When Tencent slimmed down: layoffs, loss reduction, and optimization of costs

Economic Observer reporter Ren Xiaoning reported from Beijing

The Internet's "drumming and passing flowers" style of large layoffs has been transmitted to Tencent. In March, a Tencent PCG (Platform and Content Business Group) engineer discovered that his colleagues behind his workstation had disappeared. An employee of a PCG division asked the headhunter about the 30% layoffs in his department and whether there were any new job opportunities. Douyin blogger Hongge told the Economic Observer that his friend who worked at Tencent's CSIG (Cloud and Smart Industry Business Group) was laid off and lost 6 months' salary. The reporter asked his friend if he could be interviewed, but his friend did not agree.

PCG and CSCG is Tencent's layoffs the hardest hit area, there are rumors that the proportion of layoffs is 10% to 30%, Tencent insiders told reporters that Tencent does not have the overall optimization of how much proportion, each business development situation is different, the situation is different. The relevant person in charge of Tencent responded to reporters that the total number of employees will continue to grow this year.

More than three years later, the two business groups began to lay off employees. Tencent's 2021 financial report released on March 23 mentioned the need to reduce Tencent Video's financial losses and improve the profit margins of cloud and other corporate services. He also mentioned that Tencent is adapting to the new environment, reducing costs and increasing efficiency, focusing on key strategic areas, and striving for long-term sustainable growth.

At the performance briefing on March 23, Tencent President Martin Lau also responded to the recent news of Tencent employee optimization. He said that at present, the Internet industry is encountering structural challenges and changes, and Tencent, as a participant, will also take the initiative to adjust, "We have also optimized the cost of loss-making businesses in order to maintain more healthy growth." ”

When layoffs are in progress

In early March, Yang Zi, who had already passed Tencent's final interview, turned from ecstasy to frustration when he received a call from Tencent HR saying that his onboarding process had been suspended because of the company's lock-in HC (staffing). "In fact, there is no drama." Because no one can know how long Tencent will stop recruiting, YangZi re-flipped out his resume and switched to other companies.

Tencent is the company that Yangzi wants to go to the most this year, and there is no one. He has many friends at Tencent and found that as long as they enter Tencent, even if the job position is not suitable, they can participate in the living water program, and the success rate of living water is very high. In the current employment environment, Tencent is a more stable and stable choice. The Living Water Plan is Tencent's internal talent flow mechanism, when the employee's department lays off employees or wants to take the initiative to leave the department, you can first look for opportunities in other departments of Tencent, if the other party agrees to accept, you can transfer jobs.

However, in 2022, Tencent also began to lay off employees and suspended recruitment plans. A Tencent PCG engineer told reporters that his project center has 3 layoff indicators, and the project center has a total of 40 people. Before receiving the reporter's call, Internet headhunter Wang Xiao just ended chatting with an employee of a tencent PCG division, who said that their business department had a 30% layoff ratio, but the specific layoffs were not yet known. There is also a PCG information platform and service line employee who is going through the resignation procedures, because he has not officially left, and he said that he cannot disclose more information to reporters now.

Wang Xiao recently communicated with many PCG employees, he told reporters that the wind of layoffs has been released since the end of last year, PCG internal panic, he received a lot of inquiries, especially some with two or three million annual salaries of the middle level, worried that they are very expensive, and can not contribute enough value, was laid off by the company.

"In fact, before the PCG would lay off a batch of people every year, but I had never heard of such a large-scale situation as this one." Wang Xiao said.

Douyin blogger Hongge posted a short video of his Tencent friend who had been laid off for 5 years and received more than 6,000 comments. He told reporters that his friend worked in Tencent's security department and lost half a year's salary after being laid off. The reporter asked if he could interview, but his friend said he was in a bad mood and refused the interview.

The security department belongs to CSCG, which is also the hardest hit area for Tencent's recent layoffs. A product manager at CSIG told reporters that he had not received news of specific layoff figures, and the company continued to speak according to performance, but the economic environment may not be very good, and the implementation is more stringent.

Every spring, Internet companies generally have personnel optimization plans, lay off a group of old people with poor performance, and recruit a group of fresh new people. What's special about this year is that many companies only lay off people and don't hire people anymore.

An Internet headhunter told reporters that most of the recent Internet manufacturers have tightened HC. According to his observation, only Little Red Book and ByteDance have not stopped recruiting, but most of the positions are only interviewed and not entered, and there is no follow-up in the face.

Several Tencent insiders confirmed the news of the lock HC to reporters. An employee of a Tencent subsidiary told reporters that its company had also stopped recruiting. According to the conventional actions of large factories in the past, locking HC is a pre-action of tissue optimization, and after the general adjustment is completed, HC will be gradually restored.

According to the "Internet Departing Talent Report" released by Lagou Recruitment, at the end of 2021, the trend of personnel optimization in the Internet industry has intensified. Since December last year, the number of users who are in the state of departure on the Lagou recruitment platform has been increasing, and the number of departures exceeded 2.76 million in March, an increase of 2.1% compared with the same period last year.

Why them

"CSIG layoffs are actually very necessary, and some people should lay off early." When it comes to Tencent Cloud, Zhang Guo complains a lot.

Zhang Guo is the founder of Volume Tide Technology, the company mainly does programming classes and big data projects in the university market, since 2016, he has used Tencent Cloud's services, contacted more than half of Tencent Cloud's product team, used most of its mainstream products, and witnessed the process of CSCG from small to large, and the surge in personnel. According to his feelings, after the number of employees increased, there was a phenomenon of people being overwhelmed and grabbing resources internally. "The organization is getting more and more bloated, and the combat effectiveness has not increased but weakened."

Not long ago, Zhang Guo launched a new APP, found a problem in the on-line process, so he communicated with the Tencent cloud team, the after-sales service could not be solved, found the product team, the product development was not solved, and then found the architect, simple small problems back and forth for a week. There are also several times, in the process of use found that the official SDK function and document function is not easy to use, Zhang Guo communicated with the product team, waited for several months did not change, and finally had to let his company's people modify. "We have a developer business, we are really anxious to be able to go on our own, what if the company that does not have the ability to build wheels encounters similar problems?" This work should be done officially. ”

CSIG was founded on September 30, 2018, when Tencent switched to 2B, and CSIG is a business that carries the dream of transformation. Tencent's 2021 annual report mentioned that cost optimization actions have been carried out for loss-making businesses such as cloud and long video in order to open source and reduce expenditure and maintain more healthy growth. "The biggest problem with CSIG is not making money." A 10-year-old employee of Tencent told reporters that the company's main investment in recent years has been in CSIG, and other departments, especially the business department that makes money, will have opinions on CSIG. Another Tencent employee also told reporters that this layoff is mainly aimed at departments that have lost more money.

Tencent has almost never released a separate financial data for Tencent Cloud in its earnings report. In September 2020, CITIC Securities had calculated that the gross profit margin of Tencent Cloud would remain negative from 2020 to 2022, at -14%, -7% and -7% respectively. As for what the actual data for 2020 and 2021 has passed, the reporter did not find authoritative information.

Martin Lau also mentioned at the performance briefing that the cloud business sector has losses. Because the investment in product development is very large, and the competition in the entire industry is also white-hot, the price competition is very fierce.

A cloud service entrepreneur told reporters that most of the domestic cloud manufacturers are losing money, "need long-term investment to continue to burn money, and now the peripheral environment is not good, it is estimated that the sense of distress of large factories has risen." ”

In March this year, it was reported that Tencent Cloud made some departments with product development capabilities bear their own profits and losses, and even all employees were burdened with sales performance assessment. A person from a top-ranked cloud service company told reporters that Tencent Cloud is mainly facing pressure from HUAWEI CLOUD this year. In different cloud service market reports, Tencent Cloud and HUAWEI CLOUD are competing for second place. According to the 2021 China Cloud Infrastructure Service Market Report released by Canalys on March 21, Chinese mainland cloud service providers ranked second in China with a market share of 18% and Tencent Cloud with a market share of 16%, ranking third. According to a report released by IDC in February this year, Tencent Cloud ranked second in the overall market size of China's public cloud services in Q3 last year, and HUAWEI CLOUD ranked third.

"In the field of cloud services, HUAWEI CLOUD bargains fiercely, in order to compete for customers, Tencent will sometimes be more aggressive, and even give it to customers for free." The above-mentioned cloud service company source said.

Zhang Guo has seen a price war of cloud service vendors, which shocked him, there is a microservice system project with a large traffic, the traffic is so large that Aliyun people feel that they can't do it after seeing it, and finally they are taken down by Tencent Cloud, but this single income is only 10,000 yuan, "According to normal indicators, this can be tens of millions or even hundreds of millions of projects, and their price war is exaggerated to this extent." ”

However, Zhang Guo also admitted that the main reason why he has been using Tencent Cloud is that Tencent Cloud is the cheapest, and at the same time, Tencent Cloud's service attitude is also better.

Compared with Tencent Cloud, the problems exposed by PCG are more prominent. "Half a year a minor key, a year a major key, still failed to tune out a good result." An employee of a tencent PCG division who complained with Wang Xiao said that the rotation of business group executives and middle cadres is like a sloppy flower, and each rotation will trigger a large wave of personnel and organizational structure changes. ”

Tencent established PCG in 2018 to integrate OMG (Online Media Business Group) and MIG (Mobile Internet Business Group) with the aim of emphasizing cooperation between them. In the end, this business group became the most complex business group of Tencent's business, including QQ, QQ Space, QQ Browser, Application Treasure, Tencent Video, Weishi, Tencent News, Tencent Weishi, Tencent Pictures, Tencent Animation, Daily Express and other businesses.

In an internal letter in January 2020, Ren Yuxin, Tencent's chief operating officer (COO) and PRESIDENT of PCG, who heads PCG, said that PCG shoulders the heavy responsibility of Tencent's exploration of the future development of digital content. From the current results, Tencent Video has lost money for 8 years, and QQ monthly active users have fallen from the peak of 899 million in 2016 to 552 million in 2021. Weishi is not as fast as fast as it is, vibrato, and the information flow business can't fight today's headlines. In Tencent's latest financial report, the online advertising sector with the largest revenue decline and the value-added service sector with a significant slowdown in growth are mainly PCG's business. Last Q4, Tencent's advertising revenue fell by 13% year-on-year.

Due to the complexity of the business, PCG has repeatedly changed managers and adjusted the organizational structure. In November 2019, Tencent's information flow service was unified as "Tencent Watch", connecting three information flow products: Daily Express, QQ Watch and QQ Browser. In April 2021, Tencent transferred Yao Xiaoguang, president of the Tianmei Studio Group who made "Glory of the King", to PCG and was in charge of QQ. Liang Zhu, the former head of QQ business, served as CEO of Tencent Music. On October 15, 2021, PCG established the "Information Platform and Service Line" to integrate QQ browser, highlights, search, free novels, documents, etc. On February 10 this year, the main part of Tencent Pictures will be adjusted from PCG to the Enterprise Development Business Group (CDG).

PCG is also a business group with more corruption in Tencent. Of the 22 typical cases involving job embezzlement and bribery reported by Tencent in February 2021, 14 were related to PCG (platform and content business groups), accounting for more than 60%. For the various problems existing in PCG, Tencent's internal employees are also helpless, a PCG employee told reporters that the Internet C-end traffic has peaked, PCG's business is indeed not easy to do, and after the 930 reform, PCG is Tencent's most staff BG, there has always been a problem of personnel redundancy.

Will Tencent get better again?

In 2018, Tencent fell into a trough, with its share price falling from its previous highest price of HK$473 to HK$250, and its market value was cut. On September 30 of that year, Tencent announced its transformation from 2C to 2B. Tencent then reached its peak, with a share price peaking at HK$750 per share on February 18, 2021.

In 2022, Tencent's stock price once again fell. On March 15 this year, the market even said that because Ofcent continued to fall: "Today the goose factory became a bird factory, because I was lost", "Tencent became fivecent, because half of it fell." ”

In 2018, Tencent was considered to have no dreams, and after the transformation, it was considered to have found a new direction. Now, the new business that was established at that time was laid off, and Tencent's transformation was in trouble?

Zhang Yi, CEO of Ai Media Consulting, does not believe that Tencent's transformation has failed. "If you didn't do this layout that year, these markets were robbed." If they are all robbed, Tencent will not have such a strong ecology to defend its own basic disk. He believes that the significance of Tencent Cloud is not only to expand new markets, but also to support and grow Tencent's ecological company.

Zhang Guo also does not think that Tencent failed to do the cloud, and looking back now, Tencent seized the window of opportunity at that time in 2018. For this layoff, he feels that the main reason is that the previous stalls were too big and the personnel expansion was too fast, but the product and business capabilities did not keep up. "In fact, they are also under a lot of pressure, and the needs of many large customers are very complex."

A CSIG employee told reporters that the layoffs were actually a good thing for CSCG. According to the reporter's understanding, around March this year, Tencent Cloud carried out the adjustment of the assessment mechanism, before, Tencent Cloud's sales assessment will be the general contract resale into full income, after the adjustment, only counted as the difference income. For example, if you buy 90 yuan and sell 100 yuan before, you will count 100 yuan as income, and after that, you will only count the difference of 10 yuan as income.

The above-mentioned cloud service entrepreneurs told reporters that general contract resale is common in the cloud market and is also a means to quickly improve the company's performance income. Now after Tencent adjusts the assessment, the pressure of CSIG performance appraisal has become greater, and in this case, the sales staff who have previously done resale will have redundancy. At the same time, this means that CSIG needs to focus more on its own business and improve performance through differentiation rather than resale.

Martin Lau said at the performance briefing that it would further optimize the health of the cloud business by promoting more standardized self-developed products, rather than investing a lot of resources for each customer to customize the cloud business for them. At the same time, in addition to large customers, waist customers, industry customers, and regional customers should also be covered. After this adjustment, he believes, "the growth rate may decline a little, but its loss situation will improve." ”

According to Tencent's latest financial report, Tencent Cloud's fintech and enterprise services sector has become Tencent's largest source of revenue, surpassing games. In the fourth quarter of 2021, the revenue of this segment increased by 25% year-on-year to 47.958 billion yuan. For more than three years, Tencent Cloud has operated 70 availability zones in 27 geographical regions around the world, supporting half of the newly released games in China, serving the most mainstream e-commerce platforms in China, and widely used in finance, education, medical care, retail, industry, construction, transportation, energy, radio and television.

The main revenue of the financial technology and enterprise services sector comes from financial technology, and tencent cloud has contributed much, tencent has not disclosed separately. Everbright Securities has made estimates of Tencent Cloud revenue in 2020, estimating that Tencent Cloud's revenue in 2020 will be 25.97 billion yuan, accounting for 5.3% of Tencent's total revenue that year, and it is expected to achieve a compound annual growth rate (CAGR) of 48% from 2018 to 2022.

Although there are more complaints about Tencent Cloud, Zhang Guo feels that Tencent Cloud still has a lot of room for growth, "Cloud services are still a good business, and foreign AWS has 80% gross profit." Now the domestic cloud vendors can not make a profit because they are in the early stages, in order to grab market share, there will be a price war. In another five or ten years, there is a great possibility of profitability. Because its own marginal cost is actually very low. ”

However, this stage of growth requires patience, "it depends on whether the capital market can wait." Zhang Guo said.

Wang Xiao has recommended employees to Tencent many times before, and he told reporters that Tencent's layoffs are closely related to the expansion of personnel in the previous two years. In December 2019, Tencent had 62,000 employees, and in December 2021, Tencent had 112,000 employees, adding 50,000 new people in two years. Among them, the number of people will increase by 27,000 in 2021. Wang Xiao told reporters that in the past few years, Tencent has recruited very few people, and the annual addition of only a few thousand people, compared with last year' personnel expansion speed is too fast.

Martin Lau also said at the performance briefing that Tencent's personnel growth last year was relatively large. "It's not just us, it's the whole industry. The previous operation mode of the entire industry is still a rapid growth, relatively barbaric growth, the competition is very fierce, so everyone must continue to add people, constantly raise marketing expenses, a variety of inputs. ”

Martin Lau also mentioned that Tencent will gradually transfer its employees from some relatively marginal businesses, which may need to be adjusted or reduced, to core businesses. In the process, we will continue to recruit some scientific and technological personnel and excellent graduates, but social recruitment will decline.

"There are very big changes in the Internet industry, and the industry is in a period of pain." Martin Lau said that when Tencent actively embraces changes and carries out a series of optimization actions, Tencent will be more robust and its business will be more healthy, and he is full of confidence in the future.

Although the stock price has been slashed, the current Tencent is still a company with considerable revenue. Last year's full-year revenue was 560.118 billion yuan, an increase of 16% year-on-year. At the market capitalization level, it is still the number one Internet company in China. The company has 1.27 billion WeChat users, holding the ace game, the basic disk is still solid, but now it faces a different environment than it was a few years ago.

In Zhang Yi's view, Tencent's current profit-making business is still very profitable, and the loss-making business is still very profitable, in this environment, "if you don't brake, the profits earned may not burn for long." He told reporters that now it is impossible to expand in disorder, Tencent's entire layout also needs to strategically reduce losses, "Since the era of exchanging money for money and daily gold does not exist, the loss part must be blocked." ”

(Yang Zi and Wang Xiao are pseudonyms, and Zhou Yingmei, a reporter of this newspaper, also contributed to this article)