Tencent bets on cloud computing growth abroad amid gaming slowdown

Tencent is already facing a number of issues in 2022 including a Covid-induced slowdown in the Chinese economy and a tougher market for games.

Bobby Yip Reuters

Tencent said it will launch a new cloud computing product aimed at overseas markets as it seeks new ways to grow amidst the slowdown in its core online video game business.

On Thursday, Tencent will hold a cloud product launch event specifically aimed at markets outside of China, including a suite of cloud-based audio and video products.

The move marks the realization that Tencent will need to find new sources of growth overseas as China’s economy slows. In addition to the ongoing pressure from the Covid outbreak, Chinese technology companies are also facing a tougher regulatory environment at home.

Tencent, in particular, has been hit hard by stricter regulation of online gaming. Last year, Beijing introduced rules that reduced the time people under 18 could play online games to a maximum of three hours a week. Regulators also froze game approvals for several months, meaning companies like Tencent and rival NetEase could not launch and monetize new titles.

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While there are signs that the gaming crackdown may now be over, Tencent is already feeling the impact. Domestic online gaming revenue fell 7% in the third quarter compared to a year ago.

Tencent’s second largest revenue driver is online gaming, so the slowdown in this segment is dragging on overall growth.

The Shenzhen-headquartered company sees cloud computing as an area it can replace. Tencent’s fintech and business services division, which includes its cloud computing division, grew 4% year-on-year in the third quarter.

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Chinese tech giants are not only looking for new business divisions for growth, they are also looking for new revenue streams overseas. e-commerce company Alibaba has used AliExpress and Lazada brands to expand overseas, for example, Tencent has found great success with its online games.

Now, Tencent is banking on cloud computing. The products released on Wednesday focus on audio and visual products such as live streaming for e-commerce or online meetings.

The product is aimed at companies that want such services but don’t necessarily want to maintain the infrastructure, such servers, or build the features themselves.

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Tencent’s strategy may focus on trying to sign up global firms with a presence in China as well as Chinese companies that are expanding overseas. Already, companies like BMW are using some of Tencent’s cloud products.

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As the Chinese company expands overseas, it will enter the highly competitive cloud computing market dominated by US giants. Amazon and Microsoft. Tencent’s international push into cloud computing has been relatively late compared to rival Alibaba, which has expanded outside of China in recent years. Currently, Alibaba is among the five largest cloud computing companies in the world.

Tencent’s focus on audio and video products works as one of the world’s largest gaming companies and the owner of WeChat, China’s most popular messaging app with more than 1 billion users.

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