Internet giants deep adjustment return to rationality Giants shrink "squeeze bubbles"

After nearly 20 years of rapid progress, the Speeding Internet is stepping on the brakes and slowing down: 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 "bubble" generated by rapid expansion. But depth adjustment is not the same as winter. Industry insiders believe that the return of Internet manufacturers from blind expansion to business line contraction and return 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". According to the financial report, Tencent's revenue in the third quarter was 142.4 billion yuan, an increase of 13% year-on-year; net profit 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, in September this year, the proportion of Tencent's minors' game flow dropped to 1.1%, and the proportion of minors' game time dropped to 0.7%, both of which are record lows. 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 a fiscal second quarter performance report showing that the second fiscal quarter revenue 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 Commerce" segment increased by 3% year-on-year, compared with 14% in the previous quarter. Alibaba said that the main reason is the slowdown in the growth of the e-commerce market and the increase in participants.

Baidu, JD.com, ByteDance and other major manufacturers handed over the report card also reflects the end of the overall high-growth era of the Internet: Baidu's third-quarter performance operating profit of 2.308 billion yuan, a year-on-year decrease of 63%; JD.com's third-quarter net profit loss of 2.807 billion yuan, from profit to loss; ByteDance's commercial products department disclosed that its domestic advertising revenue has stopped growing in the past six months, the first time since the start of commercialization 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 Ali's latest round of organizational structure adjustments, and the establishment of a "China Digital Business" section was managed by Ali veteran Dai Shan. Jiang Fan, who was originally in charge of Taobao Tmall, was transferred to the "overseas digital business sector" and gave up the management of the core business of e-commerce.

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. Liu Qiangdong said internally that next year will win the sinking market as the goal, looking for 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, although there are pains, but 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. "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 can they fully assess employees." Wang Chao, founder of Wenyuan Think Tank, said that as the overall development of the Internet returned from fanaticism to calmness, Internet manufacturers have also begun to cut down some business sectors and reduce costs and increase efficiency.

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, and build a fairer business competition environment with small and medium-sized enterprises.

Source: Beijing Daily