Some time ago, Ma wrote that Tencent’s revenue and profit growth had slowed down. He also believed that it could shift gears to create higher-quality development and gradually build a complete system including servers, operating systems, chips, SaaS, etc. Self-research system
Tencent’s changes are a good thing, but as the third major organizational adjustment in history, I feel it will be more difficult than the previous two changes. First of all, the time for change came a little late. Competition in the entire industry has been very fierce, and the first-mover advantage has been missed.
Secondly, compared to other large factories, Goose Factory’s new capability model still requires more tutoring classes, and the threshold for what it wants to do is not low, and the company needs to patiently climb uphill and fill in the pits. Therefore, Tencent is now in trouble, and it is still unknown whether it can continue to maintain its advantage in the future.
Tencent’s challenge of shifting gears
The difficulties Tencent faces are not just in research and development. In its recent financial report, Tencent’s revenue not only stopped growing, but its net profit also declined. The financial report shows that Tencent achieved revenue of 135.471 billion yuan in the first quarter, which was flat year-on-year and down 6% month-on-month; net profit was 23.413 billion yuan, down 51% year-on-year and 75% month-on-month.
Under non-IFRS, net profit was 25.545 billion yuan, a year-on-year decrease of 23% and a month-on-month increase of 3%. In fact, after so many years of sustained rapid growth, it is not surprising that Tencent’s net profit fell sharply in the first quarter of this year. Previously, Tencent focused on ToC business, including the mobile game "Honor of Kings" and WeChat.
However, as the dividends of the mobile Internet recede, if you want to continue the original business model, you must further expand overseas markets to seek rapid growth in market share and vitality, or increase research and development on innovative products. intensity. In the era of digital economy, ToB business has become a key factor in the breakthrough growth of Internet platforms, and Tencent needs to adjust its original business model.
If it really wants to complete its own research on chips, operating systems, servers, and SaaS, Tencent’s R&D expenses will undoubtedly be higher than Huawei’s. However, the current R&D expenses of Alibaba and Tencent cannot keep up with Huawei.
In the past ten years, Huawei has invested more than 720 billion yuan in research and development. As of the end of 2020, Huawei has more than 100,000 valid patents worldwide, more than 90% of which are invention patents.
Whether it is 5G network or semiconductor chips, they have already achieved global leadership. This technological gap cannot be bridged in a short time.
Alibaba has built its own Alibaba Cloud, database, and risc-v chip, while Tencent basically started from scratch.
Fortunately, Tencent's R&D expenses and team are constantly improving.
It is understood that Tencent’s R&D investment will reach 51.88 billion yuan in 2021, twice as much as in 2018. The number of R&D personnel increased by 41% year-on-year, and the R&D team continued to grow. More than 6,000 new R&D projects were added, an increase of 51% compared with 2020.
How does Tencent change gears?
With the peak of domestic Internet traffic, going overseas has become one of the key words for major Internet companies, and Tencent is no exception.
In order to change the current situation, we must go overseas, create profits, and feed back domestic technology research and development. The sooner we complete offshore business, the more we can seize the right to speak in the industry.
In Tencent’s financial report, international market revenue has become an important part of the game business. Last year, Tencent’s game revenue from the international market accounted for 26%. In the first quarter of this year, this revenue increased by 4% year-on-year to 10.6 billion yuan.
In addition to accelerating overseas expansion, improving the self-research ecosystem is also a necessary process for Tencent to change gears.
In terms of chips, for the three major scenarios of AI computing, video processing, and high-performance networks, Tencent has independently developed AI inference chip Zixiao, video encoding and decoding chip Canghai, and smart network card chip Lingxuan, with product performance in the industry lead.
At the same time, Tencent has in-depth cooperation with a number of chip companies to develop its own Xinghai server. Combined with the rich scenarios of cloud computing, the overall machine performance is the strongest in the industry and the reliability is doubled.
In the past year, Xinghai has rapidly iterated, supported all platforms and multiple scenarios, and grown 400 times in scale, becoming the fastest-growing server product in the industry.
At the same time, Tencent’s SaaS ecological layout continues to improve. In Qianfan’s ecosystem, nearly 100 SaaS vendors have GMV exceeding one million. Qianfan's enterprise application connector products are constantly iterated to help enterprises break through application barriers and serve many customers in industry, education, retail and other fields.
If it really does self-research, Tencent will have a ticket for the next ten years. If not, Tencent will also face great difficulties. It can also be seen from here that it can sit back and relax without more than one billion users.
The direction against the wind is more suitable for flying. Tencent, which shifts gears faster, has a very solid foundation. As for whether the change can be successful, this question should be left to time.