Tencent’s Off Its Game

Tencent's weak quarter

Image source: Anna Chernova, aommaneesri, Varlamova Lydmila, robuart - Shutterstock

What's going on?

Tencent – the second-biggest listed company in China, and the biggest games company in the world – reported a worse-than-expected fourth-quarter profit on Thursday.

What does this mean?

China’s ban on new video game approvals last year hit Tencent hard: around a third of its revenue comes from games, and even more of its profit. China’s regulators resumed signing off new games in December – but too late to save the company from its largest-ever quarterly profit drop.

In a bid to wean itself off games, Tencent – like other internet companies all over the world – ploughed cash into growing other areas like cloud computing and fintech last quarter. But while sales there are growing fast, they aren’t yet strong enough to cover their high start-up costs.

Why should I care?

Zooming out: One zigs away from gaming, another zags in.

Tencent is to gaming in China what Google is to advertising in America in Europe almost everywhere. It’s also increasingly butting heads with China’s ecommerce king, Alibaba – just as Google’s parent Alphabet is going head-to-head with Amazon in more areas. This week, Google announced a new video game streaming service, Stadia – adding Japanese console makers Sony and Nintendo to its list of rivals. Their stocks fell in response, likely as investors weighed the odds of fewer people buying PlayStations and Switches in favor of Google’s online offering.

For you personally: How much time do you spend plugged in?

A glance around Finimize HQ confirms that we now spend most of our waking hours staring at screens – so Google’s move to become an even bigger part of your day makes sense. With gaming, downloads and in-app purchases are one side of the coin – the other is esports, the fast-growing world where people watch professional gamers at play. If Google’s foray into gaming grows YouTube as an esports hub (like Amazon-owned Twitch), it’ll potentially score millions more eyeballs for its bread-and-butter business: advertising (tweet this).

Originally posted as part of the Finimize daily email.

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