In the second quarter, the company's revenue was 134 billion yuan, a year-on-year decline of 3.2%; Non-IFRS's net profit was 28.139 billion yuan, a year-on-year decrease of 17.2%. The decline narrowed for two consecutive quarters.
When will Tencent return to the growth track?
01
Financial Report Interpretation
Games are weak and advertising declines
Tencent's revenue in Q2 2022 was 134.034 billion yuan, a decrease of 3% from 138.259 billion yuan in the same period last year and 1% from 135.47 billion yuan in the previous quarter.
Tencent has three main businesses, value-added services, online advertising, financial technology and enterprise services , accounting for 52%, 17%, and 30% of the same period last year to 53%, 14%, and 32% of the current one.
Tencent's value-added service business revenue in the second quarter of 2022 was 71.7 billion , maintaining overall stability over the same period last year.
The most core revenue in the value-added service business is game revenue. Tencent’s Q2 game revenue was 42.5 billion , down 3% from 43.6 billion yuan in the previous quarter and 1% from 43 billion yuan in the same period last year.
The domestic macroeconomic growth rate caused by the new crown epidemic has slowed down overall, mass consumption willingness has declined, and the market is sluggish. In the second quarter, Tencent's international game revenue was 10.7 billion yuan, down 1% year-on-year; while the local market was similar to this, coupled with the reduction in the number of large-scale game releases and measures to protect minors, Tencent's local game revenue was 31.8 billion yuan, down 1% year-on-year.
Social network revenue is 29.2 billion , up 1%, slightly higher than the previous estimate of 29.02 billion. Among them, Tencent's video account live broadcast services and digital content ordering services increased, while music live broadcasts and game live broadcasts decreased.
online advertising business , advertising demand is still very weak under the influence of the epidemic and economic headwinds. Tencent's online advertising continues to be affected by Internet services, education and gold. In the second quarter, the revenue of in the business sector was 18.638 billion , down 18.4% year-on-year from 22.83 billion 0. Tencent said that the advertising business was hit hard in April and May, and was partially offset by the advertising revenue brought by the merger of Sogou. In terms of financial technology and enterprise services, the sector's revenue in the second quarter was 42.208 billion , accounting for 32%, becoming an important pillar of performance. However, under the impact of the epidemic, the sector's revenue growth slowed to 0.7%, and the high growth of the past quickly fell from the altar. In terms of operating data of
, the financial report shows that in the second quarter, WeChat's monthly active users increased to 1.299 billion, a year-on-year increase of 3.8%; the number of monthly active accounts of QQ mobile terminals was 569 million, a year-on-year decrease of 3.8%. In addition, during the reporting period, the number of registered accounts of Tencent paid value-added services was 235 million, an increase of 2.3% year-on-year; the number of paid members of Tencent Video reached 122 million, and the number of paid members of Music reached 83 million.
02
Cost reduction and efficiency enhancement
Video number takes on the big responsibility
Games and advertising are Tencent’s two big cash bulls. In the current environment, the two major cash bulls performed weakly. Reducing costs and increasing efficiency have become the keywords of Tencent's initiative.
In the second quarter, Tencent voluntarily withdrew from non-core businesses, tightened marketing expenses, and reduced operating expenses. achieved month-on-month growth in profits of non-international financial reporting standards under revenue pressure.
data shows that nearly 10 products of Tencent have stopped operating within 4 months this year, including QQtang, Xiaoe Pinpin, Sogou Map, Penguin Esports, etc.
In addition, Tencent is currently implementing cost control measures, and subsequent costs still have room for further decline. Previously, has optimized the number of people and salary . It is reported that Tencent disclosed that the number of employees in the first quarter report was 116,200, while as of the end of the second quarter, the total number of employees in Tencent dropped to 110,700, an overall decrease of more than 5,500.
Tencent’s series of cost reduction effects were immediate: in the second quarter, Tencent’s sales expenses fell to 7.9 billion yuan, a year-on-year contraction of 21%, and a further decline of 2.5% month-on-month.
So, where is the performance of the efficiency enhancement?
In the second quarter, the video number related data was disclosed:
Video number user usage time exceeded 80% of the total user usage time of Moments;
Video number total video playback volume increased by more than 200% year-on-year, and video playback volume based on artificial intelligence recommendations increased by more than 400% year-on-year
Daily active creators and daily average video upload volume increased by more than 100% year-on-year
From the user usage time and the growth rate of playback volume, it is not difficult to see the "money" situation of the development of video number.
Regarding the monetization of video accounts, the company stated that the entire placement is still in the process of continuous optimization and re-optimization. It is expected that the advertising load of video accounts will inevitably exceed that of friends circles, and the advertising revenue growth rate of video accounts will also be higher than that of friends circle advertisements in the future, and the video account advertising bidding system will be launched soon.
Regarding the advertising revenue space of video accounts, Tencent said that the current time users spend on video accounts is about 80% of that in the circle of friends, and this proportion is still rising rapidly. Currently, the eCPM (revenue of Thousands of Display) on the video account may be slightly lower than that of Moments, but the advertising intensity will be higher. Therefore, the revenue potential spent per minute will be higher.
In addition, compared with existing short video services, users currently spend less time on video accounts, but CPM (paid for thousands of impressions) can already compete with existing services on the market, or be better than those existing services .
In addition to advertising business, e-commerce live broadcast is a potential opportunity for video accounts , but in terms of stages, it takes time to cultivate these opportunities. From short videos to live streaming, it is necessary to establish users' habits about streaming media. Once this habit is established, the advertising system and subsequent commercial live broadcasts and e-commerce transactions are a natural thing.
03
reduces Meituan?
investment turns to hard technology
On the conference call, Tencent will also respond to rumors that it will sell Meituan: 's news reports on the sale of Meituan shares are not accurate.
The day before the financial report was released, some media said that Tencent would sell most of its Meituan shares. Affected by this rumor, Meituan's stock price once fell by more than 10%.
A rumor has caused an uproar because Tencent has reduced its holdings in in the past year by . Especially after reducing its holdings in JD.com last year, many people speculated that the next one is Meituan, Pinduoduo or Kuaishou.
Source: Hedgehog Commune
Tencent reduced its holdings in JD.com because it was not optimistic about them? Of course not. You should know that JD.com’s e-commerce business model based on its own warehousing and logistics has become increasingly mature.
New Fortune Magazine sorted out an investment map of Alibaba and Tencent at the end of 2020. According to statistics from Xin Fortune at that time, Tencent invested nearly 1/10 of the 586 unicorn companies in , as high as 52, second only to Sequoia Capital ; Tencent ranked as many as 41 listed companies with the top ten shareholders, and the total market value of these listed companies is as high as 5.4 trillion yuan, exceeding Tencent’s own market value. The dream of “creating another Tencent” has been realized beyond expectations.
At the end of 2020, the Political Bureau of the Central Committee proposed for the first time "preventing disorderly expansion of capital" . Subsequently, anti-monopoly regulatory measures were introduced one after another, and the merger of Tencent's Huya and Douyu was also stopped.
Against the backdrop of "double anti-double" (anti-monopoly and anti-capital unlimited expansion), Tencent is constantly shrinking its tentacles in the field of Internet platforms. Tencent, which has a history of reducing its holdings in JD.com, seems to be expected to reduce its holdings in Meituan at this time.
Now the market's investment in the new economy of the Internet and platform has weakened, and Tencent has quietly changed its investment style - starting to invest funds and resources in the hard technology field that conforms to China's policy direction.
According to statistics, Tencent's new investments are all-encompassing, including Moore Thread, the semiconductor company "Yunbao Intelligence", the perovskite solar module supplier "Xinxin Optoelectronics", the R&D and manufacturer of new energy storage devices and PACK integrated system "Juwan Technology Research"; Tencent has also invested in a number of biotechnology companies, including biopharmaceutical company Huayi Lejian, intelligent medical company Ruixin Intelligent and drug R&D Jimu Bio.
Previously, Tencent was building an investment empire: strategic investment but not controlling shares, and taking advantage of Tencent's advantage of having the largest social platform traffic in China to "empower" the invested companies. Nowadays, the path of traffic supporting allies is no longer possible in hard technology investment, and Tencent needs to adapt to new investment cooperation methods.
