Amid gaming slowdown, Tencent bets on overseas cloud growth

Tencent faces a number of headwinds in 2022, including a Covid-induced economic slowdown in China and a tougher gaming market.

Bobby Yeh | Reuters

Tencent The company said it would launch new cloud computing products aimed at overseas markets to find new avenues for growth amid a slowdown in its core online video game business.

On Thursday, Tencent will hold a cloud product launch event specifically for markets outside China, including a suite of cloud-based audio and video products.

The move signals a need for Tencent to find new sources of growth overseas as China’s economy slows. In addition to the ongoing pressure from the COVID-19 pandemic, Chinese technology companies are also facing a stricter domestic regulatory environment.

Tighter regulation of online games has hurt Tencent in particular. Last year, Beijing introduced rules to reduce online gaming for those under 18 to a maximum of three hours a week. Regulators have also frozen game approvals for several months, meaning companies such as Tencent and rival NetEase have been unable to launch and profit from new games.

While there are signs that the gaming crackdown may now be over, Tencent is already feeling the effects. Domestic online game revenue in the third quarter fell 7% year-on-year.

Tencent’s second-biggest source of revenue is online gaming, so a slowdown in that segment weighed on overall growth.

The Shenzhen-based company sees cloud computing as an area where it can fill the gap. Tencent’s fintech and business services unit, which includes its cloud computing unit, grew 4% year-over-year in the third quarter.

Chinese tech giants are not only looking for new business units to grow, but also new sources of revenue overseas.e-commerce company alibaba For example, using its AliExpress and Lazada brands to expand overseas, while Tencent has achieved great success with its online games.

Now, Tencent is pinning its hopes on cloud computing. Wednesday’s announcement focuses on audio and video products, such as e-commerce or live streaming of online meetings.

These products are aimed at companies that need such services but don’t necessarily need to maintain infrastructure (such as servers) or build these capabilities themselves.

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Tencent’s strategy may focus on trying to sign up global companies operating in China, as well as Chinese companies expanding overseas. Companies such as BMW are already using some of Tencent’s cloud products.

If the Chinese company expands overseas, it will enter a very competitive cloud computing market dominated by US giants amazon and Microsoft. Compared with rival Alibaba, which has expanded outside of China in the past few years, Tencent is relatively late to internationalize in the field of cloud computing. Now, Alibaba is one of the five largest cloud computing companies in the world.

Tencent, one of the world’s largest gaming companies and the owner of WeChat, China’s most popular messaging app with more than 1 billion users, focuses on audio and video products.

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