After nearly 20 years of rapid progress, the Internet that has been speeding all the way is stepping on the brakes and decelerating gears: Tencent's net profit has declined, the growth of giants such as Ali and Byte has stalled, and the big factories have intensively adjusted their organizational structures while also squeezing out the rapid expansion of the "bubble".
But depth adjustment does not equal winter. The blind expansion of Internet manufacturers from the industry to the contraction of business lines is also the process of the industry returning from fanaticism to calm. Industry insiders believe that the return of the Internet to rational development will become the main tone of the next period of time.
Internet giants say goodbye to high growth
Gone are the good days of internet giants "lying down and making money". Tencent's third-quarter financial report shows that Tencent's revenue in the third quarter was 142.4 billion yuan, an increase of 13% year-on-year; the net profit (Non-IFRS) was 31.75 billion yuan, down 2% year-on-year, which was the first decline in Tencent's net profit in 10 years.
Under regulatory requirements, the proportion of domestic minors in Tencent Games has dropped to a record low. In September this year, Tencent's proportion of minors' game turnover fell to 1.1%, compared with 4.8% in the same period last year; the proportion of minors' game time fell to 0.7%, compared with 6.4% in the same period last year. As Tencent's "printing machine", Tencent's mobile game business revenue in the third quarter increased by 9% year-on-year, and the growth rate has slowed down for three consecutive quarters this year. The growth rate of online advertising business also showed weakness, with revenue in the third quarter increasing by 5% year-on-year to 22.5 billion yuan.
In mid-November, Alibaba released its fiscal second quarter of fiscal 2022. According to the financial report, Alibaba's revenue in the second fiscal quarter was 200.69 billion yuan, and the market estimated 206.17 billion yuan. It is worth noting that the "customer management" revenue under Ali's "China Retail Business" segment increased by 3% year-on-year, compared with 14% in the previous quarter. Alibaba said that the main reason is from the slowdown in market conditions, especially the slowdown in GMV in the apparel accessories category, and the increase in participants in the domestic e-commerce market.
The transcripts handed over by Baidu, JD.com, ByteDance and other major manufacturers also reflect the end of the overall high-growth era of the Internet: Baidu's operating profit in the third quarter was 2.308 billion yuan, a year-on-year decrease of 63%; JD.com's net profit in the third quarter was 2.807 billion yuan, turning from profit to loss; ByteDance's commercial product department disclosed that its domestic advertising revenue had stopped growing in the past six months, which was the first time since the commercialization began in 2013.
Large factory shrinkage adjustment "squeeze foam"
Behind the slowdown in growth, Internet giants are also intensively adjusting their organizational structures. On December 6, Daniel Zhang issued an internal letter announcing Alibaba's latest round of organizational restructuring and the establishment of a "China Digital Business" section, including Taobao, Tmall, Taocaicai, Taote and 1688, which were managed by Alibaba veteran Dai Shan. Jiang Fan, who was originally in charge of Taobao Tmall, was transferred to the "overseas digital business sector", giving up the management of the core business of e-commerce.
Daniel Zhang said in an internal letter that this is not just a simple personnel adjustment, but a big change in Alibaba's production relations. "Face the future with a clearer strategic blueprint and a more agile organization in every area of the business and truly create long-term value."
Similar interdepartmental business splits and integrations have also appeared in the organizational structure adjustments of JD.com, Xiaomi, and Meituan in the past month. Informed sources close to Jingdong revealed to reporters that recently, Jingxi, which mainly attacked the sinking market, was directly upgraded from the business department under the original retail group to the Jingxi business group, and the new person in charge directly reported to Liu Qiangdong himself. "Jingxi is the tentacle of JD.com's sinking, and Liu Qiangdong said that next year will take winning the sinking market as the goal and find new stable growth points."
Does this mean that the Internet has entered a new round of winter? Pan Helin, executive dean of the Digital Economy Research Institute of Zhongnan University of Economics and Law, said: "The optimization of the internal structure has become a foregone conclusion, but from the perspective of long-term sustainability, although there are pains, it can make the entire industry go a long way. From the perspective of the capital market, Internet companies still maintain a relatively strong level of profitability. There is a world of difference between optimized layoffs and passive layoffs in the business, and there is no need to worry too much. ”
Rationality develops into the main tone of the future
The reporter noted that all the internet factories have recruited soldiers with high salaries on a large scale. According to Alibaba Group, as of March 31, 2019, 2020 and March 2021, alibaba group had a total of 101,900, 117,600 and 251,400 full-time employees, respectively. As of September 30, 2021, Tencent had a total of 107,300 employees, compared to 77,500 in the same period last year. In June 2021, Meituan also announced that it plans to recruit 60,000 new people this year, expanding the total number of employees to 100,000, but back to the time of Meituan's 2018 listing, this number is only 46,000.
The direct impact of the employee surge is the rising cost of compensation. For example, Tencent's third-quarter financial report shows that its general and administrative expenses were 23.862 billion yuan, an increase of 38.82% year-on-year, and the total compensation cost was 25.963 billion yuan, compared with 17.703 billion yuan in the same period last year, an increase of 46.7% year-on-year.
"When enterprises are expanding sharply, they will think of 'grabbing' people as soon as possible and driving business growth, often 'turnips are fast and do not wash mud', neither considering long-term labor costs, nor fully assessing some employees." Wang Chao, founder of Wenyuan Think Tank, said that as the overall development of the Internet returned from fanaticism to calmness, Internet manufacturers also began to reduce costs and increase efficiency, make more flexible adjustments, and cut down some business sectors according to policy orientation.
In Pan and Lin's view, with the tightening of data and information legislation, anti-monopoly and other supervision, Internet companies have cut off some business lines, but they are also adding new departments in data security and sustainable development. "As the Internet enters the mature stage of the industry, the profit model of traffic expansion in the past is not sustainable, and returning to the main business and rational development have become the main tone of industry development."
"There are views advocating that the Internet will enter the winter overnight, but this is actually an adjustment that the industry must make on the road of strengthening effective supervision and preventing the barbaric growth of capital in accordance with the law, and we must treat it objectively and have basic confidence." Wang Chao said that in the future, Internet manufacturers will no longer blindly maintain net profits at a very high level, but pay more attention to the third distribution and common prosperity, take the initiative to assume social responsibility, and build a fairer business competition environment with small and medium-sized enterprises.
Image source: Tencent
Source Beijing Daily Client | Reporter Yuan Lu
Edited by Yuan Lu
Process Editor Wu Yue
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