Tencent’s founder and CEO Pony Ma has warned employees that any part of the business could be shut down if it underperforms, adding that short video is key to the tech giant’s future. Ma made the remarks at a Dec. 15 internal staff meeting held online. Part of his speech was first reported by the Chinese news outlet Jiemian on Thursday.
Why it matters: Focusing on profitability has become even more important as Tencent’s core revenue streams in advertising and gaming have been hit by the macroeconomic slowdown and Chinese regulators’ tightening of gaming limits for young people. Tencent’s billionaire co-founder insisted the company should make cost-cutting a long-term habit, a clear bellwether for current sentiment in China’s tech sector.
Details: Pony Ma, who rarely expresses frustration at internal meetings, was unrelenting in his criticism of some of the company’s best-known and established units, such as Tencent News, according to Jiemian’s report. He also emphasized that Tencent should continue to focus on its core businesses while making short videos its new priority.
- For Tencent News, Ma stated that if the business couldn’t be self-sustaining, “there would not be much time left for them.” Ma did note however that the unit had begun to turn around in October after he made a “high demand” regarding profitability to Jonathan He, the new Tencent News head, who replaced Wang Shimu in May.
- Ma indicated that he expects Chinese regulators to continue issuing limited numbers of video game licenses, asking the firm’s gaming unit to focus on making high-quality games and “not to waste any chance of getting a license.”
- According to Jiemian’s report, Ma told employees that he regards WeChat’s short video channel as “the hope of the whole company”. He said Tencent will incorporate e-commerce features into its short video channels in the near future. He also said that the rapid development of short video in recent years is forcing the company to adjust its investment strategy for longer-length videos.
- Ma reportedly went on to turn his attention to what he described as the “corruption” faced by the internet company, labelling the situation as “shocking”. Tencent fired nearly 70 employees in 2021 over claims of commercial bribery and embezzlement, local media outlet Yicai reported earlier this year. Among the 70, more than a dozen were referred to the authorities for suspected criminal activity.
Context: In the April-June period this year, Tencent posted its first quarterly revenue decline since it went public in 2004, with revenue falling another 2% year-on-year the following quarter. Tencent’s core gaming revenue and revenue from its online advertising business both recorded year-on-year declines in the first three quarters of 2022, hit by China’s economic slowdown and ongoing regulatory scrutiny.
- Ma’s remarks followed another round of layoffs at the company in November, with Reuters reporting the layoff affected Tencent’s video streaming, gaming, and cloud businesses. The tech giant undertook multiple job cuts earlier this year, with Tencent’s earnings showing that it had 108,836 employees by the end of September, 6.3% lower than in the first quarter of this year.
- Tencent has shut down at least 16 products in 2022, including digital collectible platform Huanhe, video player QQ Player (which had run since 2008), and free WiFi software Tencent WiFi-Manager. It also cut 29 games, four of which have been online for more than a decade, according to local media outlet Times Finance (in Chinese).