Tencent Holdings Ltd (OTCPK:TCEHY) (OTCPK:TCTZF) is harnessing the power of AI to shake up the digital advertising space in a big way.

In an exclusive interview with Benzinga, Derek Yan, senior investment strategist at KraneShares, said that the Chinese tech giant is positioning itself to maintain a competitive edge and sustain growth in the rapidly evolving digital landscape.

Tencent's AI Initiatives To Supercharge Marketing Efforts

"Tencent is leveraging its proprietary AI models to enhance ad targeting precision and attribution tracking," says Yan. This has been a critical driver of Tencent's impressive advertising revenue growth, enabling advertisers to reach consumers more effectively and boost click-through rates.

In a space where precision is everything, Tencent's AI models are proving invaluable. But the company isn't stopping there. Yan highlights how Tencent is "equipping advertisers with generative AI tools that can dynamically create ad visuals tailored for various ad placements."

This capability allows advertisers to produce more engaging, customized ads on the fly, which has the potential to supercharge their marketing efforts and drive even more revenue.

How Tencent's TikTok Rival – WeChat Is Capitalizing On New Opportunities

Tencent's flagship platforms, particularly WeChat and its video account feature (a rival to ByteDance's Douyin and TikTok), still have "substantial untapped potential for further monetization," according to Yan.

Integrating AI technologies could unlock new opportunities to capitalize on this potential. In fact, Tencent's Executive Director and President, Martin Lau, mentioned in a recent earnings call that AI is expected to provide a near-term boost in ad revenue.

According to Yan, even a modest 10% increase in ad load within the WeChat and video account ecosystem could generate an additional RMB 10 billion (approx. $1.4 billion), most of which would go straight to profit.

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Tencent's Advertising Getting Stronger

With AI integration driving both operational efficiency and revenue growth, Tencent's advertising game is only getting stronger. The real question is whether Tencent can continue to outpace competitors and fully capitalize on AI's potential, or will rivals like Alibaba Group Holding Ltd (NYSE:BABA) (NYSE:BABAF) close the gap?

One thing's for sure—Tencent is betting big on AI to keep its digital dominance intact.

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