Chinese internet giant Tencent is reorganizing its business to place more emphasis on enterprise as it prepares for the future of technology and looks to alleviate the pressure on its under-fire consumer business.
The reorg, which Reuters reports is the company’s first shakeup for six years, was announced over the weekend — ahead of a holiday in China — and it comes at a challenging time. Tencent’s share price is down 33 percent from a record high in January, and the firm just experienced a rare quarterly profit drop largely on account of regulators freezing new game releases in China.
Gaming is where the firm is strongest — Honour of Kings over 200 million monthly players and is one of the top-grossing games ever, while Tencent has stakes in current blockbusters Fornite and PUBG — but a change in government regulation has prevented any new titles being released in China for months. Titles already in the market have also been affected. Under pressure from the government, Tencent was forced to acknowledge that some gamers are addicted and it has introduced systems to combat that — which now include a facial recognition pilot.
This structural change seems to be targeted at helping Tencent grow revenue beyond the consumer space, where it has seen tremendous success with WeChat, China’s top messaging app, perhaps its most successful product.
The change will see Tencent retain four units — ‘Corporate & Development,’ ‘Interactive Entertainment,’ ‘Technology Engineering’ and ‘Weixin’ (its WeChat business) — but add two new ones. Those will include ‘Platform & Content’ which will unite its digital services beyond WeChat, that includes its social networks, online media and content divisions.
The other new addition is ‘Cloud & Smart Industries,’ as the name implies that caters to cloud services, maps, security and other enterprise-led initiatives from the company. In addition, the firm’s advertising operations will be united in a single division which will sit under the corporate and development department.
Finally, Tencent is also putting a renewed focus on upcoming technology with a newly created ‘Technology Committee’ that’ll be tasked with looking at “cutting-edge technologies,” including AI, robotics, quantum research and more.
Chairman and CEO Pony Ma said in a statement that the changes mark “a new beginning” that’ll prepare Tencent for the next 20 years of operations:
It is a very important strategic upgrade as we step into the second stage of the Internet, the Industrial Internet era. In the first stage, we connected users to high quality services. In the second stage, we aspire to enable our partners in different industries to better connect with consumers via an expanding, open and connected ecosystem. As an Internet-based company focused on innovation, communications, and content, Tencent views technology as our core infrastructure. With the emergence of AI and 5G, we will use technology as our innovation engine, and to explore new connections between social networks and content. We need to not only focus on our existing businesses, but even more so seek to position ourselves for the long-term future. Together with this strategic upgrade, we will reinforce our investment in cutting-edge technologies.
