Tencent Holdings Limited (TCEHY) Q4 2020 Earnings Call Transcript

Tencent Holdings Limited (OTC: TCEHY) Q4 2020 earnings call dated Mar. 24, 2021

Corporate Participants:

Wendy Huang — Investor Relations

Pony Ma — Co-Founder, Chairman and Chief Executive Officer

Martin Lau — Executive Director and President

James Mitchell — Chief Strategy Officer, Senior Executive Vice President

John Lo — Chief Financial Officer, Senior Vice President

Analysts:

Robin Zhu — AB Bernstein — Analyst

Alicia Yap — Citigroup — Analyst

Han Joon Kim — Macquarie — Analyst

Gary Yu — Morgan Stanley — Analyst

Eddie Leung — Bank of America — Analyst

John Choi — Daiwa Capital Markets — Analyst

William Packer — Exane BNP Paribas — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by and welcome to Tencent Holdings Limited 2020 Fourth Quarter and Annual Results Announcement Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded.

I’d now like to hand the conference over to Ms. Wendy Huang from Tencent Investor Relations. Thank you. Please go ahead.

Wendy Huang — Investor Relations

Thank you, operator. Good evening. Welcome to our 2020 fourth quarter and annual results conference call. I’m Wendy Huang from Tencent IR team.

Before we start the presentation, we would like to remind you that it includes forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions is coming from a variety of sources outside of Tencent.

This presentation also contains some unaudited non-IFRS financial measures that should be considered in addition to, but not as a substitute for, measures of the Company’s financial performance prepared in accordance with IFRS. For a detailed discussion of risk factors and non-IFRS measures, please refer to our disclosure documents on the IR section of our website.

Let me now introduce the management team on the call tonight. Our Chairman and CEO, Pony Ma, will kick off with a short overview including ESG initiatives. President, Martin Lau will discuss strategy review. Chief Strategy Officer, James Mitchell, will speak to business overview. And Chief Financial Officer, John Lo, will conclude with financial discussion before we open the floor for questions.

I will now turn the call over to Pony.

Pony Ma — Co-Founder, Chairman and Chief Executive Officer

Okay. Thank you. Good evening, everyone. Thank you for joining us. 2020 was an unprecedented year with many challenges. Having said that, we have delivered solid results. We believe our low-cost operating and financial results testify to our focus on user value and technology innovation.

Let me walk you through some of our key achievements. In social, we are strengthening Weixin’s value proposition for users and enterprisers. Our new feature, Video Accounts, enable public sharing of informative and educational content in video format. Mini Programs continue to deepen penetration in more user cases with annual transaction volume more than doubling year-on-year. For QQ, we increased stickiness among young users by enriching shared experience and catering to their entertainment and e-learning needs.

In games, our worldwide revenue grew 36% year-on-year with increasing contribution from international markets. We reinforced our leadership across mobile and PC by expanding user bases for major games and launching successful new games. In content, we extend IP value across literature, anime, games and long form video to create unique and appealing content. We became clear number one in China video subscription market.

In advertising, we integrated advertising platforms, strengthening Tencent’s own properties, as well as mobile ad network as preferred choices for advertisers.

In FinTech services, payment user engage and commercial payment volume increased healthily. We will continue to work closely with the regulators and industry partners to deliver complaint FinTech products, while prioritizing risk management over scale.

In Business Services, Tencent Meeting has become the largest standalone app for cloud conferencing in China. Innovations such as our customized Star Lake server solution and self-developed T-block data center technology enhance our cloud services performance and cost efficiency.

Now, let me go through the headline number for the fourth quarter. Total revenue was RMB134 billion, up 26% year-on-year and 7% quarter-on-quarter. Gross profit was RMB59 billion, up 28% year-on-year and 4% quarter-on-quarter. Non-IFRS operating profit was RMB38 billion, up 26% year-on-year and stable quarter-on-quarter. Non-IFRS net profit attributable to equity holders were RMB33 billion, up 30% year-on-year and 3% quarter-on-quarter.

Moving to key services. In social, combined MAU of Weixin and WeChat further rose to 1.23 billion. Smart devices MAU of QQ was 595 million. Martin and James will speak to each of our other key services later.

In 2020, we continued to implement various initiatives around our mission of Tech for Good. As the world navigates through COVID-19, technology play a more significant role in restoring normal life and business activity. We provide users with convenient access to healthcare, education and public services in our products and technology. We help enterprise clients to maintain business continuity with various tools and products. Mini Programs and Weixin Pay facilitated consumer spending during the lockdown, and expedited digitalization of offline retailers and brands after that.

For charities, we have built an efficient online fundraising platform and utilized technology to assist their digital upgrade. In 2020, our flagship event, 99 Giving Day engaged over 18 million users and 10,000 charities, raising RMB3 billion in three days.

For inclusion, we are bridging the digital device for the elderly and the disadvantaged. Weixin Relative Card enable senior users to enjoy the benefits of digital payments without hassles. And image to speech in QQ helps visually impaired users interact with friends. We are also facilitating a rural virtualization with WeCounty initiative.

For other ESG commitment, we are moving towards carbon neutrality by leveraging AI, big data and cloud computing. We adhere to privacy by design and deploy advanced security technologies to safeguard users’ data. To advocate the digital wellbeing for teenage users in China, we continuously upgrade our Healthy Gameplay System. Looking forward, we will continue to integrate the social responsibility into our operations, products, and services, creating long-term value for all stakeholders.

I will now invite Martin to discuss strategy review.

Martin Lau — Executive Director and President

Thank you, Pony, and good evening and good morning to everybody. In this section, I will discuss our strategic investment in innovation, which we believe is a main driver of our business performance in the past and for the future. With a focus on user experience, we pursue continuous innovation to enhance our platforms. We invest in incremental innovation to enrich existing product experiences and we also invested in transformative innovation and to create new products to serve new user needs. Many of these innovations have taken years of patient investment to yield results. In communication and social, for example, we started with mobile chat and added social networking, Official Accounts, payments, Mini Programs over the years. At the present time, we are incubating Video Accounts as a new innovation.

In the area of games, we created new and exciting titles internally and through partnerships, as well as continuously upgrade our game-tech.

In SaaS, we identified this emerging opportunity in China when we announced our strategic upgrade in — to the industrial Internet in 2018. Over the past year, we achieved breakout growth in productivity and communication software.

In HealthTech, we are utilizing our AI, Mini Programs and communication tools to solve industry pain points.

In ecosystem, we support innovative companies via capital investment and business partnerships to better serve users and enterprises. For the rest of the section, I will discuss how innovation has driven each one of these areas and how it will continue to drive our sustainable long-term growth.

Let’s first start with Weixin Video Accounts, which represents our recent innovation in the communications and social space. Videolization of content for easy consumption is a key global trend. We saw significant increase in uploads and sharing of short videos within Weixin Moments and Chat. Hence, Video Accounts was created as a separate ID-based, short-form content creation platform within Weixin. Video Accounts enable video uploads and sharing, as well as live streaming to the public audience. Through aggregating content providers’ digital assets within Weixin, such as Official Accounts and Mini Programs, Video Accounts help reinforce their branding and facilitate user engagement and transactions. In addition, the unique strength of Video Accounts linking public domain to private domain, which provides an unparalleled channel for businesses to acquire and manage their own customers.

Video Accounts is attracting increasingly number of high-quality content providers who generate both informative, as well as educational and entertainment content. We recommend content to users based on social, interest graph and algorithm, which can diversify the mix of users’ content consumption.

Turning to games. During the year 2020, we launched several new and exciting titles and made breakthrough in new technology applications, such as gaming and AI and cloud gaming. For new games, we released Valorant on PC for the international markets, as well as Moonlight Blade Mobile and Call of Duty Mobile in China. Each game offers unique experience by innovating in character abilities, environmental design, gameplays and controls, and thereby, achieving best-in-class performance. Valorant, a team-based tactical shooter, which Riot Games spent over six years to develop was the most successful new PC game internationally.

In China, Moonlight Blade Mobile was the best performing new MMORPG for the year and was supported by our proprietary game engine honed through 10 years of dedicated development.

Call of Duty Mobile, the highest DAU game launched in 2020 in China is a high-quality complement to the franchise’s console and PC versions.

For existing titles, we continuously innovate in game-tech to refresh user experience. For example, Honour of Kings is an early adopter of next-generation rendering and high-dynamic-range imaging technologies in China, which enhances the visual effects and make animation more realistic, detailed and natural. Honour of Kings was the top grossing mobile game in China for the fourth consecutive year and worldwide for the second consecutive year. We also tested game AI Wukong in Honour of Kings, which attracted over 50 million player participants within four days of trial. Wukong is the first AI agent able to play full mobile game with deep reinforcement learning, and it will be applied to more game genres should enhance the PvE experience.

In cloud gaming, we are the first mover to launch platforms and games providing high-quality in-game experience across different devices, among which START platform is cooperating with leading TV manufacturers to offer MMO games on smart TV. XianYou platform offers more than hundred mobile games, including Honour of Kings and Peacekeeper Elite to play even on low-end phones.

Moving on to communication and productivity SaaS, we achieved breakout growth in 2020, especially for WeCom, Tencent Meeting, and Tencent Docs. We strengthened interoperability between WeCom and Weixin allowed increasing number of retailers, service providers, and teachers to connect to over 400 million users. This also boosted WeCom’s customer base to 5.5 million enterprises. We uphold the open strategy and introduced multiple cooperation models to rapidly grow partnerships with OA application vendors, in order to better sign up enterprises clients together. Besides, by leveraging synergies with Tencent Cloud Salesforce, WeCom successfully increased penetration in K-12 education market.

In view of growing needs for virtual meetings, we launched Tencent Meeting in 2020, which accumulated over 100 million users and has become the most used standalone app for cloud conferencing in China. During the year, we launched enterprise version for key accounts and enhanced in-meeting capabilities, delivering superior experience for enterprise customers. We developed new solutions Rooms and Connector in order to expand Tencent Meeting’s compatibility with the clients’ existing devices, saving cost for them and facilitating adoption for us.

Our signature productivity solution, Tencent Docs, is the first mover in China to provide online solutions that efficiently generate tables based on collaborated dated entry. During the year, we continued to add new features, such as AI-supported optical character and speech recognition input to enhance user experience and productivity. Through extensive integration with other software, such as QQ, QQ Browser and other SaaS products, Tencent Docs expanded use cases and recorded over 100 million monthly active users in 2020, more than double — quadrupled year-on-year.

Next, on HealthTech. Our product matrix includes Tencent Health, Tencent Medipedia and Health Code, providing innovative solutions to digitize offline healthcare services and benefit the entire industry. Tencent Health, an all-in-one entry point for online healthcare services has added more COVID-19-related services, such as appointment for testing and vaccination. Total active users exceeded 400 million. We also included medical insurance e-certificate and electronic health card within Tencent Health. Users can bundle medical insurance e-certificates with their social basic medical insurance accounts to conduct mobile payment in more than 10,000 hospitals, 200,000 pharmacies across 200 plus cities. Our electronic health card served as a health information management tool for users and their families and now it’s available online in more than 2,000 hospitals.

Tencent Medipedia, a reliable medical information source expanded the number of medical terms to over 120,000, leading in China. We utilized AI technology to enhance medical experts’ efficiency in reviewing content. We enriched content formats from text, picture to short video and live streaming. Tencent Medipedia content is distributed via self-owned and third-party platforms, attracting over 7 billion page views and video views in the year of 2020.

Health Code is an easy entry point for users to get their ePass automatically based on health information they filled in. During the pandemic, Health Code facilitated people’s efficient movement in and out of public areas nationwide. Within a year, Health Code served 1 billion users with over 65 billion total visits, becoming the most used ePass for verifying health and travel status in China.

Finally, complementary to our investment in innovation to drive our core businesses, investment in ecosystem is also our strategic focus. Through investments, we support innovation for our partners and investees, which ultimately together better serve users and enterprises. In Consumer Internet, we identify investments which capture emerging opportunities arising from technological advancements and user behavior changes. User value and product experiences are top priorities for us. Our key investment areas include content, games, FinTech services, e-commerce, O2O and education.

In Industrial Internet, we seek to build close relationships with value chain players to support the evolution of various industries. Leveraging our technology strength, we assist digital upgrade in sectors, such as education, healthcare, transportation and retail. In that process, our communication and social services can also connect users with more services in convenient and efficient manner.

Our investment principles are to invest in high-quality management teams and best-in-class companies which have deep industry know-how and core competence in their respective fields. We aim to support the investees’ innovation while enabling them to grow and operate independently. Through our investments, we do not only nurture the growth of start-ups, but also create synergies that are value-added to users. An additional benefit of our investment strategy is that, we can then focus our internal resources, be it developers, people, and bandwidth on driving innovation within our core businesses. This two-pronged strategy has been pivotal in driving sustainable development for the Company and the industry as a whole.

Now, with that, I’ll pass to James to talk about our business review.

James Mitchell — Chief Strategy Officer, Senior Executive Vice President

Thank you, Martin. For the fourth quarter of 2020, our total revenue grew 26% year-on-year. VAS represented 50% of our revenue, within which online games were 29%, the social networks 21%, online advertising was 18%, and FinTech and Business Services represented 29% of our revenue.

The value-added services segment revenue was RMB67 billion for the fourth quarter, up 28% year-on-year and down 4% quarter-on-quarter. Social network revenue was RMB28 billion, representing 27% year-on-year growth, primarily driven by live streaming services and in-game item sales. Sequentially, revenue growth in digital content services was offset by a revenue decline from in-game item sales.

Total VAS subscription accounts grew 22% year-on-year to 219 million subscriptions. Our video subscriptions increased 17% year-on-year to 123 million subscriptions. We strengthened our market leadership through self-commissioned animated series, deeper cooperation with channel partners, and an expanded OTT user base. Our music subscriptions grew 40% year-on-year to 56 million subscriptions, benefiting from improved user retention and our paywall strategy.

Our online games revenue increased 29% year-on-year to RMB39 billion, driven by more smartphone game players and a higher paying user ratio. Revenue decreased 6% quarter-on-quarter due to normalized user activity and seasonality. For smartphone games, total revenue grew 41% year-on-year to RMB37 billion, reflecting robust growth from in-house titles, including Peacekeeper Elite, Honour of Kings and PUBG Mobile, as well as our new massively multiplayer role playing game Moonlight Blade Mobile. For PC client games, revenue decreased 1% year-on-year to RMB10 billion as softness at Dungeon and Fighter offset growth in League of Legends and from Valorant.

Focusing on Weixin, Martin has already discussed our Video Accounts strategy and product, but I will touch briefly on live streaming and Video Accounts, which facilitates real-time one-to-many interactions. Content creators and brands can use live streaming to engage with users via red packets co-hosting an audience dial-in. Additionally, Weixin launched the Status feature, allowing users to share their current emotions and thoughts through pictures or videos and connect like-minded friends, and animated emojis enabled users to express themselves more vividly online.

Moving to QQ, we focused on enhancing interactive experiences within vertical communities. For content-oriented communities, we introduced the hashtag feature and trending topics within Mini World, which resonated with Generation Z users and increased Mini World’s daily user engagement. For game communities, we launched joint promotions and celebrity e-sports competitions for games, such as Honour of Kings and Call of Duty Mobile. Users can discuss game-related topics within interest groups and Mini Programs, while obtaining in-game incentives. For learning communities, we partnered with educational institutions to offer quiz challenges and question-and-answer services, fostering a vibrant study environment.

Looking at our game activities within China, in battle arena games, Honour of Kings released its biggest-ever update in January with the new hero skins and user interface. We upgraded the game’s rendering technology to enhance visual effects with minimal performance overhead.

For shooting games, Call of Duty Mobile attracts hardcore players with its fast-paced and competitive FPS experience.

For role playing games, Aurora Studio extended the Moonlight Blade IP from PC to mobile and the mobile game ranks the top grossing massively multiplayer role playing game on iOS during the fourth quarter.

By the end of 2020, we have distributed over 1 million Switch consoles in China.

Pony mentioned the Healthy Gameplay System, which helps parents manage younger users’ in-game play time and spending. During the fourth quarter, players aged under 18 years accounted for 6% of game gross receipts, and players aged under 16 for 3.2%.

Internationally, our game revenue rose 43% year-on-year to RMB9.8 billion. The League of Legends World Championship Finals attracted over 45 million peak and current users, a record high viewership for e-sports. League of Legends’ mobile version Wild Rift has further expanded its League of Legends franchise user base.

PUBG Mobile ranked as the most popular smartphone game by monthly active users for second consecutive year, and its flagship tournament was the most viewed e-sports competition among all mobile games.

We are increasingly seeking to create games for global appeal, by collaborating with renowned console game and anime IPs, we can bring our new mobile games to wider global attention, and we’re investing in PC and console studios that are leaders in emerging platforms that can in future nurture fan base into our platforms.

Moving to online advertising, our advertising revenue was RMB25 billion in the fourth quarter, up 22% year-on-year and up 15% quarter-on-quarter. We experienced increased demand from the education sector, e-commerce platforms and fast-moving consumer goods advertisers. Our auto-related ad revenue benefited from a domestic car sales recovery and from consolidation of Bitauto.

Our social and others advertising revenue was RMB20 billion, up 25% year-on-year and 15% quarter-on-quarter, driven primarily by Moments in our mobile ad network. Moments revenue maintained growth as we enabled performance-oriented advertisers to link their ads with their Mini Programs, so boosting their transactions and sales conversion. By offering customized in-app advertising solutions, our mobile ad network will attract more ad spend, especially from external game companies and Internet services. In-game ad revenue on our mobile ad network more than doubled year-on-year.

Our media advertising revenue for the quarter was RMB4 billion, up 8% year-on-year and 19% quarter-on-quarter, reflecting increased video ad revenue and music app monetization.

Looking at FinTech and Business Services, revenue was RMB38 billion in the fourth quarter, up 29% year-on-year and up 16% quarter-on-quarter. Within FinTech services, revenue grew year-on-year and quarter-on-quarter as our payments and wealth management services were increasing the adopted by consumers and merchants. Total payment volume grew healthily year-on-year, driven by more daily active consumers and higher payment frequency in verticals, including retail, public services, and groceries. Payment commercial take rates were generally stable. For our wealth management business, aggregated customer assets grew robustly year-on-year and looking forward, we’ll focus on investor education and helping users to identify quality products, selected by our independent research team.

Within Business Services, we expanded our customer base in key verticals and increased our platform-as-a-service revenue robustly, contributing to a faster year-on-year revenue growth rate in the fourth quarter, compared to the third quarter. We also deployed more on-premises projects during the period.

For infrastructure-as-a-service, we developed our Star Lake SA3 service architecture, powered by the latest generation AMD EPYC processors. This new architecture provides better AI, security, storage, and network capabilities with lower energy consumption, enhancing Tencent Cloud Services’ cost efficiency.

For software-as-a-service, Tencent Meeting enterprise version penetrated key accounts in the energy, healthcare and education sectors. Our conference room solutions, Tencent Meeting Rooms and then Connector, facilitate high-quality real-time communication and are compatible with customers’ existing audio/visual equipment.

And with that, I’ll pass to John.

John Lo — Chief Financial Officer, Senior Vice President

Thank you, James. Hello, everyone. For the fourth quarter of 2020, total revenue was RMB133.7 billion, an increase of 26% year-on-year, or 7% quarter-on-quarter. Gross profit was RMB58.9 billion, up 28% year-on-year, or 4% quarter-on-quarter.

Net other gains was RMB32.9 billion, this mainly comprised non-IFRS adjustment items representing increased valuations of certain investees in social media, e-commerce, and online game verticals, as well as net gains on deemed disposal of certain investees.

Operating profit was RMB63.7 billion, up 123% year-on-year, or 45% quarter-on-quarter.

Net finance costs were RMB2.3 billion, down 19% year-on-year, or up 16% quarter-on-quarter. Year-on-year decrease reflected lower interest expense as a result of reduced average cost of fund. Q-on-Q increase was mainly driven by foreign exchange losses.

Share of profit of associates and joint ventures was RMB1.6 billion compared to share of losses for fourth quarter 2019. The year-on-year difference mainly reflected non-IFRS adjustment items of certain associates and improved performance in certain e-commerce and online games associates. On a non-IFRS basis, share of profit was RMB2.7 billion for the quarter versus RMB1.3 billion a year ago.

Income tax expense was RMB3.7 billion, and effective tax rate was 5.9% for the quarter.

IFRS net profit attributable to equity holders was RMB59.3 billion, up 175% year-on-year, or 54% quarter-on-quarter.

For the full-year of 2020, total revenue was RMB482.1 billion, up 28%. Gross profit was RMB221.5 billion, up 32%. Operating profit was RMB184.2 billion, up 55%. IFRS net profit attributable to equity holders was RMB159.8 billion, up 71% and the effective tax rate for the year was 11.1%.

Now, I’ll share with you our non-IFRS financial figures. For the fourth quarter, operating profit was RMB38.1 billion, up 26% year-on-year, or flattish quarter-on-quarter. Net profit attributable to equity holders was RMB33.2 billion, up 30% year-on-year, or 3% quarter-on-quarter. For the full-year of 2020, operating profit was RMB149.4 billion, up 30%. Net profit attributable to equity holders was RMB122.7 billion, up 30%.

Moving on to segment gross margins. Gross margin for value-added services was 51.5%, up 1.4 percentage points year-on-year, or down 1.1 percentage points quarter-on-quarter. On a year-on-year basis, we continue to benefit from revenue growth of higher margin self-developed smartphone games. Sequentially, margin decrease was primarily driven by revenue mix shift from high-margin PC client games to lower margin digital content services.

Gross margin for online advertising was 53.3%, down 1 percentage point year-on-year, or 2.4 percentage points quarter-on-quarter. Year-on-year decrease was due to higher revenue contributions from mobile ad network business, which carries lower margin. Sequentially, margin increase reflected lower related content cost due to delays of sports event broadcast.

Gross margin for FinTech and Business Services was 28.5%, up slightly year-on-year and quarter-on-quarter.

For the full-year of 2020, VAS gross margin increased 1.1 percentage points to 54.1%. Our online advertising gross margin increased 2.4 percentage points to 51.4%. Gross margin for FinTech and Business Services increased 1.1 percentage point to 28.3%.

On operating expenses, selling and marketing expenses were RMB10 billion, up 49% year-on-year, or 12% quarter-on-quarter. As a percentage of revenues, selling and marketing expenses represented 7.5% for the quarter. Both quarter-on-quarter and year-on-year increase reflected greater marketing spend on online games, business services, and digital content services, including those associated with consolidation impact of Bitauto and HUYA.

G&A expenses was RMB19.8 billion, up 24% year-on-year and 15% quarter-on-quarter, mainly reflected greater R&D and staff costs. Within G&A, R&D expenses was RMB11.2 billion, up 26% year-on-year, or 13% quarter-on-quarter. G&A and R&D represented 14.8% and 8.4% of revenues, respectively. As at quarter end, we had approximately 86,000 employees, up 37% year-on-year or 11% quarter-on-quarter.

For the full-year 2020, selling and marking expense was RMB33.8 billion, up 58% and represented 7% of revenues. The increase primarily reflected greater marketing spend for online games and recent consolidations, as well as marketing spend to support long-term strategic initiatives, including short-form video, cloud-based healthcare solutions, online education, and remote work.

R&D expense was RMB39 billion, up 28% and represented 8.1% of revenues.

G&A expenses, excluding R&D was RMB28.6 billion, up 24% and represented 5.9% of revenues.

For the fourth quarter 2020, gross margin was 44%, largely stable year-on-year, or down 1.2 percentage points quarter-on-quarter. Sequential decrease reflected lower VAS gross margin compared to the previous quarter.

Non-IFRS operating margin was 28.5%, largely stable year-on-year, or down 1.9 percentage points quarter-on-quarter.

Non-IFRS net margin was 25.8%, largely stable year-on-year and quarter-on-quarter.

For the full-year 2020, gross margin was 46%, up 1.6 percentage points. Non-IFRS operating margin and net margin were 31% and 26.3%, respectively, both remain broadly stable.

Let’s move on to earnings per share and annual dividend. For 2020, on an IFRS basis, basic EPS was RMB16.844 and diluted EPS was RMB16.523. Non-IFRS basic EPS was RMB12.934 and diluted EPS was RMB12.689. Subject to the approval of the shareholders at the AGM to be held on 20th of May 2021, we are proposing an annual dividend of HKD1.6 per share payable to shareholders on 7th of June 2021. This represents an increase of 33.3% from last year.

Finally, total capex was RMB9.7 billion, down 33 — 43% year-on-year, or up 11% quarter-on-quarter. Operating capex increased by 13% year-on-year to RMB8 billion as we continue to ramp up the investment in servers and network equipment to augment our business growth. Non-operating capex decreased 83% year-on-year to RMB1.6 billion, mainly due to higher base in fourth quarter 2019 for office land purchase.

Free cash flow was RMB27.7 billion, down 11% year-on-year, or down 2% quarter-on-quarter. Net cash position was at RMB11.1 billion, which increased sequentially due to free cash flow generation and foreign exchange effects, partially offset by net cash outflow for M&A activity.

Fair value of our shareholdings in listed investees, excluding subsidiaries was approximately RMB1.2 trillion or $185 billion as at the end of the year.

Thank you. We’ll now open the floor for questions.

Wendy Huang — Investor Relations

Operator, we will take one main question and one follow-up question each time. Please invite the first question. Thank you. Operator? Operator?

Questions and Answers:

Operator

Thank you. Your first question comes from Robin Zhu from Bernstein. Please go ahead.

Robin Zhu — AB Bernstein — Analyst

Thank you. Thanks for the opportunity to ask a question. Could I ask two questions? Firstly, could management give some examples of how you plan to accelerate the growth in Video Accounts in terms of, for example, number of creators, depth of video content, and user engagement? And if you had any quantitative targets, for example, time spent or users by the end of 2021?

Second question, if I look at the deferred revenue balance, it seems to imply that cash game billings showed quite a meaningful deceleration in Q4, despite the launch of Call of Duty. I just wanted to get your thoughts on why that was, if anything one-off happened and your expectations for growth in the first half of ’21? And if you had any color on the launches like, for example, DnF or League of Legends, what your expectations are? Thank you.

Martin Lau — Executive Director and President

Okay. I’ll take the first question. In terms of Video Accounts, I think you have actually hit on the important points, which is you need to have double flying wheel, right? You need to have more content and as such, you actually sort of need to attract more content developers, as well as help them to be more active on our platform and at the same time, you actually need to have more viewership, right, and they actually serve us — so mutually reinforcing.

Now, in terms of how do we actually sort of keep on increasing the amount of content? And on that front, the key thing is, we actually already have got a very good set of content creators, and these are content creators — part of them are actually new creators and they are converted from our Official Accounts. In the past, they have been writing articles and now they convert themselves into content creators on the video side. There are new creators as well who come in and at the same time, where we have seen existing content creators on other platforms also join us. And the main reason that they actually join us is because of the fact that there is the distinction that our platform provides, which is essentially the ability for them to build their private domain viewership.

So, in other platforms, when you have a content, you actually sort of subject yourself to algorithmic recommendation and after that you basically lose your viewership. And then the next content you actually sort of have to build up again. But in our platform, we actually have a very strong set of tools and connections so that you can actually convert the public domain traffic into private domain. And at the same time, right, for a lot of the existing OA content creators, we actually provide a lot of touchpoints for them to connect their video accounts with other assets, such as Official Accounts, live streaming and Mini Programs. And so, basically one key objective and initiative that we’re doing is keep on increasing these touchpoints and providing the tools, so that there is much better connection between the public domain and private domain, so that we create a very unique platform for these content providers.

And then on the viewership side, right, we would continue to improve the algorithmic recommendation, which is very important. And at the same time, as you can see, we are actually providing pretty unique content on our platform, right? These are content, not just for entertainment purpose, but also for educational, as well as informational purposes. And a lot of the content providers are first time short video creators, and these are all unique supplies, which would help us to attract the users. And finally, when we actually provide content, we not only use the algorithmic recommendation, right, but we also have social signals, which actually help the viewer to see a different kind of world. And with all these together, we felt we can, on one hand, increase on the supply, on the other hand, we can increase on the consumption, and they will self-reinforce themselves over time.

I can say, the Video Accounts in terms of both users, as well as the user time have been increasing pretty healthily, but we’re not in a position to talk about specific numbers yet.

James Mitchell — Chief Strategy Officer, Senior Executive Vice President

Robin, thank you for the second question, as well, around game billings. So, you’re correct to observe that both the game billings and the game revenue declined quarter-on-quarter in the fourth quarter. And there’s three points perhaps to make around that. One is that, as you know, for China, the work from home period was very pronounced in the first half of last year and then relaxed as people returned to offices in the second half of last year. So, that tended to boost the billings in the first half of last year. And then because we convert our billings into reported revenue with a time lag, that flow through into lower reported revenue in the fourth quarter of last year. So that’s just sort of natural unwind of the work from home period benefit, at least in China, we haven’t seen that yet internationally.

The second point is that, for us, the fourth quarter is historically a low season for game billings. Now, you didn’t see that every year in our history, usually due to one-time events. So, for example, if you look at the fourth quarter of 2019, you didn’t see the normal seasonal decline in billings in part because we consolidated Supercell, which added many billions of renminbi to our deferred revenue moving from 3Q19 to 4Q19. But this period, we didn’t have any sort of unusual benefits. And so, the usual seasonality became more apparent.

And then third and finally, the seasonality was more pronounced than a normal year this year because of the late Chinese New Year. So, for some of our biggest games in China, we began running our Chinese New Year activities around 30 days before the Chinese New Year holiday itself. And they — 2019 to 2020 period, that meant the activities commenced in late December and so we had the deferred revenue on our balance sheet for those as of December 31 versus for 2020 going into 2021. The activities commenced in January, so they only came on to our balance sheet in the first quarter.

You also asked about the outlook for the first half. As you know, we don’t provide guidance. I think the — if you look back at the first half of 2020, then the work from home conditions resulted in higher game revenue than otherwise have been the case and lower revenue in some of our other activities, in particular payments in FinTech. So, all else equal, if — this year we’re back in a work from office mode, which we seem to be, then I think it would be natural to expect those two trends to temporarily reverse, but that’s very much the short-term phenomenon for people who are focused on the next quarter. If you are focused on the next several years, and I think the more important takeaway is that, the work from home period really expanded the audience for games and expanded the social acceptability of spending money within games, which positions the game industry, alongside several other industries who are actively in such industries, online education and healthcare for sustained multi-year growth as we — once we’ve worked through the slightly tougher comparisons in the first half of this year.

So I hope that answers both parts of your question.

Operator

Thank you. Your next question comes from Alicia Yap from Citigroup. Please ask your question.

Alicia Yap — Citigroup — Analyst

Hi. Thank you. Good evening, management. Thanks for taking my questions and congrats on the solid set of results. I have two questions. First question is, as we see increasing overlap of Internet service among all these Internet companies in China. So, in addition to user, which is the core asset for most of these companies, the proprietary content and also the content IP is actually seems to be the key differentiated asset. So, actually Tencent do have both of these users and also content. Could management share your thoughts on how Tencent could further capitalize on these various digital entertainment content portfolio that you have to enhance the user experience and also further expand the monetization potential?

And then the second question is, roughly very quickly on the Tencent Cloud. Just curious to see what are some of the key challenges that the Tencent Cloud is facing when trying to penetrate to the different enterprises? Is that related to the lack of the IT talent at this enterprise? Or is it the IT budget constraint? Or is it related to the vertical solutions that are available? And how Tencent actually help to support these enterprises to further adopt the cloud service? Thank you.

James Mitchell — Chief Strategy Officer, Senior Executive Vice President

Alicia, perhaps I’ll answer the first question. So, I think that over time that the general trend for value to migrate from traffic towards content and that’s something that we’re very aware of. And really for the past decade we’ve been investing aggressively in swimming upstream to get closer to the content and then you can see that in our game business where we’ve moved from being a distributor to a publisher, and most recently to primarily a studio-centric game business. You can see that in music where we increasingly have upstream label coverage in China, as well as States in the global leaders such as Universal Music and Warner Music. You can see that very clearly in literature. So, that’s a trend that we really embrace and we think that will validate the strategy we have been embarked on for the past decade.

And one interesting thought experiment is, if you look at the world of traditional video linear entertainment then, while there are many excellent companies competing in this space, one company, Disney, has pretty consistently enjoyed outside success, both with its organically developed IP such as Frozen, also with acquired IPs, such as Cars or Star Wars. And there are many reasons, but I think one key reason is that, Disney has an unparalleled ability to, not only provide the linear video entertainment, but also to provide an interactive experience in the form of its theme parks, really deepens the engagement between the users and the IP, because they are actually interacting as opposed to just passively consuming. Now, of course, the bottleneck to that business model is that, theme parks are expensive and rare and only a limited number of consumers can enjoy them at any point in time versus we’re in a world where we’re providing interactive entertainment experiences through our games, which are universally available, very cheaply and expensively available to users. But what we see is increasingly that the games serve the same role as a theme park would in terms of deepening the engagement between the user and the IP and heightening the user’s appetite to consume the IP and other linear format.

And so, if you look, for example, that our intellectual property, Soul Land and Douluo Dalu, then that’s China literature novel. It’s also been evolved into a comic book, into an animated TV series, into a live-action TV series and into a card-based mobile game, all of which are successful and each of which feeds the general interest in the IP and drives into a higher level than would otherwise be the case.

Martin Lau — Executive Director and President

Okay. I’ll take the second question with respect to the key challenges that Tencent Cloud is facing when penetrating enterprises, right? I would say, the number one challenge is really the business reason for them to adopt cloud solutions, right, and that is actually sort of a lot of times the most important question. They may give you the fact that, oh, you maybe expensive, they may give you, oh, there is no time, and all these other reasons. But the fundamental reason is, okay, what is the key business proposition for converting themselves into a cloud service. And I think the evolution of the mobile Internet has really sort of continuously provide this kind of key reason, the key business proposition, because when the customers of the businesses get online and increasingly engaged online, then the businesses have to go online, right, and the businesses — when the businesses go online, their suppliers have to go online. So, there is a chain reaction that’s happening initially pretty slowly, but now with increasing speed, especially it’s accelerated by the pandemic, right? In the past, when retailers look at e-commerce, it’s nice to have. It’s an additional business. But during the pandemic, they realized, it’s actually a must-have. So — but having the business proposition for them to move online and to adopt cloud solutions, I think that’s number one.

Number two is really the inertia, especially more on the organizational inertia, right, they — all the businesses have their existing practices and suddenly you say, you have to move online. Yes, it’s more efficient. Yes, it’s more cost-effective over time, but it involves the change of behavior of a lot of internal procedures and people’s behavior. And I think in order to overcome that, the number one reason has to be very strong. And at the same time, when we actually can create examples and role models through which a certain case have been created within the industry, then it’s much easier to replicate that case in other clients. So that’s exactly what we’re doing, right? We’re trying to create the role models and then trying to make them into a more common set of solution and then populated to other players within the industry.

The third one is about IT resources within those enterprises, right, and that’s the reason why we have been working with lot of ISVs and system integrators so that they can actually help the companies. Once they have the key reason and value proposition to move online and at the same time, they have a clear blueprint to do that, and then the IT resources actually they can find in the third-party world. And I think that’s addressing one set of issue.

The other set is about, oh, Tencent Cloud, in particular, right? As a challenger, I think we do face many challenges, right, and we are tackling them one-by-one. The first one being just building relationship with enterprises, that’s not easy, right, and we have been making good traction in the year of 2018-2019, especially after our organizational upgrade, but it was actually interrupted during the pandemic, because during the pandemic, it’s very hard to build new relationships and even though you have signed on new contracts, it’s hard to implement. So that’s the reason why our Cloud growth was a little bit impacted in the first half and the third quarter of last year, but then as the world returned to normal, we have seen that the relationships and the implementing projects are back on track and as a result, our growth rate in the fourth quarter on the Cloud business is much stronger now.

And the other thing is just sort of continuously building up our technology so that our product is actually competitive, our cost is competitive, and that’s the reason why we have invested in a lot of the new technologies, such as AMD servers, such as our T-block architecture so that we can make our solutions cost competitive.

And I would say, finally, right, Tencent has got a lot of SaaS solutions on the communications and productivity side, which are market leading. And in the future when we can actually connect our cloud service with these SaaS solutions, I think that’s the time when we can really leverage our competitive advantage and overcome a lot of these challenges.

I hope that answers your question.

Operator

Thank you. Our next question comes from Han Joon Kim from Macquarie. Please ask your question.

Han Joon Kim — Macquarie — Analyst

Great. Thank you very much management for your time today. I do have — first one is just touching upon I think the relationship with I think Alibaba on Taobao Deals that I think media has talked about. And please correct me, if I’m wrong. I think it’s — we’ve probably not had too much engagement with them I think since 2016. So, should we just view this as something in isolation or kind of should we see that there is more room for collaboration with other ecosystems out there in China? And how do we think kind of the shifting dynamics in that kind of scenario where, on one hand, I guess, we have to kind of make sure we protect our user kind of experience and integrity of the experience within WeChat, while also kind of thinking about how we remained open platform in collaboration with other ecosystems out there?

And then the second question I wanted to touch upon is in regards to your investment into Rakuten. Mikitani-san did host the call and I think he kind of elaborated that he would want to work with you guys a little bit more deeply and even in areas I think like games, I mean — and for you guys, is it more of a passive role if they want something like games? Are you happy to kind of give it to them? Or is that kind of more strategically minded initiative where we kind of see the ability to export some of our key kind of resources and services to other geographies? Thank you.

Martin Lau — Executive Director and President

So, in terms of the first question, right, without going into a lot of details, I would say, our general principle is that, we are open in nature. We have an open platform which encourage organic cooperation with other platforms. But at the same time, as a platform manager, we actually need to look after the user experience, as well as protect our users’ privacy with a lot of focus, right? So, there is a deal responsibility there and our responsibility for the users is actually much higher. And as a result, we actually have to protect our users’ experience and in a lot of cases, prevent spending, especially encourage spending of our users. And if we actually sort of see violation of user privacy, we’d actually sort of step in and we stop the service. And that principle actually extends, not only to third parties, but also to our investee companies and sometimes our own services, right. If you see our own services actually spamming users in unscrupulous way, we actually sort of put in penalties, too.

And finally, I think the relationship with any large company has to be mutually constructive. So, I think these are sort of the principles that we adhere to when we look at these relationships on the industry end.

Now, in terms of our investment in the international market, right, I would say — I would refer you to — on the particular case of Rakuten, right, I refer to the press release, as well as what Miki said, I think this is a company which is a champion — local champion in Japan. It’s very innovative, and it also has a very strong franchise in the area of e-commerce and FinTech and emerging in the telecom space. And we are very honored to be able to work with them. And we felt that by working with them, we can actually sort of help to download some of the know-how that we have, we can help them with their capital. But at the same time, they are very competent company who can operate very independently. And we felt we can actually help them to operate even more competitively in the local markets, as well as internationally.

And in terms of thinking about working with international partners, I think the approach is very similar, right? I mean, we look for very competent management teams and passionate entrepreneurs. We look for companies which has very strong presence within the local market. They have good support by the government. They have good report with the consumers in the market. And what we do is that, we’ll provide our resources, basically know-how, as well as some capital and maybe in some cases some access to the Chinese market. And by and large, these companies with some help from us would be able to perform in a prudent way in penetrating their local market and sometimes in the international market. And by engaging in these kind of partnerships, we felt that it help us to get access to exciting markets, exciting teams, exciting products around the world.

Operator

Thank you. And next question comes from Gary Yu from Morgan Stanley. Please ask your question.

Gary Yu — Morgan Stanley — Analyst

Hi. Thank you for the opportunity to ask questions. I have two questions from my side. The first one is on FinTech. Correct me if I’m wrong, I think majority of Tencent credit business is being conducted under the WeBank subsidiary. Just wanted to check the new kind of FinTech regulation on forming financial holding company, how does it affect way Tencent conduct credit business in the future, if at all? And how does it affect out revenue financially?

And the second question is related to Video Accounts. Just a follow-up question on the unique feature from content and also diverted traffic between kind of private domain and public domain. Given this unique feature compared to other short-form video platform, do we expect the future kind of monetization opportunity will also be a lot more different compared to what we’ve seen out there in other platforms in the form of advertising, e-commerce, live streaming? Are we expecting more kind of different form of monetization opportunities going forward? And if that’s the case, what kind of timing are we looking at in terms of monetization? Thank you.

Martin Lau — Executive Director and President

Yeah. On WeBank, it’s an affiliate. And the vast, vast, vast majority of our loan business is actually conducted through WeBank. And WeBank is a licensed bank, subjected to a much more stringent banking regulation measures of CBIRC as opposed to the micro loan license.

And yeah, there is a lot of nuances in your question, right? So, maybe I’ll just try to sort of answer in full. There is a question of, what is the impact of financial holding company, right? And I would say, financial holding company as a concept is an important concept put forth by the regulators in managing the risk within the financial system. And we have been paying very close attention to the relevant development. And we would be completely compliant, right, if it’s required to. But from our understanding, the financial holding company in itself is neutral in nature. It does involve organizational change, but it doesn’t really impact the businesses. What impacted real FinTech businesses are really the regulations that have been gradually put in place to regulate loan practices.

And if you look at what happens in the past few months, right, there have been a number of regulations that have been put in place. But I have to say, because of the way that we conduct our FinTech business and the loan business, which is — I would say, there are a few principles, right, that we have continuously emphasize in terms of our approach to FinTech businesses, and I would like to reiterate them once again, right? Number one is, we operate in strict compliance with rules and regulations and that’s both in form, as well as in substance. We are very prudent in our risk management. We have been — have always been optimizing for quality and risk management rather than pursuing scale. And we focus on product and services that benefits consumers and merchants, and we also emphasize cooperation with financial institutions as opposed to disruption.

So, with that in mind and especially in the compliance point, as well as the focus on risk management and the fact that we have been very self-restraint in terms of pursuing scale of our loan business. So when you look at some of the key regulations that have been put in place in the past few months, including 30% self-funding ratio, including no loans to students, including trend down on high interest rate, including max loan size of RMB200,000, each and every single one of them, we have been complaint even before these regulations come around. And I hope this actually sort of shows that for our FinTech business, we have been prudent all along the way and as a result, we are actually sort of less affected by all these regulations. And in a way, right, we actually sort of embraced these regulations and we will be completely compliant whatever regulations that will be come in place because we felt that with new regulations, with these more healthy regulations, at the end of the day, the entire industry will be healthier and it will be sustainable for longer-term growth.

And then in terms of just the Video Accounts, right, I would say, monetization is probably sort of too far a question for us to answer at this point in time. We have always seen when we get users, when we get user engagement, over time there is going to be monetization. But number one, at this point in time, we are very focused on building the ecosystem of content providers, as well as the viewership. And we prioritize user experience over any monetization. And number two, even when monetization comes around, right, you know, the practice of Tencent has always been much more self-restraint in terms of monetization. It will only come on a gradual basis.

So, I think that’s the answer on your question.

Operator

Your next question comes from Eddie Leung from Bank of America. Please go ahead.

Eddie Leung — Bank of America — Analyst

Good evening. Thank you for taking my questions. It is a pretty straightforward question, but perhaps a quite important. Just wonder given the recent determining antitrust regulation, what are some of the things that Tencent can do to stay competitive in the industry, while still able to address the concern of the regulators?

And then just a follow-up question on the Weixin ecosystem. Any target or strategic goal for Weixin’s transaction ecosystem in 2021? For example, any more new initiatives to facilitate the commercialization of your merchants and service providers? Thank you.

Martin Lau — Executive Director and President

Okay. Well, in terms of the first question, right, I would say, there are more and more focus on government regulations, and I think this is something, which — to be honest, right, it’s actually quite natural. Yeah. I think in the past, we actually have talked about this view and this is — we want to reiterate it, which is, as companies become large and as Internet services become more and more part of people’s life, then companies needs to be much more responsible, both to the users, to the government, to society and socially, right? This is just something that needs to be done. And to some extent, right, it signifies the importance of the industry that we operate.

And in order to navigate this, right, I think it’s a boring answer. This is basically sort of doing some — a lot of the things that we have been doing, but with a very strong focus on communication with the government and compliance. So, if you look at the operating principles of Tencent, right, we have always emphasized that we would be fully compliant with rules and regulations. And now, I think it’s important for us to understand even more about what the government is concerned about, what the society is concerned about, and be even more compliant, maybe even sort of with the futuristic approach, right? So, you anticipate what is needed and try to be sort of even more compliant in the businesses in anticipation of any rules and regulations change.

We want to focus on user value and innovation. I think this is essentially what answers your question, right? The ultimate competitiveness actually come from you providing more and more user value and you come up with exciting and innovative products that deliver more user value, not only to the users, but also to industry partners, right? And when that’s done, then I think it also complies with what the government, what the society, what the users expect of you. We are very self-restraint in terms of monetization and our business practices. And I think a lot of people comment that, oh, there is one way that you can actually turbo charge your revenue. I think we sometimes get criticism on being too self — much in self-control. But that’s something that we will continue to do and we think it’s going to be beneficial for us in the current environment.

We embrace open platform, and we provide open platform to a lot of industry partners and help them to grow. We embrace competition, right, but in a fair way. We embrace fair competition, even within our own Company, right, because we think that fair competition actually makes the teams better. And when the teams are better, they provide good products and innovation that create a lot of user value.

And finally, we engage in partnerships, while respecting our partners’ independence. And this has been our principle in our investments, in our business partnerships, and we’ll continue with that. So, with all these existing practices and we continue to put through our efforts in exercising them, right? I think over time, we would be able to comply with the rules and regulations and also present ourselves as a healthy force in the industry and also fulfill the expectation of the society as a whole.

So the second question is about — oh, the Weixin GMV, I don’t think we have any target, right? Weixin GMV has been increasing, and I think the reason is because of the fact that more and more merchants, as well as service providers look at online as important. And the importance was especially heightened during the pandemic, right? In the past, they look at online as an additional channel. Now they look at online as indispensable channel.

The second one is, more and more companies and e-commerce players and service players now value private domain more and more. Now, in the past, they — when they look at online as an additional channel, it’s okay for them to host their users on the public domain, right? And over time, when they feel that online is indispensable part of their future, then they want to engage with their users like the way that they engaged with their users in their shops, right? So the private domain is becoming more and more important and Mini Programs actually allow them to engage with their users in a private domain.

And now, we had also added a lot of tools for them to engage with these users, right? That’s the third reason we have had Official Accounts, we have had Weixin Payment, but now we are adding mini shops, we’re adding Video Accounts, we’re adding live streaming. And a lot of these tools are actually helping them to manage their customers online on the private domain better and better. And with all these factors and with also a continuous education process and the establishment of role models within the industries, the ecosystem of Mini Programs just keep on getting more and more vibrant and we are very happy to see that.

Wendy Huang — Investor Relations

Operator, we will take two more questions. Thank you.

Operator

Certainly. Your next question comes from John Choi from Daiwa Capital Markets. Please go ahead.

John Choi — Daiwa Capital Markets — Analyst

Thank you for taking my question. I have two questions. First of all, I think, on the online games international part, management mentioned that you guys will continue to collaborate with renowned console game and anime IPs going forward. So, would this be another strategy for both the domestic and the international market? And just quickly a follow-up also on that is, in terms of the investment, it seems that you guys are stepping up more on the PC and console studio. So, could you kind of share your thoughts whether you are going to be more serious in these two genres going forward?

And a quick follow-up is on your online advertising. Given that some verticals such as online education has been seeing some challenges, what are the trends that you’re seeing despite all the changes in the industry? Thank you.

James Mitchell — Chief Strategy Officer, Senior Executive Vice President

So, on the game question, yes, we absolutely seek to work with intellectual property to create games that we think can resonate both internationally, as well as in China. And yes, we have been very active investing in studios that are active on console and PC, but we’ve also been very active investing in studios that focus on mobile. And in reality, our mental framework is not that, if you want to invest in a certain number of console studios, and certain number of PC studios, and certain number of mobile studios, we want to invest in the best or the future best studios within each genre of games.

And sometimes that genre of games is particularly well developed in China, in which case, the best studio will often, not always, but often be mobile-centric. Sometimes, that studio might be in Japan or United States, where the best studios are often console-centric. And quite often for the sort of smaller deeper genres, the best studios are in Europe, where they are typically PC-centric. But our view is that, over time, it’s becoming easier to cross platforms. And so, we’re much less interested in whether our studio has mobile or console or PC expertise, and much more interested in whether it has simulation expertise or card game expertise or role playing expertise that can move across different hardware platforms over time. So that’s on the game front.

And then, on the advertising side, I mean, yes, I think anytime you look at the advertising market, the short-term is always murky because it’s sensitive to GDP growth, which is unknown at the moment, as it always is. It’s sensitive to regulatory changes. Right now, we have some uncertainty globally around the impact of Apple’s IDFA changes. So they are in China, that will be mitigated by the fact that Apple’s and their teams [Phonetic] percentage of mobile traffic. It’s also sensitive to changes within specific advertiser industries. So, for example, in China, it’s possible there will be rules around advertising by the education industry, which will have some negative impact on the advertising industry as a whole.

So, I think at any point in time, in the next few months, where advertising will always look cloudy and confusing. But over the longer-term, advertising is a function of GDP growth. And so, if you’re an opportunist and you believe that the economies tend to grow, over time as we do, then advertising will tend to grow over time. And I think what you can see very clearly from 2020 is that, whatever the advertising industry growth rate, for a number of reasons, we tend to outgrow the industry because we have more activity, more traffic, more tools, more resources, less monetization than the industry in aggregate. So, in good times like 2019 and in bad times like 2020, we tended to outgrow the overall advertising industry and over the long-term, we think advertising is a growth industry in and of itself.

Operator

Thank you. Your last question comes from William Packer from Exane BNP Paribas. Please go ahead.

William Packer — Exane BNP Paribas — Analyst

Hi, management. Many thanks for taking my questions and congrats on the strong numbers. Last quarter on this call you gave some helpful initial perspectives of the draft announcement regarding antitrust and platform rules. Could you provide an updated view now that we’ve had a bit more information set out? That would be helpful. And is it still right to think that your video games and digital entertainment businesses are not likely to be a focus?

And then as a follow-up. In terms of acquisitions, both stakes and larger deals, should we expect the pace of your investing for change as new systems of oversights are established? Thank you.

James Mitchell — Chief Strategy Officer, Senior Executive Vice President

So perhaps, I’ll start with the second question. So, for better or worse, the pace of our investing activity has been relatively unusually intense during the past six months. And that’s not because of regulation, that’s just because COVID has provided a glimpse of the future, particularly for industries like games, education, healthcare and then, especially enterprise software-as-a-service. And we’ve really utilized that glimpse into the future to step up our support for independent companies in those spaces, particularly enterprise software-as-a-service in China. So, as you know, historically, the very vast majority, over 95%, 99% of our investments, minority investments rather than mergers or outright acquisitions, that will remain true going forward. And for that very vast majority, then a different antitrust regime will not, we believe, impact the desirability of us investing in and supporting start-ups and helping them to grow into bigger, better companies over time. So, we remain active investors, both internationally, as well as, especially in China.

Martin Lau — Executive Director and President

Yeah. In terms of the last question, I would say, because the gaming and the entertainment business is, by nature, much more competitive and there are many more players in the market, and it’s essentially sort of free for all competition, right, so it’s less relevant for the antitrust regulations. And in terms of what we should be doing, right, I think I would refer you back to the answer that I provided to Eddie, right, which is, we’ll continue with our focus on compliance, as well as our business practices and work very closely with the regulators and navigators.

Wendy Huang — Investor Relations

Thank you. Thank you, operator. We are closing the call now. If you wish to check out our press release and other financial information, please visit the IR section of our Company website at www.tencent.com. The replay of this webcast will also be available soon. Thank you, and see you next quarter.

Operator

[Operator Closing Remarks]