Source: Daily Economic News
After the close of business on the afternoon of November 10, Tencent Holdings (0700.HK) disclosed its unaudited consolidated results for the three and nine months ended September 30, 2021. The financial report shows that Tencent’s revenue in the third quarter of 2021 was 142.37 billion yuan, a year-on-year increase of 13%; non-IFRS net profit was 31.75 billion yuan, a year-on-year decrease of 2%. Compared with the slowdown in the second quarter, this is Tencent’s Net profit fell for the first time.
Image source: screenshot of financial report
In the third quarter financial report, Tencent also gave a report card to prevent minors from indulging in online games. In September this year, the proportion of minors in Tencent’s local game time was 0.7%, and the proportion of minors in Tencent’s local market of game turnover was 1.1%, a sharp drop compared with the same period last year.
It is worth noting that in the third quarter, Tencent’s R&D expenditure was 13.73 billion yuan, a year-on-year increase of 38.6%, a single-quarter high; the R&D expenditure in the first three quarters was 37.859 billion yuan, a year-on-year increase of about 36.2%.
At the performance exchange meeting on the evening of November 10th, Tencent CEO Ma Huateng said that the company has a large number of technologies and capabilities to explore and develop Metaverse. Tencent will point its sword to Metaverse and seize the new frontier of future science and technology.
Local game revenue increased by only 5%
Video membership increased to nearly 130 million
From the perspective of business sectors, the value-added services business is still the bulk of Tencent’s revenue. In the third quarter, revenue was 75.2 billion yuan, an increase of 8% year-on-year and a 4% month-on-month increase. In the value-added service business, the game business, which is the most concerned by the market, achieved revenue of 44.9 billion yuan in the third quarter, accounting for approximately 31.5% of the total revenue, and remains the largest source of revenue.
Different from the past, Tencent stated in its financial report that it will disclose its revenue from games in the local market and games in the international market as a new sub-segment under the value-added service business from this quarter. Specifically, during the reporting period, Tencent’s domestic game revenue increased by 5% year-on-year to RMB 33.6 billion; and due to the strong overseas performance of games such as “Valorant” and “Clash of Clans”, international market game revenue increased by 20% year-on-year to RMB 113. 100 million yuan, the international game market is gaining momentum, and it accounts for more than 25% of the total game revenue. Tencent’s deployment in overseas markets for many years has achieved remarkable results, and its position in the international game market has become increasingly prominent.
Image source: screenshot of financial report
In the third quarter, Tencent’s social network revenue increased by 7% to RMB 30.3 billion. Tencent said it was mainly due to the relatively rapid growth of paid membership services for video and music, and the moderate growth in the sales of live broadcasts and game props.
The financial report shows that in the third quarter, the number of paid members for Tencent’s paid value-added services increased by 10% year-on-year to 235 million, of which the number of paid members for video increased by 8% year-on-year to 129 million, mainly due to “Cracking Black Storm”, “You Are My Glory”, etc. Promoted by high-quality content, the two dramas were the top two in China’s online platforms in the third quarter; the number of paid music members increased by 38% year-on-year to 71 million, because TME enhanced the music streaming experience.
With the development of big data, cloud computing, artificial intelligence, virtual reality and other technologies, people expect that technology will bring changes to life, and companies have also deployed related technology fields to compete for the next outlet that may bring revolutionary changes.
“To make the virtual world more real and to make the real world richer in virtual experience is a direction of integration and a general direction of Tencent.” At the performance exchange meeting on the evening of November 10th, Tencent CEO Ma Huateng said that the company has a large number of technologies and capabilities to explore and develop Metaverse.
At the same time, Tencent executives responded to questions and said that compared with hardware drivers, Tencent will always adhere to software drivers to improve user experience. In the fiscal year 2022-2023, Tencent will continue to increase investment in the research and development of virtual reality products in the game sector, and provide users with more engaging virtual reality experience products.
The source of income extends to the physical industry
The Q3 financial report also showed that out of Tencent’s total operating income of 142.4 billion yuan, the financial technology and corporate services sector contributed 43.3 billion yuan, a year-on-year increase of 30%. Some analysts pointed out that Tencent’s revenue focus is no longer limited to value-added services brought by virtual products, but also proactively extends to creating value for the physical industry, which is conducive to the realization of the “removal of virtual to real” profit.
What is the latest development of Tencent’s corporate users? According to data, Tencent conference users have nearly 200 million, and it has further opened up with Tencent’s document function. The electronic signature function has been upgraded, and templates such as “small IOUs” and “personal sales contracts” have been launched, which can be used by both C-end individual users and B-end enterprise-level users. With the application and development of 5G and AI technologies, traditional industries such as industrial manufacturing are also in urgent need of digital intelligence transformation. Tencent relies on big data and AI algorithms and has a large number of landing cases through Tencent Cloud. For example, some small and medium-sized enterprises only need quality inspection projects. Save 56% of the cost.
Tang Daosheng, senior executive vice president of Tencent, pointed out that the industrial Internet is a long-distance race, and the value boost to the physical industry is an important criterion for measuring its development. At present, Tencent Industrial Internet has landed in more than 30 industries and created more than 400 industry solutions.
It is worth noting that in the third quarter, Tencent’s R&D expenditure was 13.73 billion yuan, a year-on-year increase of 38.6%, accounting for 9.6% of revenue, a new single-quarter high; R&D expenditure in the first three quarters was 37.859 billion yuan, an increase of approximately 36.2% year-on-year. Accounted for 9.1% of revenue. The substantial increase in R&D expenditure will inevitably put pressure on Tencent’s third-quarter net profit performance.
It is worth noting that just last week, Tencent announced its chip development progress for the first time, including Zixiao for AI computing, Canghai for video processing, and Xuanling for high-performance networks. The chip is the core part of the hardware and the core infrastructure of the industrial Internet. Tencent said it will continue to actively explore and make long-term investment.
The proportion of minors’ game time dropped to 0.7%
After the National Press and Publication Administration issued the “Notice on Further Strict Management and Effective Prevention of Minors’ Addiction to Online Games” on August 30, game companies such as Tencent actively implemented new anti-addiction regulations, which have now achieved remarkable results.
According to the “National Minor Internet Usage Research Report 2020” released by Gamma Data, 85.8% of minor users have experienced anti-addiction system restrictions during game play, and more than 40% of parents feel that their children’s recent game time is long. Significantly reduced, the anti-addiction system has covered the vast majority of underage players.
Following the first disclosure in the second quarter that the turnover of players under the age of 16 and under was 2.6% and 0.3%, respectively, in the third quarter Tencent announced the turnover of underage users and also added game duration data: In September this year, minors were in the local area. The proportion of game duration in the market was 0.7%, compared with 6.4% in the same period last year; the proportion of juvenile game turnover was 1.1% and 4.8% in the same period last year, both of which were the lowest in history.
Tencent stated in its financial report that the company fully implements the latest regulations on anti-indulging in games for minors, and continues to crack down on minors’ fraudulent use of adult accounts through measures such as upgrading the cruise system to identify fraudulent accounts.
The latest data shows that as of October 2021, an average of 6.92 million accounts in Tencent Games have triggered face recognition during the login process and 15,000 accounts during the payment process every day. Among them, about 71% of the login processes have been rejected or failed to pass verification. Of accounts were included in the anti-addiction supervision, and 77% of the accounts in the payment link were blocked from recharging.
In addition to continuously improving the anti-addiction system, Tencent has also been active in the front line of combating part of the gray industry chain that has been extended from it. In the past two months, the “Tencent Guardian Project” security team, Tencent Growth Guardian platform, Tencent Guardian team, etc., assisted the police in destroying a number of groups that illegally bought and sold personal information for illegal game account leases and used “removal of anti-addiction” as an example. By a criminal team that commits fraud against minors.
Ma Huateng said at the performance exchange meeting that Tencent will actively embrace the new regulatory environment and believes that the new environment can help the industry move towards a more sustainable development track.
Reporter | Li Jianing
Editor | Dong Xingsheng He Xiaotao Du Hengfeng Wang Jiaqi