Tencent, a Chinese gaming and social media giant saw its revenue rise by 8% in the fourth quarter. This is the slowest rate since 2004 when it was made public. Its results reflect the regulatory scrutiny that has harmed both its advertising and gaming businesses.
China has stopped game approvals from August last year, and reduced gaming time for children under 18 years old, as part of Beijing’s attempt to tighten its control over society and technology industries, following years of unbridled development.
Advertising has been affected by this cutback.
Tencent Holdings, which derives a lot of its revenue through gaming and creates games like ‘Honour of Kings’and ‘Call of Duty Mobile ‘, reported that domestic gaming sales increased 1% during the quarter ended December 31.
Tencent stated that the restrictions on minors had an effect on the game’s time consumption, which was 88% less than the average user. They also said that revenue growth will be more favorable later in the year.
On Wednesday, Chief Strategy Officer James Mitchell said that revenue growth should not be affected as we move into 2022’s second half. He was referring to minor-protection policies.
Martin Lau, Tencent president, stated that regulators are still supportive of the gaming sector and added that the company had a pipeline of games ready for approvals when they resume.
The company also reported its slowest annual revenue growth of 16%. However, its revenue from online advertising fell 13% during the fourth quarter.
After companies adapt to regulatory requirements, it expects that its ad business will resume growth in the second half of 2022.
Refinitiv data revealed that total revenue increased to 144.2 billion Yuan ($22.63 trillion) in the third quarter. This is below the average of 147.6 million yuan, which 17 analysts had expected.
Beijing also has rules for regulating financial holding companies. Tencent’s, affiliate Ant was directed by Beijing to become a financial holding firm with capital restrictions.
Lau, who previously stated that the creation of a financial holding company would not affect its business, reiterated his position on Wednesday, saying Tencent was actively discussing whether such a license is possible.
STAFF NUMBERS
Lau stated that “Going forward, we believe that we’ll see new regulations come in but that the incremental ones won’t be as significant as the bulk of the regulations that occurred in the first two years.”
He stated that he expected staff growth to be slower this year than in previous years because companies are more focused on efficiency and reducing costs.
Reuters reported that Tencent CEO Pony Ma said to employees that at the end of 2021, the company should be ready for winter and that Alibaba and Tencent were preparing for a massive round of job cuts.
Tencent’s stock lost more than a quarter of its value over the past twelve months, while Alibaba’s stock has more than doubled.
Their shares are still up after Chinese Vice Premier Liu He stated last week that Beijing would support the economy and maintain stability in markets.
Tencent announced Wednesday that its December quarter adjusted profit fell to 24.9 billion Yuan due to rising costs.