Tencent Holdings is stepping up efforts to earn money from WeChat's fast-growing video function, which is challenging popular short video platforms such as ByteDance's Douyin and Kuaishou Technology, as the Chinese internet giant seeks new ways to expand sales and profits.

On Thursday, the Shenzhen-based company launched a new e-commerce tool to create online stores on Channels - the short video and live-streaming service within multipurpose app WeChat- which streamlines the process for merchants to list products, sell and receive payments.

The announcement of the e-commerce tool comes after Tencent added video ads to its Channels feeds on Monday, which allow users to shop directly through an advert and share with friends on WeChat.

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"It's no surprise that Tencent is finally monetising Channels, as the company has pinned very high hopes on the product," said Zhang Yi, chief analyst with Guangzhou-based iiMedia Research. "Channels is a product with the biggest growth and potential for Tencent over the past five years, and it will have to be able to make money for Tencent and offset waning growth from its games and advertising businesses."

Tencent is speeding up its efforts to make money from Channels after reporting almost no revenue growth and a halving of its profits in the first quarter of 2022 amid macro headwinds and an uncertain regulatory environment. WeChat Channels is now expected to be a key catalyst for the company's profits in the second half of 2022, according to a research note issued this week by securities firm Shenwan Hongyuan Hong Kong.

WeChat, which has 1.29 billion monthly active users, now sees a big opportunity to grow its video and live-streaming functions. While the monetisation is still at an early stage for Channels, it is expected to bring in 37 billion yuan in advertising revenue for Tencent in 2023, according to a report by Citic Securities. The report estimates that the number of daily active users for Channels reached 500 million by the end of last year.

WeChat last month launched its own 618 online shopping festival via Channels for the first time, offering traffic incentives to woo merchants to sell through the app's live-streams. WeChat also signed up brands as sponsors of online concerts it streamed, featuring US luxury carmaker Lincoln in a recent Backstreet Boys show.