Tencent’s Pony Ma says cost-cutting will continue in 2023 and pins hope on short video as major growth driver: report
- Ma reviewed Tencent’s cost cutting efforts in staff meeting and hit out at employees for a lack of urgency
- Tencent’s founder said the internet giant must focus on core businesses in 2023 and that short video is key to the future
In the year-end meeting for company employees, Ma reviewed Tencent’s cost cutting efforts and hit out at employees for a lack of urgency when it comes to improving efficiency, according to the report. “Please don’t tell me the possible chances,” Ma said. “How big can a noncore business grow into, and if it grows big, so what?”, he was reported as saying.
Ma said Tencent, which has been divesting some of its investment portfolio, has to get into a habit of cutting costs and finding core areas instead of seeking expansion and scale. “In the past, when we saw others were adding weight, we also tried to increase in size, but what we added was just fat, and we were still unable to defeat others,” Ma was quoted as saying.
Tencent did not immediately respond to a request for comment. A Tencent employee, who declined to be named for having no authority to talk with the media, confirmed the authenticity of Ma’s remarks.
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The 51-year-old Chinese tech tycoon, who has kept out of public view in recent years, warned employees that any business could be cut if it underperforms, including the firm’s long-established news portal unit whose logo is emblazoned on Tencent Towers, one of the company’s main office buildings.
“If they [the news operation] cannot sustain themselves, if they still have a lot of problems, then their time is limited,” Ma was quoted as saying. “If there’s no meaning to continue, the whole [news] operation could be axed.”
Ma told employees that short video is the future of the company, saying it was inevitable that it would erode certain areas, such as long videos and even video gaming. “In the past, we might have been interested in investing in mediocre productions, but now we may have second thoughts,” said Ma about its long-form video strategy.
Ma described Tencent’s short video accounts, marketed as Channels, as “the hope [of the company]”, according to the report. The company will step up efforts to add e-commerce to its short video business, Ma said.
Ma warned that its video gaming division will continue to live under a stringent regulatory environment, and he expects regulators to keep a tight grip on the number of new game approvals in the long run, according to the report. Tencent is the biggest games publisher worldwide by revenue.
Ma’s speech follows months of cost-cutting efforts, including shrinking its workforce and shutting certain businesses in the face of economic and regulatory headwinds that have hit business segments such as video gaming and advertising.
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Tencent recorded a 2 per cent drop in revenue in the third quarter, only the second quarterly decline since the company listed in 2004.
Tencent has seen its core gaming business hit by a slowing domestic economy and ongoing regulatory scrutiny and in the third quarter domestic game revenue fell 7 per cent to 31.2 billion yuan. As such it has been on the hunt for growth overseas, through investments and partnerships.
During the staff meeting, Ma revealed that a reshuffle at Tencent News has helped the unit to turn a profit in October. Chinese media have reported that there have been major job cuts among news and sports teams, which form part of Tencent’s Platform and Content Group.
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For cloud computing, Ma encouraged employees to focus on product development as opposed to gaining market share through projects that hurt profitability. Ma criticised costly customer acquisition efforts and warned against following competitors into new businesses that are non-essential.
Ma said cost-cutting efforts have reaped some rewards, and that measures would continue into next year, according to the employee who declined to be named. Ma said that short video, fintech and software-as-a-service would be key growth engines.
