximately CNY 98 billion. That concludes our presentation. Thank you.
Thank you. We shall open the floor for questions now. Operator, we will take one main question and one follow-up question each time. Shall we invite the first question now? Operator?
Operator. Thank you.
Yes.
We will now begin the question-and-answer session. If you wish to ask a question, please press star one on the telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Our first question comes from the line of Wendy Huang from Macquarie. Please ask your question.
Thank you for taking my question. My first question is about your broad internet finance business. You mentioned mobile payment MAU increased significantly. What's the absolute number for that mobile payment MAU, and also what kind of revenue model that you will try to build around your internet finance business?
Okay. Well, in terms of MAU, we have never disclosed it and we are not providing the exact number. I think we try to provide the relative growth to give you some color on the growth of the activity. In the past, we have announced that our total number of cards bind was more than 200 million. Now the number is safely more than 300 million. I think this should give you a sense of the continued growth of both the number of users as well as the level of activity. In terms of mobile payment, it's interesting that you ask the question because it was actually generating losses, and the loss has been accelerating at a very fast clip as the level of activity increased because
As the payment platform, we actually have to pay the bank a certain handling fee when users move their money into the payment system. When it's actually used for a merchant payment, we get some revenue from the merchants. If it's actually a user-to-user transfer, then we don't receive any fees. That's why it was actually generating a loss. Recently, I think we actually have told the public that in the month of January, the amount of bank handling fee that we pay minus the amount of money that we get from the users actually exceeds CNY 300 million a month. It's actually a pretty significant number. As a result, we announced on March 1st that we have to put on a fee when people extract money out from the payment platform onto their bank card.
This measure has actually helped us to contain the cost. Now, in terms of what we see as the revenue model for the payment platform, I think number 1, when the payment is actually to merchants, then we actually charge merchants a certain fee, and that's actually more than able to cover our bank handling charge. Now, because of competition, sometimes we actually have to reduce the fee and even subsidize some of the merchants. As a result, we actually believe that the payment platform itself is not going to be a profitable business. What's the value actually to us? The value of the payment platform is that there's a lot of activities that can happen. It will benefit our overall ecosystem.
When we actually try to make our ecosystem a diverse one, and we start to put advertising into our ecosystem, then having the ability to pay actually helps to make the advertising more valuable to merchants. Also, we believe, in the longer term, having the payment pathway actually help us to secure a very important launch pad of online financial transactions. For example, our wealth management platform, Licaitong, and our consumer lending business in our affiliate WeBank, actually rely on the fact that we have a lot of people active on our payment platform, a lot of people who have binded their bank cards to the Weixin and to the QQ account. When we have that, then being able to identify these as potential customers and directing them to the online financial applications will be much easier.
Thanks, Martin. My second question is about your advertising business. On the revenue front, you mentioned that mobile advertising already accounted for 65% of the total advertising revenue in 2015. I just wonder what kind of pricing that mobile is at the moment, whether its CPM is still at a discount to PC CPM, or it has already exceeded the PC CPM due to its more targeted nature. How do you see your advertising model to develop differently from Facebook down the road? On the cost side, I think in the past 2 quarters, you specifically mentioned about the Esports World Cup and also NBA costing the Q4. Given the uncertain competition in the video market, how should we look at the 2016 second cost? Thank you.
On mobile advertising, PC advertising has got a very, I would say, bipolar type of inventory composition. There is the homepage and then there's everything else. The homepage typically sells very well and commands a high CPM. Very quickly, when you go to the deeper pages, the CPM drops significantly. On mobile, what we're seeing is that because we can do it on the feed and because we can actually get the advertising in a more targeted way, as you said, the CPM that we get on the different type of pages are actually not that different. That's why on an aggregate basis, actually, we would say the mobile platform is a better place to put advertising.
What you may not be able to command exactly the same CPM as the front page, but there's actually much more inventories that you can sell that command a respectable CPM. In terms of content cost.
In terms of the content costs, you mentioned that video advertising revenue grew more than 100% year-on-year, and video subscriptions grew a little more than 600% year-on-year. When we see an industry that's exhibiting those transformational rates of growth, it's very natural you should expect us to continue reinvesting in content, both exclusive and non-exclusive. As a reminder, some of the exclusive content we already possess includes NBA rights, HBO, "Star Wars," "James Bond 007," Paramount early window rights. We'll continue to look for rights just as some of our big competitors will, because the video industry is a very fast-growing, dynamic industry.
If you look at the video subscriptions opportunity, I think we and a couple of competitors are all growing very quickly as a better regulatory environment and consumers more willing to pay for premium content really creates a business model that didn't exist in the recent past.
Thank you. Operator, next question, please.
Thank you. Once again, as a reminder, please ask one question each. If you wish to ask another question, you may rejoin the question queue. Thank you. Your next question comes from the line of Eddie Leung from Merrill Lynch. Please ask your questions.
Good evening. Thank you for taking my questions. Regarding the performance-based advertising, as we have seen more inventory from different types of applications, just curious, how does it affect two things? Number one is the average eCPM you get from across the board. Secondly, how that would affect the gross margins of your performance-based advertising business. Finally, perhaps just a housekeeping question. Any update on the up trend of your different types of games that would be great. Thank you.
On the advertising eCPM and gross margin, as you'd expect, we're placing performance advertising across a wide range of inventories. Different inventories have different trends, different formats have different trends. For example, when we put advertising into a third-party ad network, which we're building out initially, the eCPM might be a little bit lower, whereas when we put advertising into our WeChat Moments news feed, the eCPM would be materially higher. If we put advertising into a video format, that would be materially higher CPM versus a text format. In terms of the gross margin, the pricing is the less important determinant of gross margin.
The bigger determinant of our performance advertising gross margin is whether the inventory is owned inventory, such as the WeChat Moments, or kind of shared inventory, where we're the exclusive distributor, such as the WeChat official accounts, or third-party inventory, such as our ad network. It's really the nature of the owner of the inventory that determines the gross margin. In general, the incremental gross margin on our performance advertising business is quite high because much of the inventory is owned inventory, given our substantial underutilized traffic.
In relation to the output for MMOG, it ranges from CNY 265-CNY 410 in quarter 4. Advanced schedule games, CNY 85-CNY 310. For casual games, it ranges within CNY 185-CNY 195 when you see that portfolio.
Thank you. Next question, please.
Your next question comes from the line of Alan Hellawell from Deutsche Bank. Please ask your question.
Hello, Alan? If she's not on the line, we'll move to the next question, please.
Thank you. Your next question comes from the line of Jason from HSBC. Please ask your question.
Good evening. Thank you so much for taking my questions. I have two quick questions. Firstly, I was wondering if you can give us sort of an update and maybe an outlook on WeChat Moments advertising. You mentioned the potential to increase your ad load, I'm wondering sort of what you think about Moments for this year. Secondly, if you can give us an update on WeBank, any sort of data on sort of microloans or sort of user behavior would be very helpful. Thank you.
Okay. In terms of Moments ads, right, I would say it is an ad format, an ad platform which carries significant long-term opportunity. It's a very important engagement tool for our users. We want to sort of do it slowly and do it right. If you look at our performance ads revenue, a big chunk is still actually on our Qzone feed. There's the second portion, which is on the official accounts or the content page in the official accounts. It's the Moments. I think over time, as we continue to improve the targeting technology as well as continue to educate more and more advertisers about sort of how to create the right type of Moments ads in a stylish and in a social way, we'll continue to release more inventories. That's not the highest priority for us.
The highest priority for us is actually to make sure that our technology is done right, and that we continue to expand the universe of advertisers who are capable and who are proficient in developing performance ads, especially on Moments. Now, as it relates to WeBank, I think WeBank is performing according to plan. They have their flagship product, which is a consumer loan product, which has been signing up a pretty good number of users, and it leverages our WeChat and our QQ channels to reach users in a targeted way. It has a whitelist which allows it to target the creditworthy users, and it's gradually expanding the whitelist to include more and more users as it continues to refine its credit model.
On the funding end, it's actually using a capital-light model so that it actually partners with a lot of banks to provide loans on a joint basis. Basically, it's not a traditional bank. Essentially, it's a bank cooperation or partnership platform with a banking license. I think that model is actually working out pretty nicely, and we continue to gradually increase the number of users that we feed into that system.
Thank you, Martin. Next question, please.
The next question comes from the line of Dick Wei from Credit Suisse. Please ask your question.
Hi. Thanks for taking my question. I wonder if management can share some observations on the user behavior for paid premium content. I think the other users are mainly from existing QQ users, or they may not be existing kind of paying members on Tencent. How do we expect the paid subscription growth? Is that mainly from kind of cross-selling to different categories as we have more diverse subscription content, or is it going to be more spread out into more new users going to subscription of our premium contents? I wonder if you can also comment on, is there any kind of synergy that brings into maybe some paid subscription to some of these services within our company service and content ecosystem? Thanks.
In terms of the nature of the consumers who are subscribing to our digital content services, it is relatively nationwide, and it is relatively balanced across different demographics. Although, like most things internet, it is skewed a little bit to men and a little bit to younger users. We do some limited upselling of our traditional privilege subscriptions into the content subscriptions. Historically, that has been a small minority of the subscriber growth. The large majority has been activating people cold who previously weren't paying us and persuading them to pay us because they love music or they love movies or they love literature.
When we look at the growth opportunity going forward, I think that as Martin alluded to in the opening remarks, we feel there is an increase in the supportive macro environment in terms of government regulations, in terms of the app stores kind of policing content, and in terms of consumers becoming more sophisticated, more willing to pay for content. Then finally, in terms of the content suppliers willing to make their content available more widely behind a premium service. While there is many individual sort of tactics, that is the broad backdrop. Another factor that I think has been particularly impactful in the last 12 or 18 months has been the growth of mobile payment platforms such as our Weixin Pay.
When we have surveyed consumers in the past or when movie studios or record labels have surveyed consumers in the past and talked to them about why they're not paying for premium content, typically the answer was not that they felt CNY 10 or CNY 20 per month, which is the rate we charge, is too expensive. The answer was it was inconvenient to pay. If they wanted to watch a movie now, if they wanted to listen to a Taylor Swift record now, they didn't want to have to go to a 7-Eleven and buy a prepaid card in order to activate that experience. Now that they have a smartphone in their hand, and that smartphone is bound to their bank accounts, and they can pay instantaneously through Weixin Pay, it makes what was previously inconvenient, inaccessible service much more convenient and accessible.
We think those are all the factors supporting the growth, those should also continue to support the growth going forward. Of course, we'll continue to work with content suppliers, to some extent, our growth is also a function of how our competitors behave a little bit. If our competitors adopt a forward-looking mentality and try to nurture premium content consumption as well, that's good for them, it's also good for us and for the overall industry.
Thank you. Operator, next question, please.
Your next question comes from the line of Natalie Wu from CICC. Please ask your question.
Hello, Natalie? Operator, we move to the next question, please.
The next question will come from the line of Erica Poon from UBS. Please ask your question.
Good evening, management. This is Ming Xu asking on behalf of Erica. I have two questions. The first question is regarding WeChat. Firstly, could you share with us maybe the split between, in terms of Moments ads
Could you share with us the split between big advertisers and the long-tail advertisers in terms of number and also in terms of revenue? We also noticed recently that you have lowered the minimum placing requirement for each ad. I'm wondering what's the update in the past one month and also what's your outlook for the rest of 2016. Secondly, could you share with us some color on the application account and also corporate WeChat? I have a follow-up on games.
I think, Ming, that will be the two questions that we're going to take from you.
Yeah.
Thank you.
In terms of the Moments advertising, at this point, it's really the bigger advertisers, and that's where we're focused in because we think it's initially most appealing for the bigger advertisers. As far as the outlook is concerned, I'd refer you back to Martin's earlier comments, that we think this has a great long-term potential, as evidenced by the success of global peers, as evidenced by the advertiser reaction to our initial batch of ads. We'll manage the growth carefully.
Yeah. In terms of app, well, you actually asked two questions which are not really launched yet. They're forward-looking questions. I think, the idea of application accounts is really helping the official account owners to provide more functionality and more customized functionality for their official account. For the traditional official account, it's menu-based and it's conversation-based. We saw that with a lot of different types of merchants and organizations using the official accounts, some of them actually want to upgrade the experience and provide a lite app for their users through our platform. That's why we are now designing the application accounts to cater to these kind of needs. In terms of corporate IM or enterprise IM, we clearly see that more and more people are using WeChat for business purpose, and there's sort of a lot of mixing between personal usage and enterprise usage.
We also saw that enterprises now want to have a more unified experience for their employees. That's the idea behind our enterprise IM, and both of the products are actually in the making right now. I think we can provide you with more updates when we actually launch the product.
Okay. Thank you. Next question, please.
Your next question comes from the line of John Choi from Daiwa Securities. Please ask your question.
Thank you for taking my question. I have actually a question on mobile games. Could management give more color, particularly on the user behavior, given that you guys have already been doing games for three years and now we've started to see more IP from your PC launching on the mobile side. Particularly if we look at the developed markets, it seems like the mobile game market has been maturing. I think for this year, we should continue to see strong growth. How long do you think mobile game will continue to deliver strong growth momentum? Thank you.
Well, I think there's mobile games individually and mobile games in aggregate. Mobile games individually, titles move in and out of favor and that can cause volatility for individual products and individual companies. The mobile game industry in aggregate, we think it is on a strong secular growth trend. If we look at how user behavior has evolved in the U.S. and in Europe and Japan, there was a relatively rapid move from casual games into mid-hardcore games with longer life and greater monetization. In China, it's been a more winding path. I think that three years ago, most of the games in the market were very casual games with correspondingly very low ARPU. Then we started to see a handful of mid-core games enter the market with much higher ARPU, but typically shorter life.
Early 2015, we began to see some role-playing games come into the market, which appeared to exhibit a decent ARPU and a decent longevity, but relatively small absolute number of users. Then I think as the years moved on, we've tried to bring games to the market that are mid-core in nature, have respectable ARPU, have, we hope, some degree of longevity, but also have actually fairly sizable user bases. As the game markets move through those, then it's expanded with each new generation iteration. Looking forward, while we've already pioneered some genres such as mobile shooting games, mobile battle arena games, there's many, many more genres that are popular on the PC, but not yet popular on mobile, and many genres that are popular in the West or in Japan or Korea, but not yet popular in China, that we think will become popular in time.
We hope to support the growth of the overall mobile game industry.
Thank you. Operator, in the interest of time, we'll take the last three questions, please.
Your next question comes from the line of Thomas Chong from Citigroup. Please ask your question.
Hi. Thanks management for taking my questions. I have two questions. The first question is that in the press release, you talk about the cloud computing business delivered over 100% year-over-year revenue growth. I think this is one of the few times that you talk about the monetization for the cloud computing business. Can management talk about your view on that front and the trend for the next couple of years? Secondly, the question is about payments. Can management comment about how Apple Pay will affect the competitive landscape in China? Thanks.
In terms of cloud business, we believe the cloud business is a very strategic business for us to grow over the long run. The reason is because it's part of our overall connection and ecosystem strategy. As we continue to build our platform, our social ad platform, we get into a relationship with a lot of companies, entrepreneurial companies, large and small companies providing services. Our App Store, for example, also hosts a lot of these companies. As a result, we actually see a lot of these companies as sources for our cloud business. Our cloud business is a gateway for us to leverage our very large cloud computing, in-house and cloud computing infrastructure. We have economies of scale just based on our existing in-house business.
At the same time, we have developed over the years many technologies such as acceleration technologies, such as security, such as bandwidth saving, such as caching technologies, which we can actually share with a lot of companies in our ecosystem. As a result, we have been building our cloud business. We started off from the game vertical, and in the course of last year, we have expanded it to cover many other industries. We have seen strong growth traction in this business, and we'll continue to invest in this business as part of our overall ecosystem strategy. Now, in terms of the payment, I think we do not want to be very too much focused on what other companies are doing. What we are focused on is actually building our own payment platform because it is actually very tied with our own ecosystem.
So far, we have been seeing strong traction in terms of both number of users adopting our payment solution, in terms of merchant adopting our payment solution, as well as in terms of user activity.
Thank you. Operator, we take the last question, please.
Thank you. The last question comes from the line of Ming Zhao from 86Research. Please ask your question.
Thank you. Two questions. First question on mobile gaming. Can you talk about the mobile games in your pipeline? Will you slot those games evenly for the balance of this year and next year? Do you expect a sharp increase in the supply of such games, especially the mobile MMO games, and then you want to launch them quickly to gain market share? That's question number 1. Question number 2 is on margin. Correct me if I'm wrong, from Q4 performance and the fact that you are charging users fees for withdrawing money from the wallet, management seems emphasizing profit margins a bit more than the past. If not, what are the areas of heavy expenses in this year? Thank you.
I think on the mobile games, it's never been Tencent's policy to rush a lot of product to market in order to grab market share. We don't think that's how the mobile game industry works at this point in time. We have what we hope is a very good pipeline of mobile game titles, and we'll release them at a measured pace through the year. We hope give each of the new mobile games time to find its feet and grow its audience. If we do that, then our market share will take care of itself. More importantly, the overall market will take care of itself. I think when we've launched successful battle arena games or shooter games, we haven't been pulling users or revenue away from competitors.
We've been creating a demand, creating an audience, and creating revenue that wouldn't exist were it not for what we're doing. We're not particularly focused on market share grab, and we're certainly not front-loading or tank rushing a huge quantity of mobile games to market in a short period of time.
Yeah. In terms of margin, I think I will repeat what James said. We're not really focused on margin. The reason is because our margin is actually a collection of different businesses with very different natures, right? It's very difficult to just draw an implication from a particular number, which is a composite of many, many different elements. Addressing a little bit to your question, the bank handling fee was actually accelerating throughout the past, I would say six months. The highest number reached was actually January. That was a number, and it becomes very significant. Tencent will have to put in some measures to contain it.
Now, in terms of the margin itself, I would say the bigger impact on the margin frankly, in the course of last year and fourth quarter was mainly because of the cost that we incur in acquiring content from our partners. For example, games. We actually have a lot of partners in which we operate their games, we publish their games, and then we have revenue share. For example, in terms of video and music content, we actually pay licensing fees to our content partners, and that will incur these costs. These sharing to the partners has actually reduced the margin on our business. I think it's actually a healthy increase, right? Because it means that we are actually becoming the gateway of revenue for a lot of our partners, and that's a healthy relationship.
Over time, we can actually leverage the creativity and value created of these partners to create more tying and more attraction for our users. I do think that's actually a healthy increase over time. I think it's hard to just look at that number. I think we actually have to look at different business lines and look at how the margin trends. I think it would be much more informative insight.
Okay. Thank you very much for joining us this evening. We're closing the call now. If you wish to check our press release and other financial information, please visit our company website at www.tencent.com/ir. A replay of this webcast will also be available soon. Thank you, and see you next quarter.
Thank you. That does conclude our conference for today. Thank you for participating in Tencent Holdings Limited 2015 fourth quarter and annual results announcement conference call. You may disconnect now.