On May 18, Tencent announced the first quarter financial report of 2022 as of March 31. This quarterly report card is unusual for Tencent, but it is expected. In the past five years at least, the outside world has been accustomed to the rapid growth of this Chinese Internet giant But in the past quarter, all indicators of Tencent's revenue have declined comprehensively. The growth rate of core game business revenue fell to single digits
(Sina Finance Hua Zijian)
Editor: Han Dapeng
Key points:
- Tencent's revenue data fell in the first quarter, and the only thing to achieve double-digit growth is to B business. In this quarter, Tencent's foreign investment was inactive, its recruitment strategy was conservative, and "adjustment" and "contraction" were the main melody of Tencent.
- In the short term, it may be difficult to see Tencent resume its previous rapid growth. The overall transformation to industrial Internet is an inevitable trend, but it can not be achieved overnight; As a social enterprise, Tencent is also bound to assume more social responsibilities.
Tencent can still make money, with a net profit of 23.4 billion yuan, down 51% year-on-year, and an adjusted net profit of 25.5 billion yuan. According to this calculation, Tencent's net profit this year is expected to be 100 billion yuan, still exceeding the vast majority of Chinese companies. But from the outside world, Tencent's decline is quite rare. Is it active or passive adjustment?
Tencent meat cutting adjustment
The slowdown of growth rate has been seen in the last two quarters of Tencent 2021, but such a comprehensive decline is rare in at least the last five years.
According to the financial report, Tencent's revenue in the first quarter was 135.5 billion yuan, basically flat year-on-year; Net profit fell 51% year-on-year to 23.4 billion yuan; Under non international financial reporting standards, the net profit was 25.5 billion yuan, a year-on-year decrease of 23%.
Specifically, in terms of business: the revenue from value-added services was 72.7 billion yuan, which remained stable compared with the same period last year. Among them, the game revenue in the local market was 33 billion yuan, a year-on-year decrease of 1%; The game revenue in the international market was 10.6 billion yuan, a year-on-year increase of 4%; Social network revenue was 29.1 billion yuan, a year-on-year increase of 1%. According to the merger, Tencent's original "cash cow" game business has hardly increased.
The revenue of online advertising business decreased by 18% year-on-year to 18 billion yuan. Among them, social and other advertising revenue decreased by 15% to 15.7 billion yuan; Media advertising revenue fell 30% to 2.3 billion yuan.
The income from financial technology and enterprise service business was 42.8 billion yuan, a year-on-year increase of 10%. This is Tencent's only business that achieved double-digit growth in the quarter, and to B's position within Tencent has been improved. The proportion of this business in Tencent's revenue increased to 32%; In the first quarter of 2019, the proportion was 25.5%.
In the first quarter, Tencent's capital expenditure was 7 billion yuan, a year-on-year decrease of 10%, which also means that Tencent's investment in the quarter was not active. However, in terms of R & D expenditure, Tencent increased its investment by 36%.
Affected by the overall contraction of business, Tencent's free cash flow in the first quarter was 15.2 billion yuan, a year-on-year decrease of 54%.
Among all the data, another noteworthy thing is that Tencent's recruitment shrank in the first quarter of this year. According to the financial report, the total number of employees of Tencent in the first quarter of 2021 was 116213. In comparison, in 2019, 2020 and 2021, the number of Tencent employees was 63000, 86000 and 113000 respectively.
According to this calculation, Tencent added only more than 3000 employees in the past first quarter. Converted into annual units, 12000 employees are expected to be added throughout the year. This is far less than the increase of 23000 and 27000 respectively in the previous two years.
"Meat cutting", "contraction" and "adjustment" became the key words of Tencent in the first quarter.
Tencent explained that in the performance pain period, Tencent is accelerating the integration of digital and real, increasing R & D investment, and upgrading from the pursuit of large-scale growth to the pursuit of high-quality growth. This adjustment mainly includes:
The revenue structure has changed from virtual to real, indicating that the financial technology and enterprise service sector representing the integration of digital and real has become the business with the fastest revenue growth, and the quarterly revenue of 42.8 billion yuan is closer to the revenue of 43.6 billion yuan of game business.
Tencent's active adjustment - in terms of personnel organization, Tencent controlled the growth scale of recruitment and completed the optimization of personnel structure by means of survival of the fittest; In terms of business, Tencent has determined to continue to invest in three strategic growth areas: enterprise software, wechat video number and games in the international market. Through continuous adjustment, Tencent optimized its cost structure.
Ma Huateng, chairman and CEO of Tencent, talked about these adjustments: "facing the challenges of the industry, the company has implemented cost control measures and adjusted some non core businesses, which will help to achieve a more optimized cost structure in the future."
Tencent is no stranger to today's situation. In 2018, Tencent's business was still maintaining stable growth, but Tencent also fell into a painful period when the "930 reform" began. Subsequently, Tencent once again entered the track of rapid growth.
But the question now is, when will Tencent return to the era of making a net profit of 600 million a day?
As a social enterprise, it is difficult to achieve high growth in the short term
It is undeniable that Tencent's self-regulation ability is quite strong. Even if it is considered to be in the "business pain period", it can make a net profit of about 250 million yuan per day, which is even higher than the net profit of most A-share listed companies in one year.
On May 16, Tencent released its first report on Tencent's sustainable social value. Ma Huateng and Liu Chiping, executive director and President of Tencent's board of directors, shared some views in this report, which vaguely shows the future development direction of Tencent.
"Tencent's revenue and profit growth has slowed down. We also believe that we can take this shift to create higher quality development, that is to focus on the origin centered on user value, scientific and technological innovation and social responsibility... To create greater value for the country and the times." Ma Huateng pointed out.
In 2021, he mentioned a new concept in "choice" - the Trinity development idea of CBS, that is, the main object of Internet services has developed from user (c) to industry (b) to society (s).
Liu Chiping pointed out that as a digital technology enterprise, Tencent will not stop pursuing the business success of lasting foundation. It will also stimulate the goodwill of users, everyone in the industry and society... And help the whole society create a healthier and sustainable future.
In their views, both of them are inseparable from "society". The implication may be that Tencent is more like a social enterprise than an Internet company:
Tencent has a huge user network. As of March 31, 2022, wechat and wechat had 1.29 billion monthly active accounts, and QQ mobile had 563.8 million monthly active accounts. Wechat helps users link with various services. The financial report shows that nucleic acid detection applets serve 700 million users, and an average of 200 million users use government services on applets every day.
Tencent has set a new high in the coverage of small and medium-sized businesses. Wechat links a large number of small, medium and micro merchants. At the wechat open class in 2022, the wechat payment team revealed that more than 100 million collection codes were issued to small and micro merchants; Tencent will also invest 10 billion yuan to help these small and micro businesses carry out digital upgrading.
Tencent is an indispensable link in youth protection. As the world's largest game company, Tencent's main revenue source of game business is the domestic market. Calculated by 2021, Tencent occupies more than 30% of the domestic market share.
Tencent is seeking higher participation in the digital transformation of the real economy. Tencent regards serving the real economy as the current important business focus. In the fields of government affairs, finance, education and transportation, Tencent and more than 9000 partners xiaoniai have formed more than 400 industry solutions.
The transformation from Internet to industrial Internet is actually more like Tencent's transformation from an "Internet company" to a "social enterprise", which also means that the simple pursuit of high income growth and profitability is not Tencent's primary goal at present. Tencent, which is in the throes of transformation, is also difficult to see its previous high-speed growth in the short term.