Slowing growth is no longer a problem, Tencent’s game business achieves stable growth

According to news on May 19, Tencent faces two major challenges: commercialization and slowing growth.

Projects such as the video account are regarded as representative of Tencent’s long-term business commercialization issues and may bring long-term potential risks. Although the number of users of video accounts has exceeded the 400 million mark and achieved amazing growth, it still faces many difficulties in commercialization. Compared with other platforms, the commercialization process of video accounts is relatively slow, and MCNs and experts in the market have a wait-and-see attitude towards business opportunities. The advertising revenue performance of video accounts is poor, far behind platforms of the same size such as Douyin and Kuaishou. Tencent has high expectations for video accounts, but commercialization still faces challenges.

However, in the recent first quarter financial report, Tencent did not encounter the problem of slowdown in growth, and important business areas including online advertising, games and financial services regained growth. The game business is particularly outstanding, reversing the trend of decline for four consecutive quarters, and domestic and foreign game business revenue increased by 6% and 25% respectively. This is due to the recovery of the game market and the relaxation of version number policies. Tencent plans to launch 18 new games this year and increase investment in overseas game markets. Overseas game revenue already accounts for 38% of Tencent’s game revenue. The growth of the gaming business has brought stable revenue to Tencent.

In addition, Tencent’s cloud services and enterprise services have also achieved growth and profit improvements. Tencent believes that the growth of cloud services is due to the increase in sales and technical service fee income from video account trading. Although enterprise services slowed during the market downturn, they have now returned to growth and become an important part of Tencent's revenue. On the other hand, Tencent has improved profits by reducing costs and adjusting its expense structure. Over the past year, Tencent has successfully reduced administrative expenses and selling expenses by controlling costs.

Although Tencent faces the challenges of commercialization and slowing growth, Tencent's core business still has a stable foundation, driven by the recovery of the market environment and business growth. Businesses such as Tencent's games, cloud services and enterprise services will continue to bring growth and profits to the company. However, Tencent needs to overcome the difficulties in commercializing video accounts to unleash greater business potential.

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