While Tencent’s core business is struggling, the Chinese giant is trying to find a second wind by leveraging the cloud. New products, intended for foreign markets, will be launched in the coming months.
Tencent puts the package on the cloud
On Thursday, December 1, Tencent held an event to announce the launch of new cloud-related products. The opportunity for Tencent to also present a new suite of audio and video products based on cloud computing. The company must do faced with a significant slowdown in its activity in the field of video games. This initiative shows that the Chinese giant has become aware of the need to find new sources of growth abroad.
Like most Chinese technology companies, Tencent is facing several constraining phenomena: the zero Covid-19 policy imposed by Beijing and the increasingly strict regulatory environment imposed by the government. The owner of WeChat suffered particularly from the government gambling restrictions. Last year, Beijing introduced rules that limit the time people under the age of 18 can spend playing video games to three hours a week.
Regulators also have frozen game approvals for several months, meaning companies like Tencent or NetEase (a direct competitor) were unable to launch or monetize new titles. There are, however, some signs that the government could ease the pressure on the video game market. That didn’t stop Tencent to feel the effects. In China, gaming revenue fell 7% in the third quarter from a year earlier.
This market represents the second revenue driver for Tencent. The current slowdown therefore represents a real threat for the Chinese giant. The Shenzhen firm therefore considers the cloud as a new way of growth. A way to find new sources of income abroad. A model validated by Alibaba, which has used its brands AliExpress and Lazada to develop abroad. Companies such as BMW are already working with some of Tencent’s cloud products.