Ladies and gentlemen, thank you for standing by, and welcome to the Tencent Holdings Limited 2015 third quarter 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 your 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 hand the conference over to your host today, Ms. Catherine Chan from Tencent. Please go ahead, Ms. Chan.
Thank you, operator. Good evening. Welcome to the third quarter of 2015 results conference call. 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 are underlined by a number of risks and uncertainties that 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 downloadable at www.tencent.com/ir. Let me introduce the management team on the call tonight.
We have our Chairman and CEO, Pony Ma, President, Mr. Martin Lau, Chief Strategy Officer, Mr. James Mitchell, and Chief Financial Officer, Mr. John Lo. Pony will kick off with a short overview. Martin will speak to strategy. James will review our business, and John will go through the financials before we take your questions. I'll turn the call over to Pony now.
Thank you, Catherine. Good evening. Thank you for joining us. During the third quarter of 2015, we delivered solid growth in our core platforms across social, games, news, video, and payment. Financially, our mobile games business accelerated growth following implementation of the new strategy that extend our product range. Our online advertising revenue doubled year-on-year, benefiting from growing mobile contributions in our popular media platforms and our unique social performance advertising. We also saw a sharp increase in mobile payment usage. In addition to commercial success, we also seek to leverage our platform to create positive social impact. On September 9th, we launched a one of its kind Internet Plus donation campaign. The 99 Charity Day create widespread resonance among our partners and the community at large. Let me highlight a few numbers for you. John will provide you the details in the financial section.
Total revenue, excluding e-commerce transactions, grew 37% year-on-year to RMB 26.5 billion. Sequentially, it rose 14%. Non-GAAP operating profit was RMB 10.5 billion, up 27% year-on-year and 2% quarter-on-quarter. Non-GAAP net profit to shareholders was RMB 8.3 billion, up 26% year-on-year and 4% quarter-on-quarter. Moving on to platform updates, our social communication product, QQ and Weixin, further deepened engagement with a wide spectrum of Internet users in China. QQ is the most popular social platform for young, entertainment-driven users. Total MAU reached 860 million in the third quarter, within which smart devices MAU increased 18% year-on-year to 639 million. Weixin is the fastest-growing mobile-only social platform that was able to convert users who had not used instant messaging before. Combined MAU of Weixin and WeChat rose 39% year-on-year to 650 million.
Qzone, our social sharing platform integrated to QQ, grew total MAU to 653 million, within which smart devices MAU rose 14% year-on-year to 577 million. For online games, we deepened penetration in multiple genres in PC and mobile, reinforcing our leadership as the largest operator and publishing platform in China. Among our online media platforms, our mobile news service continued to grow due to better content curation and improved customization. Total video views increased robustly, both within the mobile apps and within Weixin official accounts. In mobile utilities, Ying Yong Bao App Store became the most popular third-party app store in China. Our mobile security and mobile browser are also a market leader in their respective categories. With that, I will pass to Martin.
Thank you, Pony. Good evening and good morning to everybody. Since there have been many news flows in the online to offline O2O space, and we have also made quite a number of significant investment in best-of-breed O2O companies, we feel that it's important to provide you with more information around our O2O strategy. First of all, we do believe that the O2O space is very important to Tencent. Why? Firstly, it's a way for us to capture business opportunities when various industries move part of their business processes from offline to online as part of the bigger Internet Plus movement in China. Our highly engaging social apps, Weixin and QQ, can connect users to a broadening spectrum of vertical services. This unlocks business opportunities for partners in our O2O ecosystem, and at the same time provides our users with better user experience.
Secondly, O2O activities can grow Weixin Pay and QQ Wallet user base, as well as develop payment habits among our users. Thirdly, we can also source new advertisers for our performance-based advertising platform via our O2O partners as we look into the future. Why do we choose to partner with best-of-breed companies as opposed to doing it ourselves? The most important reason is that O2O businesses require significant domain expertise as well as significant offline execution capabilities. These are not particularly the strongest suit of a technology and product-focused company like us. By partnering, we can actually leverage the skills owned by the best-in-class management in the entire market. In addition, we can also increase our capital efficiency by investing in multiple companies, in multiple category leaders, and achieve best overall consumer experience.
As to the future of O2O companies, we believe that while many of them are still in investment mode in the near term, over time, we believe that our investment in these leading O2O companies will generate significant value as these companies gain better efficiency in business processes as well as achieve economies of scale when their businesses continue to grow rapidly. In addition to that, we believe that the O2O activities also help to deepen a mobile payment habit among our users. Our mobile payment solutions, Weixin Pay and QQ Wallet, have grown rapidly to produce a synergistic relationship with our O2O ecosystem. There are now more than 200 million users with bank cards bound to Weixin Pay and QQ Wallet. This impressive growth was initially driven by C2C transactions among users, such as red envelope gifting and money transfer.
Now it is increasingly expanding to commercial payments such as O2O activities, utilities payment, as well as e-commerce. Weixin Pay and QQ Wallet are very important building blocks in our overall ecosystem. We're doing a number of things to grow user adoption and deepen payment habit among our users. Firstly, we invest in technologies to upgrade our product, as well as to enhance the security protection for our users. Secondly, our key O2O partners such as Didi Chuxing, Meituan-Dianping, and 58.com, generate millions of transactions per day. By integrating Weixin Pay and QQ Wallet to their platforms, we leverage these high-frequency payment scenarios to deepen users' habit of using our mobile payment solutions. At the same time, we also drive traffic to our important O2O partners. Thirdly, we encourage repeated usage of the users by subsidizing the bulk of the bank handling charges to the users.
Although we are now incurring a significant cost as a result, we believe that these subsidies are worthy investments for the future. As our mobile payment solutions continue to gain traction, our ecosystem can be more useful to our partners where consumers can find what they need, interact with merchants, and complete transactions in a seamless manner. With that, I'll pass to James to talk about the business review.
Thank you, Martin. In the third quarter of 2015, our total revenue increased 34% year-on-year. Excluding e-commerce transactions, it grew 37% year-on-year. VAS represented 77% of our revenue, within which games contributed 54% and social networks 23%. Online advertising represented 19% of our revenue, up seven percentage points year-on-year. For value-added services, segment revenue was RMB 20.5 billion, up 28% year-on-year and up 12% quarter-on-quarter. Social networks revenue was RMB 6.2 billion, up 32% year-on-year and up 14% quarter-on-quarter. Our super VIP privilege subscription service, premium content subscriptions, and item sales drove the growth. Online games revenue was RMB 14.3 billion, up 27% year-on-year and up 11% quarter-on-quarter. New smartphone games and the strong performance of advanced casual games delivered the year-on-year growth, while new smartphone games and positive seasonality contributed to the quarter-on-quarter increase.
Looking at social networks, starting with mobile QQ, we enrich functionalities for specific types of QQ groups, such as project assignments for students and friend-finding for nearby groups. We introduced celebrity-themed fonts, stickers, and chat bubbles to make messaging friends more fun and more engaging. With our QQ Wallet product, we are leveraging red envelope gifting to drive greater QQ Wallet adoption. For Weixin, we upgraded voice and video technologies to support nine-party video conferencing. We added group chat management features such as a publishing tool for group announcements. For Weixin Pay, we've seen very rapid growth in consumer-to-consumer transactions over the last two years. More recently, Weixin Pay has started to experience a surge in money transfer, e-commerce, and O2O transactions.
Looking at our PC client games, average concurrent users for our advanced casual games grew 14% year-on-year to 8.7 million, reflecting deeper engagement within our key genres. Average concurrent users for massively multiplayer games were flat year-on-year, stabilizing after several quarters of declines. Within the major game genres, for our battle arena games, League of Legends sustained healthy total user growth and expanded its paying user base with new limited edition skins. Within our shooting games, we organized several esports events, such as the national finals for CrossFire and city matches for Assault Fire. For our sports games, we're looking for new users with co-marketing activities, such as cross-promoting FIFA Online 3 with a new reality TV show, and cross-promoting our NBA 2K Online basketball game with specialized programming on our video platform.
For massively multiplayer games, we put two new games, Moonlight Blade and ArcheAge, into large-scale open beta testing in the third quarter, and these contributed to the sequential uptick in average concurrent users. For smartphone games, during the third quarter, we began implementing new developments and publishing strategies for specific types of gaming experiences. For example, for content-driven games, such as role-playing games, which generate most of the mobile game industry's revenue today, we're launching titles based on proven IPs and targeting them at existing fan communities. For example, our new RPG and battle card games, Legend of Mir 2 and King of Fighters '98, ranked within the top five revenue-grossing games in China in September.
For gameplay-driven titles, such as shooting and action games, which we expect to become increasingly important in the future, we're building on our PC experiences to launch innovative titles that should define and popularize their genres. For example, our shooting and battle arena games, Free Fire and MOBA, are leaders in their emerging categories. For platform-driven titles, such as board and playing card games, which generate low ARPU but high daily active usage, we're leveraging WeChat and QQ to drive activity into our titles and maximize their social impact. For example, our playing card puzzle and mahjong games each have millions or tens of millions of daily active users. While it's still early days for these new strategies, the initial results are quite encouraging. We generated 5.3 billion RMB in smartphone game revenue in the third quarter, up 60% year-on-year on a gross-to-gross basis and up 18% quarter-on-quarter.
Out of the 12 new titles we launched in the quarter, eight were mid-core. According to App Annie data, we operated five of the top 10 grossing titles in China during the third quarter of the year. Moving on to online advertising, segment revenue doubled year-on-year to RMB 4.9 billion and rose 21% quarter-on-quarter. Our brand advertising revenue was RMB 2.5 billion, up 67% year-on-year and 27% quarter-on-quarter. More traffic in our video and news apps drove the year-on-year growth. The Voice of China fall program and monetization of our news app contributed to the sequential growth. Performance advertising revenue was RMB 2.4 billion, up 160% year-on-year and up 16% quarter-on-quarter. Mobile inventory, fill rates, and pricing all contributed to the year-on-year growth. Revenue grew sequentially due to higher click-through rates and CPCs on our WeChat official account ads and more impressions in our mobile ad network.
Taking a closer look at our media brand advertising, we gained market share across our top five advertiser categories, namely food and beverage, automobile, personal care, online services, and consumer electronics. In video, if we add together the video views within our Tencent Video app and the video views inside WeChat official accounts, we enjoy increasingly clear mobile traffic leadership. Compared with the same quarter a year ago, our average daily video views within our video app almost doubled, and our average daily video views within WeChat official accounts quadrupled. Consequently, our mobile advertising inventory more than doubled year-on-year, resulting in our video advertising revenue in total almost doubling year-on-year. We continue investing in high-quality content, licensing live sports broadcasts and movies, as well as online drama series. In news, we improved mobile sell-through rates and revenue by shifting to selling more paid feed ads on a CPM basis.
For social performance advertising, we continued to carefully control ad loads but grew revenue rapidly nonetheless by enhancing our targeting capabilities and broadening our advertiser client base. Looking at some of our major social ad inventories, Qzone CPC increased year-on-year due to more bidders and better targeting. WeChat official accounts ad impressions more than tripled year-on-year. WeChat Moments ad campaigns increased quarter-on-quarter as we lowered the minimum ad spend threshold to RMB 200,000 per city and added new verticals such as travel and real estate advertisers. Finally, our mobile ad network traffic partners impression volumes grew significantly year-on-year from a low base. I'll now pass on to John to walk through the financials.
Thank you, James. Hello, everyone. For the third quarter of 2015, our total revenue was RMB 26.6 billion, up 34% year-on-year, or 14% quarter-on-quarter. Gross profit was RMB 15.6 billion, up 23% year-on-year or 8% quarter-on-quarter. Other gains of RMB 614 million in the third quarter primarily reflected disposal and dim disposal gains arising from 58.com and other investee companies, which was partly offset by impairment provisions for certain investee companies. Operating profit was RMB 10.3 billion, up 37% year-on-year or 3% quarter-on-quarter. Net finance costs of RMB 481 million in the third quarter mainly reflected interest expense on debt balances in the third quarter, as well as foreign exchange losses of about RMB 108 million, mainly arising from RMB depreciation. The increase in share of loss of associates and joint ventures mainly reflected additional loss related to one-off non-GAAP expenses incurred by associates.
Income tax expenses were RMB 1.6 billion, up 13% year-on-year or down 15% quarter-on-quarter. Effective tax rate for the quarter was 17%. Net profit attributable to shareholders was RMB 7.4 billion, up 32% year-on-year or 2% quarter-on-quarter. Looking at non-GAAP. Operating profit for the quarter was RMB 10.5 billion, up 27% year-on-year or 2% quarter-on-quarter. Net profit attributable to shareholders was RMB 8.3 billion, up 26% year-on-year or 4% quarter-on-quarter. Diluted EPS was RMB 0.881 for the quarter. Turning to segment gross margin. Gross margin for value-added services was 64%, roughly flat year-on-year on a gross-to-gross basis, and down 2 percentage points quarter-on-quarter. Sequential dip in gross margins primarily resulted from a mix shift towards lower margin third-party smartphone games revenue and higher channel costs in the third quarter. Gross margin for online advertising was 49%, down 3 percentage points year-on-year and quarter-on-quarter.
The lower gross margin mainly flowed from higher video content costs. Moving to operating expenses. Selling and marketing expense was RMB 2 billion, up 7% year-on-year or 28% quarter-on-quarter. The year-on-year increase was a result of greater staff costs and advertising spending, which was partly offset by reduced marketing expenses for WeChat. The sequential jump was mainly driven by greater advertising spending to promote key products such as online games, online media, and mobile utilities, some of which are seasonal in nature. G&A expense was RMB 4.4 billion, up 16% year-on-year or 9% quarter-on-quarter. Of which, R&D expense was RMB 2.5 billion, up 21% year-on-year or 19% quarter-on-quarter. G&A expense increased due to increased R&D expenses. As a percentage of quarterly revenue, selling and marketing expense was 8% and G&A was 16%. R&D represented 9% of quarterly revenue, and share-based compensation was approximately 3% of quarterly revenue.
As at quarter end, we had just over 30,000 employees, representing a 15% increase year-on-year or 7% quarter-on-quarter. Campus recruitment was the driver behind headcount growth sequentially. Look at margin ratios for the third quarter. Gross margin was 58.6%. It was down 3.5 percentage points year-on-year on a gross-to-gross basis and down 3 percentage points quarter-on-quarter. Increased video content costs and bank handling fees on money transfers using our mobile payment solutions drove margins lower year-on-year. Sequentially, the mix shift to lower margin third-party smartphone games and increased channel costs for smartphone games were additional factors that compressed margins. Non-GAAP operating margin was 39.5%. It was down 1.1 percentage points year-on-year on a gross-to-gross basis or down 4.5 percentage points quarter-on-quarter. Lower operating margins year-on-year reflected lower gross margins, partly offset by reduced operating expenses as a proportion of total revenues.
The sequential drop mainly flowed from lower gross margins and higher selling and marketing expense as a proportion of total revenues. Non-GAAP net margin was 31.8%. It was down 0.8 percentage point year-on-year on a gross-to-gross basis or down 2.7 percentage points quarter-on-quarter. The sequential decrease was due to lower operating margin, partly offset by reduced income tax expense as a proportion of total revenues. For the third quarter, total CapEx was RMB 1.7 billion, up 56% year-on-year or down 42% quarter-on-quarter. Operating CapEx was RMB 1.2 billion, up 94% year-on-year or 45% quarter-on-quarter. The increase was primarily for the purchase of servers to support business operations. Non-operating CapEx was RMB 498 million, up 7% year-on-year or down 76% quarter-on-quarter. Non-operating CapEx was significantly lower quarter-on-quarter because we had CapEx for land use rights in the second quarter.
Free cash flow was RMB 6.6 billion, down 5% year-on-year and up 22% quarter-on-quarter. Free cash flow in the third quarter reflected higher operating cash flow, partly offset by payment for land use rights and servers. Our net cash position at quarter end was RMB 21.2 billion, flat year-on-year and down 2% quarter-on-quarter. Slight sequential decline in net cash mainly reflected exchange losses on bank borrowings and notes payable denominated in US dollars. Fair market value of listed associates and available-for-sale financial assets was approximately RMB 73 billion as at quarter end. This concludes our presentation. Thank you. Thank you, operator. We're open for questions now. We will take one question and one follow-up in every turn. We actually prefer the others to go back on the queue and do a second time if they have any more questions. Please, operator, let's take the first question.
Thank you. 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. Your first question comes from the line of Eddie Leung from Merrill Lynch. Please ask your questions.
Hi, good evening. Thank you for taking my questions. I want to understand how your O2O ecosystem benefits your advertising business. Could you share more color on that front? Any metrics would be helpful. A housekeeping question. I wonder if you mind to share the ARPU of various types of your games. Thank you.
In terms of the O2O ecosystem, right now, we are still in the process of building the ecosystem. There's not a lot of meaningful revenue contributed on the advertising side. If you take the e-commerce ecosystem as an example or precedent, what we see is, as we work with each one of the e-commerce network, the biggest being JD.com, for example, because JD.com itself has got an open platform, which hosts a large number of merchants. When we work with JD.com, we're able to convert a lot of those merchants into advertising clients on our platform. Effectively, JD.com's advertising platform would take in the advertising dollars from its own merchants. Then, in order to get additional traffic, it would actually put some of the money in our own performance-based advertising system.
As a result, a lot of the merchants on the JD.com network become our own advertisers. As we look into the O2O space, the O2O space is a big movement in which there will be platform companies, which helps the merchants within a particular verticals to become online. In the case of, for example, in the future, we look at Dianping and we look at Meituan. When they host a lot of restaurants and when they host a lot of offline services companies, they can actually convert some of the merchants into our advertisers. Likewise, for 58, for example, when they host a number of different advertising on their platform, be it companies which are trying to hire people, be it property agencies which are trying to promote their services.
In the future when we have these connections to their advertisers, our entire network of performance-based advertising inventories can actually serve them. Right now, we're still in the process of building these links, but over time, we can actually leverage them to get access to advertisers in different industries that they serve.
In relation to ARPUs, for MMOG, quarterly ARPU ranges from RMB 145-RMB 455. For advanced casual games, it ranges from RMB 80-RMB 270. For platform mobile games, if we look at this as a whole, it would be within RMB 170-RMB 180 on a quarterly basis.
Thank you. Your next question comes from the line of Wendy Huang from Macquarie. Please ask your questions.
Thank you. My first question is regarding the bank handling fee you mentioned for the C2C money transfers. Was it actually mainly related to the red envelope issued in the WeChat platform? I noticed the cost of revenues for others almost doubled to RMB 1.1 billion. Is this amount actually mostly related to the bank handling fee? Same question is regarding your ambition in the travel space. Currently you are holding 15% in Tongcheng and 37% in eLong. What's your plan to integrate those travel assets you already invested, or you have other plan for the travel space? Thank you.
Okay. In terms of the bank handling fees, what happens is, when users transfer money from their bank cards, either debit card or credit card, to our account or use our WeChat Pay and QQ Wallet to pay merchants, we incur a bank handling charge. For the part which are related to merchant payments, we actually charge the payments, and we generate corresponding revenue. For the consumer-related payment, we actually sort of incur a cost. The cost actually sort of is proportional to the amount. As you look at the two different big components, one is actually our red envelope payment scenario. The other one is money transfers. It turns out that, the red envelope is actually a small amount, but sort of, large volume, type of payment scenario.
Whereas, bank transfers among consumers can have much fewer transactions, but sort of much higher amount per transaction. A lot of the bank handling charges actually sort of related to the second part, which is the money transfer rather than the red envelope. At this point in time, we're still subsidizing a lot of these bank charges. Over time, we'll think about ways to contain the bank charges, especially with respect to the higher amounts per transaction type of transactions, so that we don't lose the high-frequency transactions. We continue to sort of provide a lot of incentive for users to use the high-frequency transactions, which sort of, by the way, constitute a small part of the overall expense. That's sort of our plan going forward.
Yeah, in relation to the increase of costs and the others, you are right that a big chunk of it is attributable to the bank charges, but there are three parts of it, as Martin has mentioned before. The first part is in relation to red envelope, and the second part is in relation to money transfer, and the third part is in relation to our normal online payment businesses.
In relation to the travel industry, as you have pointed out, we have investments in Tongcheng, and we have investments in eLong. We think sort of each one of the two companies is actually sort of a competent player in the overall market. Each one of them actually sort of plays a slightly different role in the overall ecosystem, which is actually very big. Tongcheng is a player which focuses on scenery spots, and they are also moving into package tours. Whereas, eLong is actually a dedicated hotel player. We feel that since the overall travel market is actually growing in a pretty rapid manner, and the entire industry is actually moving online, we believe with the distinctive positioning of the two companies, each one of them will have a pretty healthy growth going forward.
Thank you. Your next question comes from the line of Chi Tsang from HSBC. Please ask your questions.
Hi, thank you very much for taking my question. I had just a kind of a question. My first question relates to the wallet. I mean, you're seeing the 200 million users is a very impressive number. I was wondering if you can give us a little bit more color in terms of the transaction volume. How much of it is coming from C2C versus e-commerce O2O? Maybe you can comment on what kind of market share you might have in mobile payments today. Secondly, I was wondering if you can just kind of comment on how you view the current video landscape, especially after Alibaba acquiring Youku. Thank you very much.
What I can say, in terms of Weixin Pay and QQ Wallet, is that first of all, we have seen rapid growth in terms of the number of people who have binded their bank cards. That's the first step. Last time we have provided the number of more than 100 million, this time around, we have exceeded 200 million. A pretty high proportion of these people actually sort of active users of the payment solution. In terms of the payment scenarios, by far the largest is still C2C, which includes by far the largest being the red envelope gifting, which is very unique to the Weixin and QQ ecosystem. In addition to that, the transfers has got a pretty important volume, and the amount is actually quite big because the transfer per transaction, it's much higher than the red envelope.
Followed by that is actually O2O transactions, which is that sort of our partners actually generate millions of O2O transactions on a daily basis. It's followed by utility payments, including people charging up their mobile phone cards, including people paying for different sort of types of utilities. E-commerce, which constitute a smaller number of transactions, but usually higher amount per transaction. The overall volume on e-commerce is actually quite large as well.
In terms of the video industry, as you know, we were not the first mover in video, for us, the video industry has always been extremely competitive and it probably always will be somewhat competitive. That said, we think that we've done several things that improve our competitive position, and that insulate us to some extent from some of the shorter-term disruptions in the market. For example, we've purchased a large volume of very high-quality content on long-term multi-year contracts such as our NBA basketball rights, our HBO rights, our Paramount rights, our Star Wars rights, and our James Bond rights, which we just announced yesterday. Again, those are long-term multi-year contracts that don't come up for rebid every few months.
More importantly, I think that our position in video is a little bit dissimilar to the rest of the industry, and that we have some unique advantages that flow from our platform. One set of advantages is our ability to drive IP across different formats, such as from our online literature business or our online game business into online video. Another set of advantages that's becoming increasingly apparent is the growing consumption of video content within social networks. This is something that's happening globally if you look at the big social networks in the U.S. We mentioned in the introductory remarks that it's also happening in China, where the video views within WeChat official accounts quadrupled this quarter versus the year-ago period.
Okay. Next question, please.
Thank you. Your next question comes from the line of Erica Werkun from UBS. Please ask your questions.
Thank you. If I may just first follow up on James' comment on video. For your overall video business or movie business, how should we think about the roles of Penguin Pictures and also Tencent Pictures? How do you allocate capital among these two divisions and also online video? A quick question on WeChat Moments advertising. Could you just share, I think last quarter you shared that you ran about 60 ads. How many ads did you run in the third quarter, and what is the split between the Fortune 500 brands and the SME? Thank you.
Certainly. On the video front, we allocate capital based on expected return, but also on the broader sort of halo impact around the platform, both in the eyes of users and advertisers, which means that we often focus disproportionately on very highly branded, high-value content in the eyes of both users and advertisers. With regards to the two vehicles you specifically mentioned, Tencent Pictures is primarily focused on managing Tencent-sourced IP, particularly game and literature IP, managing that through different windows such as movie, TV series, game, and so forth. You may know that as well as having the leading online game platform in China, we also have the leading online literature platform in China. You're probably aware that there's been a recent trend, which we think is a persistent trend, of popular online novels becoming popular TV series, popular movies, popular games, and so forth.
Tencent Pictures is our attempt to leverage on and accelerate that trend. Penguin Pictures is a different vehicle which focuses on taking stakes, usually minority stakes, in drama series that are being created, and therefore participating in the distribution of IP that's often sourced from outside Tencent. Although the two are superficially similar, one of them is more focused on the IP and then managing the IP through multiple windows, whereas the other is more focused on tapping into the single video window. That's on the video question. With regard to WeChat Moments, we're progressively ramping that product up. We served over 100 advertisements in the third quarter, and we continue to expand the number of advertisers. Although right now, we are still primarily focused on large-sized advertisers. I think in the first half of the year, it was primarily Fortune 500 advertisers.
During the second half of the year, we're enabling more targeting by city. That's opening up to some of the more kind of regional or provincial advertisers. We're still primarily focused on bigger advertisers, and we'll kind of democratize that as we move forward.
Okay. Next question, please.
Your next question comes from the line of Alan Hellawell from Deutsche Bank. Please ask your questions.
Yeah. Hi. Thank you. Taking in turn, Erica's question a bit further. With regard to WeChat, can you give us just a rough sense of what might have been the revenue contribution from Moments in the quarter? I'm not sure maybe you've mentioned this, how many P4P advertisers do we have currently, and how would we envision that growing maybe over the next year? One small other question. What is the current revenue share with official account owners, and is that likely to change? Thank you very much.
Sure. A number of questions there. I think that with regards to the WeChat Moments, we don't disclose the exact breakdown, but within our performance advertising business, some of the bigger contributors include advertising on mobile Qzone, advertising in the WeChat official accounts, advertising on our mobile ad network, advertising on WeChat Moments, also advertising within our app store and our mobile browser. There's a range of different contributors, and WeChat Moments is a meaningful, but certainly not the biggest one of those numerous advertisers. In terms of the number of advertisers, I think you're asking about the number of advertisers on our performance advertising platform in total. That would be in the 10 thousands. That number is up over 50% year-over-year. We have some initiatives that we think may accelerate the growth in number of advertisers going forward, that we're seeking to develop.
In terms of the revenue share with the official account owners, this is situations where an advertiser buys an ad at the bottom of an official account within WeChat, and then we'll share that advertising revenue with the owner of the official account. We have a sort of sliding scale based on the nature of the content. The owner of that content might capture roughly half of the advertising revenue, depending on where he falls in that scale.
Thank you.
Next question, please.
Your next question comes from the line of Dick Wei from Credit Suisse. Please ask your questions.
Hi. Yeah, I got 2 questions. First question is on how should we look at the IVAS growth margin trend going forward? I think there are a couple of dynamics about in-house games, third-party games, as well as Android OS. Wonder how should we think about the trend kind of going forward. Then secondly, as the shareholder of Meituan-Dianping, what is kind of the Tencent thinking about the right strategy for the company growth, down the road in terms of the strategy, technology, and subsidies? Thank you.
Well, in terms of IVAS, that's a pretty big basket. I think sort of there are two components, right? One is obviously the games, and in terms of the games, as you can see we have actually delivered a pretty consistent growth. Although sort of slower than before, but consistent growth on our PC games, and that's actually sort of mainly driven by our main games, including most prominently League of Legends. In terms of mobile games, which is sort of the segment that's really gaining traction as an overall gaming sector, we have put in a new strategy, as we mentioned in our last conference call, in that, if you think about sort of in the past, the key component of our strategy was actually sort of putting our mobile games on our two important social platform. One is WeChat, the other one is QQ.
Over time, we started to leverage the two platforms as well as leverage our browser to push forward, to find more channels and traffic, as well as more context to promote games to our users. Then sort of in terms of the content itself, we have actually moved from the casual games into mid-core games, now into more hardcore games. As you move from these game genres, typically, you'll see sort of newer players, but sort of higher ARPU. The ability to do more target advertising is actually important. Our strategy actually sort of also involve us identifying pockets of users which may be interested in certain hardcore genres and promoting those genres to these users. As you can see in our latest MMOG on mobile, it's actually sort of quite successful.
We still believe that sort of the mobile game segment has got good growth opportunity. We will continue to execute our new strategy to tap into that opportunity. With respect to Meituan and Dianping, I think we are a relatively small shareholder in the company right now. We feel that sort of the two companies by merging sort of has established a very strong presence within the O2O space, both in terms of the restaurant as well as other lifestyle services, as well as the food delivery part. Over time, we believe that they would be able to establish stronger economies to scale. They will also be able to not only just do the transactions, but also get deeper into the entire value chain so that they can create more value for their merchants as well as for their consumers.
As mentioned in our O2O strategy section, we believe that our ecosystem can help, not only them, but other O2O partners in terms of directing user traffic to them, in terms of helping them with payment scenarios, as well as going forward, if their network actually connects with our advertising network, we can actually help them to generate revenue and also direct even more traffic to them.
Thank you. Operator, next question, please.
Your next question comes from the line of Jin Yoon from Mizuho Securities. Please ask the question.
Hey, good evening, guys. Just a couple more questions on Moments. Can you just talk about what are the current ad loads on Moments looking like right now? What are the remaining impediments to kind of pushing forward with more Moments ads? The follow-up question is to your prior statement that you said that on WeChat Moments or on SNS advertising, you're targeting more on localized advertisers. Is that advertiser acquisition going to be direct or indirect coming from agencies? If so, what are the economics behind that? Thanks, guys.
In terms of the ad load right now, when we first launched Moments, it was in a pilot launch mode. Over time, we continued to scale it. In terms of the ad load right now, we still put in a very stringent control. Right now, a user would not see more than one ad within 48 hours. When you compare it to a lot of the other apps, this is actually sort of very low ad load. The reason we're doing this is, this is a very important user engagement scenario for us. We want to make sure that we can get the content right, we can get the technology right, we can sort of understand the user behavior in relation to advertising.
We want to invent certain mechanisms so that we can add the fun component and add the social component around advertising. There are a lot of basic things as well as innovative things that we are testing on the Moments ads. We want to make sure that quality is high so that users would like these ads, actually, before we start to increase our ad load. That will take a process. We know that this is something that can be done over time. We want to ensure the quality of execution along the way, along the different dimensions I talked about. Now, in terms of the localized advertisers, for now, in terms of the big advertisers, we are leveraging our own sales force to do it, and we're working with the 4A advertising agencies, which is sort of the typical channel.
We also have a self-serve channel, which allows advertisers to upload their advertising, but that's sort of in our general inventory. In terms of Moments, right now, we're still in a pretty stringent mode, which is there needs to be a pretty heavily engaged process in which the advertiser will work with agencies and then sort of come up with high-quality advertising, and then we put it onto the Moments. Over time, we'll continue to find other agencies who can actually sort of help us to source advertisers and also create campaigns that are of high quality, and that will proliferate.
Thank you. Operator, in the interest of time, we shall take the last three questions, please.
Thank you. Your next question comes from the line of Cynthia Meng from Jefferies. Please ask your questions.
Thank you, management. I have two questions. First of all, on e-commerce, the newly announced JingTeng Plan, can management give us more color on the progress of your cooperation in terms of traffic directed to JD and conversion ratio that you can see from your statistics? Also, the payment from Tencent, does that also benefit JD? Then I have a follow-up question.
Okay. Well, the cooperation with JD.com has been progressing quite nicely, I would say, overall. That includes generating transactions for JD.com within our ecosystem, within our Weixin and Mobile QQ apps, in terms of sort of transactions on a daily basis that has been sort of growing on a consistent basis. At the same time, we also find that our apps are great sources for JD.com to reach new consumers. As you know, JD.com's brand and access is actually very strong in a lot of 1st-tier cities, but sort of as you get into sort of the 2nd-tier, 3rd-tier, the 4th-tier cities, there are still users who have not really sort of get exposed to the service.
Through our app, a lot of these new users would put in their first order, and once they discover that the user experience is great, the product is actually authentic, and quality is high, fulfillment is great, then they may repeat purchase within Weixin or Mobile QQ. At the same time, they may just download an app and start buying through the JD.com app. From a new user acquisition perspective, we actually sort of contribute quite a large proportion of the new users to JD.com, especially on the mobile side.
Well, in addition to that, we also talked about the cooperation around ad networks, right? A lot of our traffic is actually directed to JD.com's advertising system, for them to present these inventories to their merchants. That actually is a good way for them to bring more traffic to their merchants. The recent JingTeng Plan is really for us to create more CRM and more marketing opportunities for high-quality brands that sell on JD.com. That would include advertising inventories, that would include a better promotion of the official accounts, and that would also include some specific entry points for some of these good brands. Overall, I think the relationship as well as the performance of our cooperation is actually progressing well, as well as going from strength to strength.
Thank you, Martin. My follow-up question is in the area of mobile game. Mobile game has shown very strong growth this quarter compared to last quarter. I know some of that is related to product launch delay in the second quarter. Is there something else that has driven the rebound? Is it related to the overall industry or an uptake in the more sophisticated hardcore games? Thank you.
I think the major changes are change in strategy. We had a mobile game strategy that we were executing from late 2013 until early 2015. We recognized, as the mobile game industry matured and segmented, it was time to adjust our strategy. We came up with the new strategy during the second quarter, during which time we actually delayed several key new title launches while we were preparing the new strategy. Then we began to implement the new strategy in the third quarter. I think that internal change was the primary dynamic.
Thank you. Next question, please.
Thank you. Your next question comes from the line of Alicia Yap from Barclays. Please ask the questions.
Hi. Good evening, everyone. Thanks for taking my questions. I have a couple questions. Number 1 is that, could you actually give us a little bit more detail how is the official account advertising is progressing, and how is that, for example, now this quarter versus three or six months ago? Second, I have a broader question from the video industry landscape. Will video to be a winner takes all, or the landscape will remain to have multiple players? Related to that, it seems that all the major online video platform are trying to own or secure as many differentiated content as possible to attract user. With the takeoff of the video subscription service, what is the management view regarding the consumer behavior over time on the subscription side?
Will one platform stand out to win more user, or do you think that user could potentially subscribe to multiple video sites, then the attractive content will still be a swing factor? Lastly, just related to that, is that when should we expect Tencent Video to turn profitable? Thank you.
In terms of the official accounts, I believe we launched advertising the official accounts in the third quarter last year. It is actually a very powerful advertising medium, I think more powerful than many people in the financial community recognize. That is first because there is a gigantic volume of page views in the official accounts each day. We are talking in the billions of impressions. Secondly, because advertising within the official accounts can use dual targeting technologies, one based on the social profile of the Weixin or now the QQ user, which we know is very powerful from the ads we have in Qzone and Moments and so forth. Then secondly, based on the content of the official account itself. We are actually seeing very good growth in official accounts.
We mentioned the inventory tripled year-on-year, good growth in CPC, very high click-through rates. We are quite optimistic about the future. One change we have made is that, in the past, we had a flat fee or a flat rate revenue share with the official account content creators. Now we actually channel a bigger proportion of the revenue to those official account owners who create original content into their official account first, then a lesser share to those who simply repurpose web-based content into the official account. That is having the desired impact of driving more original content creation, both text, image, and now video, within the official accounts. That is the official accounts.
On the online video side of the business, I think you touch on an interesting issue, which is that all else equal, an advertising-funded video world is more likely to be fragmented between multiple channels, whereas a subscription-funded video world tends to consolidate a little bit more because it is easier for the consumer to change channels than it is for them to cancel one subscription account and subscribe to a new subscription account. All else equal, while I think that both formats, ad funded and subscription funders are super competitive today, will remain super competitive in the future. At the margin, the subscription-funded business will probably be a little bit more consolidated, the ad-funded business will probably remain more fragmented. In terms of user behavior, I can give you a mix of quantifiables and qualitative factors.
On the quantitative side, what is interesting is that the habit of watching subscription video is something that is truly nationwide. It is still relatively concentrated in terms of age group and the type of content people pay for, which is top-tier local drama serials, Western drama serials, Western movies, and Western sports. It is a habit that has evolved nationwide. In terms of qualitative, if you look at the comments people put under the subscription-funded comment a year ago, it was all about, "Oh, how can I watch this for free? Which other sites have this for free?" Now, people have largely kind of grown through that and are much more inclined to actually discuss the merits or drawbacks of the content itself, which is an encouraging signal, and I think reflects the fact that the willingness to pay in order to watch high-quality video content is increasingly embedded.
That's something that's benefited the whole industry. Our own subscription video revenue is up about 800% year-on-year. I think that's off a low base, and many of our peers are seeing similarly rapid year-on-year revenue growth rates for the subscription video service. In terms of bringing the video business in aggregate to profitability, that's not a near-term target for us. Right now, what we're seeing is that as we spend more money on content, we attract more users, which generates more revenue, enhances our platform quality, we continue to reinvest in content rather than focusing on near-term profitability.
I just want to add, we don't look at the video platform in isolation. We believe that the video platform is actually a very important part of our overall traffic ecosystem. As we look at, as an engagement tool, it actually generates a very engaging amount of time with the users. At the same time, when you look at our overall IP strategy, which get us into the literature, which help us to monetize through the content as well as games, we believe a lot of these different platforms actually will work together, and the overall profitability of the entire ecosystem will be bigger than the individual platforms on an aggregate basis. I think that's the strategic importance of our overall video platform.
Thank you, Martin. May we take the last question, please?
Great. Thank you. Thank you. Your last question comes from the line of Thomas Chong from Citigroup. Please ask your questions.
Hi. Thanks management for taking my questions. I have two questions. The first question is about how we should think about the competitive landscape of the mobile games market this year, because we see Tencent and NetEase already consolidating the market. For the CrossFire and DNF for the mobile games, should we expect these two to be a blockbuster, if there is any color on that one? My second question is about the margin trend. Can management talk about how we should think about the margin trend going forward? Should we expect it to be year-on-year increase or stable? Any color would be great. Thank you.
I think that in terms of the mobile game market, you are correct to observe that NetEase and Tencent have taken some share of the mobile game market this year, and more importantly, have enjoyed some sort of stability in terms of both of us having multiple games within the top 10 games by revenue month-in, month-out. I think that is the sort of trend that we are seeing globally in terms of some of the bigger, more established mobile game developers in the United States, in Europe, in Japan, in Korea, enjoying enhanced market share and more importantly, greater revenue stability from their mobile games. I think it reflects structural changes in how easily consumers can discover new mobile games, the ability to update and enhance the player experience within the big existing mobile games and so forth.
That is something that is generally worked to the benefit of the stronger mobile game developers and publishers in the industry. With regards to specific new mobile games, we are obviously optimistic, otherwise we would not be publishing the titles. Time will tell how successful they become. I think in terms of margins, as you know, we generally do not give margin guidance. You should be aware that in the third quarter, we are still lapping the change in our accounting from net to gross, and that effect will drop out of the year-on-year comparisons going forward. Looking forward, we will continue to bear some costs related to the growth of our payment business. We will continue to bear some costs related to the growth of our video business.
In the third quarter, you saw some impact on our Internet-based gross margins because some of our newer mobile games, A, have a revenue share to the third-party developer, and B, for various reasons, skew more toward iOS than Android. To the extent that our future mobile games are also third party and also skew more toward iOS than Android, that would have some impact on margins, but it is not something that particularly bothers us given the incremental margin on those third-party iOS-skewing mobile games is still a very healthy incremental margin relative to our overall corporate operating margin, even if it is not as good as a first-party game that is largely on Android. Anyway, those are just some of the things to think about when you are thinking about our margins.
Thanks.
Okay. Thank you very much, operator. We're rounding up the call now. If you wish to check our press release and other financial information, please visit our corporate website at www.tencent.com/ir. We'll post a replay of this webcast on the site shortly. Thank you, and see you next quarter.
Thank you. That does conclude our conference for today. Thank you for participating. Tencent Holdings Limited 2015 third quarter results announcement conference call. You may all disconnect now.