Are Chinese People Using QQ Less?

QQ, Tencent’s mega-popular instant messaging client, has been a staple of the internet in China for nearly a decade. Microsoft’s MSN also attracts a fair number of users, but no other IM client even comes close. Still, with the popularity of microblogging surging, pundits have been wondering whether QQ would see a slump in user activity.

Tencent’s Q2 financial reports offer an early indication that might be the case. Sina Tech is reporting that according to Tencent’s Q2 financials, QQ’s “most users online at the same time” has dropped for the first time since Tencent IPOed in 2004.

That statistic has traditionally been used as a frame of reference for QQ’s growth. In 2009, for example, it was rising by an average of 20 percent each quarter. But in 2010, it fell back to just 10 percent growth. Q2 2011 is the first time QQ has seen it fall.

There are other indications in Tencent’s report that the company, which is accustomed to rapid growth, may be facing significant setbacks. While the company raked in 2.3 billion RMB in profits this quarter, that was actually a 19 percent drop. And Tencent has also seen a significant decrease in available cashflow.

So what’s going on? It’s tough to be sure. The drop in QQ’s numbers might be a one-time problem; we’ll have to see if it persists next quarter. But if it isn’t a fluke it could certainly be the result of Chinese net users moving to other forms of communication, like microblogging. That would be bad news for Tencent, as they dominate the IM market it China but are currently a distant second to Sina Weibo in the microblogging field.

Financially, the company said in its earnings call that the drop in profits and cash flow is because Tencent is still in the early stages of expanding into new markets and platforms, including games, online video, and e-commerce.

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