Jex LiRegional BD lead

Tencent

Win Together in China

China’s Internet Market Overview

China Economic Development Snapshots

1975 1985 1995 2015

Chinese Income Distribution

$50 $500 $5,000 $50,000

1975

1985

1995

2005

2015

Source: National Bureau of Economic Research Working Paper

Fast Growing Internet Users

2010 2011 2012 2013 2014 20150

200

400

600

800

1,000

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

457 513

564 618 649 688

34.3%38.3%

42.1%45.8%

47.9%50.3%

Number of Internet UsersInternet Penetration Rate

Unit: Million

Chinese Internet User Base(2010-2015)

Source: CNNIC

Number of Mobile Internet Users

Mobile Internet Users as % of Internet Users

Unit: Million

Chinese Mobile Internet User Base(2010-2015)

2010 2011 2012 2013 2014 20150

200

400

600

800

1,000

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

303 356

420 500 557

620

66.2% 69.3%74.5%

81.0%85.8%

90.1%

Top 20 Smartphone Apps in China(Mar 2016)

Source: Tencent Financial Report, Analysys.cn, excluding game apps

Rank App Name Company MAU Rank App Name Company MAU

1 Wechat Tencent 762.00 11 Youku Youku Tudou 143.01

2 QQ Tencent 658.00 12 UC Browser Alibaba Group 138.61

3 Taobao Alibaba Group 193.91 13 Tencent News Tencent 133.50

4 Baidu Baidu 185.09 14 360 Mobile Security Qihoo 360 132.28

5 Alipay Alibaba Group 170.09 15 QQ Music Tencent 125.97

6 Sogou Pinyin Input Sohu 157.81 16 Tencent Mobile Security Tencent 120.79

7 Tencent Video Tencent 151.20 17 Kugou Music KuGou 116.03

8 iQIYI Baidu 147.61 18 Baidu Map Baidu 109.59

9 QQ Browser Tencent 143.64 19 Baidu Mobile Store KuGou 106.20

10 Sina Weibo Sina 143.33 20 MyApp Tencent 106.02

- Tencent FamilyUnit: Million

Game Center E-commerce Payment O2O

WeChat in China – The New Way to Connect

Voice Message Location Sharing

Mobile App Innovations in China

JD real time tracking DIDI Tencent News Feeds

UI of Chinese Popular Games

The Legend of Mir

Fantasy Westward Journey CF MOBILE

Chinese Online Game Market

Global Game Market Overview

Unit： USD in Million

22,194 26,17312,023 12,272 12,376 12,50623,050 23,820

25,17017,990

18,42019,430

32,77029,87518,047

12,618

25,87024,480

19,95018,910

0

20,000

40,000

60,000

80,000

100,000

120,000

102,658

4,187

2016E

95,682

4,1033,848

2015

88,468

4,022

2014

81,117

2017E 2018E

4,268

108,826

JapanSouth KoreaNorth AmericaEurope

China

Southeast Asia

OthersLatin America

Global Game Market(2014-2018E)

Source: Newzoo, iResearch, Tencent Analysis

Large and Growing Chinese Online Game Market

Unit: USD Million

11,007 12,54017,55615,71714,069

3,6643,490

3,1162,640

2,087

7,2086,613

5,5114,113

2,742

0

5,000

10,000

15,000

20,000

25,000

30,000

2015

19,293

2014

15,836

2018E

22,696

2017E

25,81928,428

2016E

PC BrowserMobile PC Client

CAGR16.1%

15.1%

12.4%

27.3%

Chinese Online Game Market(2014-2018E)

Source: iResearch, Eguan,Newzoo

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1,445 2,497

3,638

6,676

9,722

12,423

Tencent Leads the Market in Key Fronts

Unit: USD in Million

Tencent Game Revenue(2010-2015)

Source: Company Annual Report

20112010

+50%

2015201420132012

Source: Newzoo, and game revenues of Sony, Microsoft, Apple and Google were estimated by quarterly earning reports in which these are not specifically segmented out

Tencent Microsoft Sony Activision Blizzard

Apple EA Google NetEase Warner Bros King0123456789

10

7.2

5 5.14.4

3.54.5

2.41.6 1.6

2.3

8.7

6.85.8

4.7 4.4 4.3

3 2.82.2 2

FY 2014 FY 2015

Top 10 Public Companies by Game Revenues

Unit: USD in billion

+21%

+36%+13% +6% +26% -4%

+25%

+76% +39% -12%

Tencent Leads Game Publishers in the World

Chinese PC Game Market

Chinese PC Game Market Overview

1,518 2,1311,595

1,7331,6711,426

1,3951,395

4,3854,370 4,094

8432,469

1,809

1,334

3,772

0

2,000

4,000

6,000

8,000

10,000

12,000

2014

9,997644

2013

9,123 690 552

583

2016E

10,304

2015

10,380

MusicOthers

RPG

MOBAShootingAction

Unit: USD Million

Source: Industry News, Company Annual Report

Chinese PC Client Game Market(2013-2016E)

CAGR7%

Tencent Leads the Market in Growing Fronts

BrowserRPG SportsRacingMusicPokerMOBAActionSTG

TencentOthers

Tencent Game Market Share by Genres (2015)

Source: Industry News, Company Annual Report

Proven Track Record of Hit Games

Dungeon & FighterDeveloper: NeoplePCU: 3M

Jun 2008 Jul 2008

Cross FireDeveloper: Smile GatePCU: 4M

May 2008

QQ DanceDeveloper: TencentPCU: 2.6M

Jan 2008

QQ SpeedDeveloper: TencentPCU: 3M

Aug 2003

QQ GameDeveloper: TencentPCU: 9M

May 2015

May 2013Sep 2011

League of LegendDeveloper: Riot GamesPCU: 10M

NBA 2K OnlineDeveloper: 2K Sports

Call of Duty OnlineDeveloper: Activision

1H 2016E

Moonlight BladeDeveloper: Tencent

Orcs Must DieDeveloper: Robot

Nov 2013

Blade & SoulDeveloper: NCSoftPCU: 1.7M

Heroes of NewerthDeveloper: S2 Games

Apr 2015

FIFA Online 3Developer: EA

Monster Hunter OnlineDeveloper: CAPCOM

Jul 2015 Dec 2015 1H 2016E

Chinese Mobile Game Market

China Mobile Game Market Outpaces All Other Regions

Mobile Game Market Growth by Regions(2015-2017E)

Source: App Annie, iResearch, PWC

Mobile Game Market Size by Regions(2014-2017E)Unit: USD in Million

7,402 9,6776,488

6,7157,232

7,7296,0166,205

6,6027,015

3,7824,050

4,3824,738

4,9350

10,000

20,000

30,000

40,000

2017E

37,299

11,522

2,021

2016E

33,619

1,874

2015

29,559

1,736

2014

25,968

1,647 South Korea

ChinaJapan

North AmericaEuropeSoutheast AsiaLatin AmericaOthers Area China Japan South

KoreaNorth

America Europe Southeast Asia

Latin America Others

Market Share (2015) 25% 22% 6% 21% 14% 5% 2% 5%

Market Share (2017E) 31% 21% 5% 19% 13% 5% 2% 5%

Growth Rate (2015-2017E) 33% 6% 7% 5% 8% 11% 14% 11%

Tencent DominatesChinese Mobile Game Value Chain

Mobile Game Landscape in China(Mar 2016)

*Revenue allocated along the value chain based on revenue share percentageSource: Company Public Information, Industry News, Company Annual Reports

100%

35%30%25%20%15%10%

5%0%

40%45%

65%70%75%

95%

50%55%

90%

80%85%

60%

Distribution

Tencent Android30%

Tencent iOS13%

Netease iOS9%

App Store

360

BaiduUCMi

Huawei OPPO

Others

Publishing

Tencent36%

Shanda Games LedongLongtu Games Yinhan

Netease22%

Perfect WorldChangyouTianma

Perfect WorldLilith GameTianxiang Supercell JurenBlue HarborSnail Digital

Others

Tencent Published (Others)17%

YinhanLedong

Tencent24%

Development

Others

Digital SnailBlue Harbor YouzuJuren

Tianxiang

Shanda Games

Netease17%

Tencent Published~11%

Tencent Mobile Game Performance

No.1 on Free Download Chart No.1 on both Free Download and Grossing Chart

45 Games 13 Games

Source: App Annie (As of Mar 2016)

Tencent Games

iOS Top Grossing Games Ranking in China

Source: App Annie

　 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16

1 Fantasy Westward Journey

Fantasy Westward Journey

Fantasy Westward Journey

Fantasy Westward Journey

Fantasy Westward Journey

Fantasy Westward Journey

Fantasy Westward Journey

Fantasy Westward Journey

Fantasy Westward Journey

Fantasy Westward Journey

Fantasy Westward Journey

Fantasy Westward Journey

2 We Fire We Fire We Fire We Fire The Legend of Mir 2 The Legend of Mir 2 Westward Journey Online

Westward Journey Online

Westward Journey Online

Westward Journey Online The Legend of Mir 2 Westward Journey

Online

3 Shenwu2 Shenwu2 MU Miracle The Journey of Flower The King of Fighters’98 Westward Journey Online The Legend of Mir 2 The Legend of Mir 2 The Legend of Mir 2 The Legend of Mir 2 Westward Journey

Online Clash Royale

4 MU Miracle We Fly We Fly MU Miracle We Fly We Fly The King of Fighters’98 Loong Craft The King of Fighters’98 Hero Moba Hero Moba Hero Moba

5 We Fly MU Miracle Shenwu2 Shenwu2 We Fire The King of Fighters’98 We Fly We Fly Loong Craft Naruto Mobile We Fly Cross Fire

6 Dota Arena Dota Arena Dota Arena Happy Elements Happy Elements We Fire We Fire The King of Fighters’98 Hero Moba Cross Fire Cross Fire Naruto Mobile

7 Blade of Three Kingdoms Boom Beach Happy Elements We Fly 9LZ WeChat Dash Clash of Kings Hero Moba Clash of Kings The King of Fighters’98 Naruto Mobile We Fly

8 West Arena Happy Elements Boom Beach Craz3 Match The Journey of Flower Clash of Kings Clash of Clans Clash of Kings We Fly Loong Craft The Legend of Zu The Legend of Mir 2

9 Craz3 Match Landlord Poker Clash of Clans Dota Arena MU Miracle Happy Elements CangQiongBian We Fire We Fire We Fly The King of Fighters’98 The King of Fighters’98

10 Boom Beach Blade of Three Kingdoms I am MT2 The King of Fighters’98 Shenwu2 We MOBA Happy Elements Clash of Clans Clash of Clans Shenwu2 Clash of Kings Legend of the Qing Qiu

Fox

Hit Titles

Tencent Leads the Market in Key Genres

Tencent Mobile Game Market Share by Genres(2015)

RPGRacingStrategyTower Defense

SimulationCasual & Puzzle

MOBABoard Game

MusicFlight Combat

Action

Source: App Annie, Industry News, Company Annual Report

TencentOthers

Opportunities in Chinese Mobile Game Market

Chinese Mobile Game Market Has Huge Potentials

254367

452

118

135

145

0

200

400

600

800

2013

390

+24%

2015

603

2014

510

AndroidiOSOthers

User Base(2013-2015)

Source: CNNIC, Trendforce

Unit：Million

Daily Playing Times

42% 47%

37% 25%

21% 29%

0%

25%

50%

75%

100%

2014

< 30 min

30 min - 1 hour

> 1 hour

2015

Monthly Pay Rate(2014-2015)

+9%

2015H22015H12014H22014H1

New Opportunities of Different Genresto Be Explored

Players’ Preference by Genres(2015)

16%

RPG 33%

Music

67%

40%

Flight Combat 46%

Tower Defense 52%

Casual & Puzzle 58%

RAC 64%

Poker & Chess

SPT

Source: App Annie, Industry News, Company Public Information, Company Annual Report

Turn-based

ARPG MMO Cards

FPS/TPSMOB

APoker

& Chess

Match 3

Flight Comba

tParkou

r COC PuzzleTower Defenc

eWar

Strategy

1615

161516

15

16

15

16

1516

15

16

15

16

15

16

15

16

15

1615161516151615

Others Tencent

Market Size by Genres(2015-2016)

Challenges in Chinese Mobile Game Market

Different Taste in Mobile Games

Cobweb of Distribution

ChannelsUnsuitable Business Model Unsuitable

Gameplay

Language Barrier

Cumbersome Payment

Network EnvironmentUnsuitable Art

Style

Hardware Performance and Fragmentation

Under Marketing /Promotion

Missing Localization or Live Op Team

Insufficient Onboard Tutorial

Unappealing Theme

Challenges for Overseas Publishers in China

　 Subgenres China Japan South Korea US

RPG

ARPG 7% 1% 45% 7%MMO 24% 1% 13% 19%

Card RPG 9% 18% 26% 12%Mixed Card RPG* 4% 76% 14% 62%

Turn-based 56% 5% 2% 1%

Genres China Japan South Korea US

RPG 70% 74% 61% 5%Casual & Puzzle 6% 10% 9% 16%

Action 7% 6% 7% 10%Strategy 15% 10% 12% 47%

Poker & Chess 2% 1% 11% 23%

A Different Taste in Mobile Games

Comparison of Top 50 Mobile Games by Genre(2015)

Source: App Annie， Tencent Analysis

* Mixed Card RPG : Puzzle & Dragons etc.

Low-end, Domestic PhonesLead to Device Fragmentations

Smartphone Installed Base Share by Brand(2016Q1)

0%

20%

40%

60%

80%

100%

Apple; 0.2346

Samsung; 0.1426

Xiaomi; 0.102Huawei; 0.0794

Bubugao; 0.0462

OPPO; 0.0453

Lenovo; 0.0293Coolpad; 0.0228

Meizu; 0.0219

Others; 0.2759

Price Range of Domestic Mobile Phones(2016Q1)

Unit: USD

23%

28%

39%

10%

Above $480$320-$480$160-$320Below $160

Android Game Device by Resolution(2016Q1)

0%

20%

40%

60%

80%

100%

1920*1080, 16%

1280*720, 26%

960*540, 8%

854*480, 13%

800*480, 10%

1080*1776, 5%

Others, 21%

Source: ZDC, Talking Data

Convoluted Distribution Channels

APP Stores

Pre-installation

Mobile Ads

Portal & Community

Lack of One-Stop Payment Gateway

SMSVirtual cur-rency

Pre-paid cards

E-Banking

Win with Tencent

Key Capabilities in Mobile Game Publishing

Tailored Operation Strategy

Coverage of Vast User

Base

Multidimensional, Social Graph

Based Marketing

Social Graph Improves Game Performances

Mobile Game Platform with Vast User Base

Premier Platform• Mainstream premier games

for the general public

MyApp Platform• Rich game portfolio for all

types of mobile users

MAU: 658 Million MAU: 762 Million(2016Q1)

Peak Daily Distribution: 145 Million

Multidimensional, Social Graph BasedMarketing/Promotions

Promotions Based on Social Graphs

Tencent SocialNetwork Users

Social Promotions

SNS/ Ranking

Invitations/ Forwards C to C Sharing

Game Center

Enter the Game

Marketing and Promotions

Celebrity Tie-ins

Theme Songs (MV)

Transmedia Promotions

Official Website

WeChat/ Mobile QQ

Official Accounts

Tencent Games Arena

Tailored Operation Strategy

Casual Games with High DAU

Blockbuster

Release

High DAU

Casual

Game

Midcore Mobile Games: Controlled Release

Player Portrai

t

Player Pre-

registration

Core Players

Periphera

l Players

General Players

8 weeks before OBT

Steady operations

4 weeks before OBT

OBT 1 week after OBT

3 weeks after OBT

Future Strategy

Next Steps for PC Games

• Maintain leading position in each genre

• License games from all over the world

• Explore innovative gameplays

Together, We Can Make Wonders!

Thank You