Text | Wang Yuchan
Edit | Yang lin
In 2023, two important changes have occurred in the Chinese Internet world: first, Pinduoduo's market value surpassed Alibaba; second, ByteDance's revenue in the first half of the year surpassed Tencent.
The people who work in front of countless computers in giant companies seem to have witnessed the history of "new kings replacing old kings". At the critical juncture of 2024, how does the "king of the old era" view his situation?
On January 29, Tencent held its annual meeting, at which a number of senior executives, including Tencent Chairman and CEO Pony Ma, President Martin Lau, and WeChat Business Group President Zhang Xiaolong, delivered speeches at the Shenzhen Bay Sports Center, summarizing the development of the past year and looking forward to the plan for the coming year.
Ma Huateng expressed Tencent's current situation very bluntly. "How old trees sprout new shoots is a big problem. Ma Huateng said. "At BAT, it seems that we only see a chance to sprout a little bit at the moment. And the other new trees are thriving, which also brings us a lot of pressure. ”
Compared with the other two "old trees" of the same era - Alibaba and Baidu, Tencent is indeed a relatively good one - there is no obvious lag behind, there is no violent high-level turmoil, business split, and all businesses maintain a kind of "certainty" no matter how much they make or how little they earn. In its usual style, this company is cautiously and calmly moving towards middle age.
In his speech at the annual meeting, Ma Huateng mentioned the word "confidence" many times, not only to express confidence in the future development of the company, but also to express confidence in the macroeconomic environment. This confidence is manifested in the stock market, in the form of a series of buybacks by Tencent.
On January 30, according to Wind data, the scale of Hong Kong stock buybacks in 2023 hit a record high. Among them, Tencent's repurchase amount accounted for 40% of the total amount, reaching HK$48.4 billion. Entering 2024, Tencent once again ranked first among all repurchase companies with 13 repurchases, involving an amount of more than HK$9.8 billion, accounting for 43% of the total repurchase amount.
Where does confidence come from? Tencent's "sprout", what is the next business to bring new growth?
In his speech, Martin Lau showed a diagram of "high-profit platform products" and "more imaginative business". Responsible for driving profits are: video account, financial management + credit, mini game + search. Responsible for expanding the imagination of the business: expanding the scale of the platform business, making breakthroughs in the game business, and generating new outputs from long-term investment.
PPT of the annual meeting
Old products, new profits
Among the three directions that bear the responsibility of driving profits, two are related to WeChat. Channels have brought an increase in advertising and e-commerce business, and Mini Games + Search has also maintained a healthy daily activity and flow.
Ma Huateng gave a good evaluation of the performance of the video account in the past year. "A year ago, I said that the video number is'the hope of the whole goose factory', after more than a year of development, it has indeed lived up to expectations, giving us a lot of surprises in the process of growth, so that we have a solid grasp again in the case of the failure of short videos in the past. Ma Huateng said.
Ma Huateng's "short video failure" is the experience of gathering the power of the whole group to assist Microvision in the past, and finally the bamboo basket was empty. Because Microvision failed to successfully block Douyin and caused "endless troubles", the video account had to use Tencent's shortcomings to touch Byte's longboard again. However, fortunately, with WeChat's user base and the product design capabilities of the WeChat team, it has not repeated the mistakes of Weishi.
PPT of the annual meeting
Short video will bring live broadcast, live broadcast will bring e-commerce, e-commerce will bring advertising, and ultimately feed back short video creators - this is already a business model that has been repeatedly verified by Byte and many content platform companies, but there are still many lessons to be made up for Tencent. Ma Huateng said in his speech: "The consumption power of our user group is very strong, but the e-commerce knowledge we have lacked over the years still needs to be supplemented, so what we can fully develop this year is the live broadcast e-commerce of Channels, and e-commerce and advertising complement each other." ”
In the WeChat open class on January 11, the WeChat team announced the 2023 Channels sales data: in 2023, the GMV (total transaction volume) of Channels live streaming will reach three times that of 2022, the supply volume will increase by 300%, the number of orders will increase by 244%, and the GPM (the average total amount of orders placed per 1,000 viewers, which is often used to measure the selling capacity of the live broadcast room) will exceed 900 yuan.
WeChat open class on-site PPT
Although the WeChat team did not release specific data on GMV in 2023, a reliable source revealed to 36Kr that the GMV of video number e-commerce in 2022 will be about 130 billion, which is the sum of the GMV of short video e-commerce and live streaming. On this basis, it is estimated that in 2023, the GMV of live streaming on Channels should have exceeded 300 billion yuan.
Although the growth trend is obvious, with such a huge base of Tencent's products, this achievement is obviously the result of "receiving" rather than "releasing it". Restraint, slowness, and prudence have always been Tencent's style in commercialization.
However, as the "hope of the whole goose factory", the "Buddha space" left for the video account will become smaller and smaller. In the WeChat open class, the Channels team has made it clear that it will increase investment in R&D, operation, and business, and it is estimated that the team will expand by hundreds of people. In addition, around the Lunar New Year, a new advertising streaming tool will be launched to connect ADQ (Tencent Advertising System) and WeChat Dou.
An insider revealed to 36Kr that the target for video number advertising revenue in 2024 is 24.3 billion yuan, and it is expected to exceed the 50 billion mark in 2026. At that time, the commercialization ability of Channels will likely surpass Moments and become the dominant source of advertising revenue on the WeChat platform, and may even exceed the advertising revenue of all other business segments of Tencent combined.
As one of Tencent's "oldest" products, WeChat is also giving birth to other sprouts, including mini programs, mini games and search.
Martin Lau's PPT displayed at the annual meeting showed that WeChat Mini Games had more than 400 million users, with an annual turnover increase of 50%, accounting for 8% of the game market, 70+ game DAUs exceeded one million, and more than 100 games had a quarterly turnover of more than 10 million. The annual GMV of Mini Programs has also maintained a growth rate of more than 50%.
PPT of the annual meeting
Light investment, high returns, and the contribution of businesses such as video accounts and mini games to the group's profit margin is obvious, which is a very important indicator for Tencent, which is becoming more and more pragmatic. The data displayed by Martin Lau shows that the revenue of the three high-margin businesses of video number, mini game, and wealth management + credit is increasing, and the marginal direct gross profit margin has reached about 95%, much higher than the company's overall gross profit margin of 60%.
PPT of the annual meeting
Game: Scream and get out
Among the three imaginative businesses listed by Martin Lau, Ma Huateng particularly hit the game business, and used sharp expressions such as "lying on the credit book" and "seemingly no achievements".
In the past year, Tencent Games seems to have been "eating the old book", except for the casual family party game "Yuan Dream Star" launched at the end of the year, there are almost no other new products that meet Tencent's standards.
"In the past year, we have been challenged a lot, the new generation of game companies are emerging one after another, and we are at a loss for a while in the transition from gameplay to content, and our competitors continue to produce new products, and we seem to have no achievements - we have also launched new products, but they are not as good as we imagined. Ma Huateng said.
Although this result is hardly satisfactory to the boss, it is true that IEG cannot be blamed on it. Many companies, including NetEase and Bilibili, have experienced the contraction of cutting projects and layoffs, and Byte has even retreated directly and sold its game business entirely.
PPT of the annual meeting
In a market where there are no dividends, it sounds too cruel to compete with friends in high-quality products. For all game companies that are looking for profit margins, it's time to think about the opportunity to go overseas.
"Going overseas is actually our company's biggest hope for internationalization. Ma Huateng said. "In the past few years, we have given full play to our advantages and established a reputation in the research and development of mobile games and network operation of overseas big IP game companies. We hope to do a thorough and solid job in software and game development, rather than being an enemy of other game companies or hardware manufacturers from a deep perspective, and more importantly, to find our own main business and focus on it, so that we have a better chance of winning. ”
Martin Lau's PPT shows that Tencent's overseas game scale has reached more than $7 billion, higher than Mihayou and Temu.
According to a report by Newzoo, an authoritative game research institution, the global game market will reach $184 billion in 2023. Subtracting the size of the Chinese market announced by the China Game Industry Association (300 billion RMB, or $42 billion), the global (excluding China) game market revenue is about $140 billion.
Using the data released by Martin Lau, it can be estimated that Tencent occupies a 5% share in the overseas market. Judging from this relatively small share, there is indeed a lot of imagination for Tencent Games to go overseas.
In terms of game categories, Tencent has been "fighting away" in the past two years, launching two-dimensional, MMO, and party games to block the opponent's explosive works on the track, but the results are mixed.
Ren Yuxin, president of Tencent IEG (Interactive Entertainment Business Group), said at the annual meeting that in the future, Tencent will still have to keep the basic market of competitive games, "and cannot be shaken by some popular MMOs and two-dimensional games." ”
The game business has changed from a "cash cow" in quarterly financial reports to a "key criticism" at the annual meeting, which is actually a change that has occurred in the past two years. As a giant company in the midst of a "mid-life crisis", Tencent is more concerned than ever about profit margins and human efficiency metrics. In the very involuted environment in China, it is difficult for the game business to pursue ultra-high profit margins, and it is also an inevitable result to be "driven out of the country to attract money".
"Now we are as excited as a chicken, and we have returned to the process of how to step up from a dozen people in the game industry back then. Ma Huateng said.