Tencent Holdings is facing a tough environment this year as its core online games business suffers from regulatory uncertainties.
Chinese authorities have frozen approval of new games in a bid to curb youngsters’ addiction to online games and stamp out violent or inappropriate game content.
To reduce reliance on online games, Tencent announced a series of corporate restructuring moves last week, including shifting its focus to cloud computing business. This means that the social media giant is moving from being a consumer-focused company to becoming an enterprise-focused service provider.
In its first restructuring in six years, Tencent will consolidate three content business groups into one unit and create a new group for cloud and smart businesses. The move is seen as part of the company’s bid to beef up its cloud-based data offering services for corporate clients.
Its newly established Cloud and Smart Industries Group (CSIG) integrates industry solutions such as Tencent Cloud, Internet+, Smart Retail, Education, Healthcare, Security and location-based positioning.
Tencent stressed that the company is still an internet-based technology company. Technology still holds the key to its further development.
With the advent of artificial intelligence and 5G mobile technology, the company will use technology as its engine to explore new opportunities, such as the development of industrial internet and the next generation of social media and content integration.
Tencent’s industrial internet aims to connect different institutions and enterprises in the same industry through the network. This involves cloud, big data and 5G applications.
The company believes that the industrial internet will upgrade industries through digital technology, connecting consumers and industries, thereby creating huge social and industrial value.
The upgrade from the consumer internet to the industrial internet is a natural extension of the company’s connection strategy and shows the path for building a new intelligent industry ecosystem.
Such a change cannot be accomplished solely by relying on enterprises. An enterprise can only accomplish its own digital transformation. To connect the enterprises to form an industry, it is necessary to have an organization to coordinate the activities of the various participants, which will invest in the system and thus achieve the industrial internet.
Tencent will “further explore the integration of social, content and technology that is more suitable for future trends, and promote the upgrade from consumer internet to industrial internet”.
The company said it will also set up a technology committee to help strengthen its research and development and promote collaboration and innovation.
Over the past two decades, Tencent has been focusing on product development for individual users from QQ, QZone, WeChat, WeChat Pay to online games.
All are serving individual customers’ needs rather than enterprises. While Tencent was able to maintain a huge user base, its presence in the enterprise market was lagging behind overseas rivals such as Amazon Wireless Service, Microsoft Azure and Alibaba Group’s Aliyun service.
Aliyun, in fact, has cornered half of China’s cloud market, while Tencent and other competitors such as Kingsoft, China Telecom and other operators hold the other half.
Tencent needs to find a new growth engine as its online games business is practically at a standstill while advertising revenue may continue to suffer from regulatory restrictions.
The company recently invested in retail chain Miniso. This could be a good opportunity for Tencent to take advantage of its technology advantage and deploy it in the commercial world.
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