Sales 2023: RMB 609,000 billion (€ 79,500 billion)

Overview

Tencent rose to prominence with its universal app WeChat and, at the beginning of 2024, was Asia's fourth-most valuable company by market capitalization (after Saudi Aramco, Taiwan Semiconductor Manufacturing Company, and Samsung). In addition to the WeChat platform, without which it is said to be "almost impossible to get by in China," Tencent operates the world's largest video and online games company. It also operates film, television, music, and books: Tencent is one of the three Chinese media and tech giants ("BAT": Baidu, Alibaba, Tencent), and is also referred to as the "Chinese Disney."

General Information

Headquarters
Tencent Binhai Towers No. 33
Haitian 2nd Road
Nanshan District
Shenzhen 518054
China
Phone: 0086 755 8601 3388
Website: tencent.com/en-us/investors.html

Branches of trade: social networks, online games, e-commerce  
Legal form: Stock Company
Financial year: 01.01. – 31.12.
Founding year: 1998

Basic economic data (in million RMB)

	2023	2022	2021	2020	2019
Revenue	609.015	554.552	560.118	482.064	377.289
Profit (total comprehensive income)	107.182	59.564	200.390	281.173	119.901
Share price (in HK$, year-end)	292,20	317,23	421,10	521,77	353,07
Employees	105.417	108.436	112.771	85.858	62.885

Executives and Directors

Management:

• Ma Huateng (Pony Ma), Co-Founder, Chairman of the Board & Chief Executive Officer
• Lau Chi Ping (Martin Lau), President
• Xu Chenye (Daniel Xu), Co-Founder, Chief Information Officer
• Ren Yuxin (Mark Ren), Chief Operating Officer
• Zhang Xiaolong (Allen Zhang), Senior Executive Vice President, President of Weixin Group
• James Mitchell, Chief Strategy Officer, Senior Executive Vice President
• Tong Tao Sang (Dowson Tong), Senior Executive Vice President, President of Cloud and Smart Industries Group
• Lu Shan, Senior Executive Vice President, President of Technology and Engineering Group
• Ma Xiaoyi (Steven Ma), Senior Vice President
• Lin Ching-Hua (Davis Lin), Senior Vice President
• John Lo, Chief Financial Officer, Senior Vice President
• Guo Kaitian (Leon Guo), Senior Vice President
• Xi Dan, Senior Vice President
• Yeung Kwok On (Arthur Yeung), Senior Management Adviser

Board Members:

• Ma Huateng (Pony Ma), Chairman of the Board
• Jacobus Petrus (Koos) Bekker, Non-Executive Director
• Charles St Leger Searle, Non-Executive Director
• Li Dong Sheng, Independent Non-Executive Director
• Ian Charles Stone, Independent Non-Executive Director
• Yang Siu Shun, Independent Non-Executive Director
• Ke Yang, Independent Non-Executive Director
• Zhang Xiulan, Independent Non-Executive Director

History

Tencent and founder Ma Huateng (Pony Ma) are now virtually synonymous with China's innovation in the internet sector. In November 1998, when the company was founded in Shenzhen, Tencent's internet services were essentially plagiarisms and unconventional in the crowded field of large "internet service portals" that had emerged between 1996 and 1998 (such as NetEase, Sina, and Sohu). These portals were not viewed as "media," but as entertainment sites. However, additional content offerings could generate growing user numbers and higher advertising revenues.

Tencent's desktop-based instant messenger, OICQ, launched in February 1999 and was a virtual copy of ICQ—a service developed two years earlier by the Israeli company Mirabilis. A trademark infringement lawsuit filed by ICQ owner AOL that same year forced Tencent to rename its service "QQ." However, the QQ messaging service clearly differentiated Tencent from the competition. It was free to use, and the service's popularity quickly grew among young, often student, internet users.

In 2001, at a time when Tencent was still unprofitable and little known, the South African publishing group Naspers, through its subsidiary MIH Holdings, acquired a 46.5 percent stake in the company for $34 million. Tencent's growing user base and popular news service seemed particularly promising. Although Naspers had experience with unprofitable media investments in China and had even considered exiting the market, the investment in Tencent would definitely pay off. Prosus, the Amsterdam-listed investment company founded by Naspers in 2019 (Naspers stake: 72.5 percent), still owns just under 29 percent of Tencent today.

By the end of 2001, QQ already had more than 90 million registered users. By 2003, Tencent was the clear market leader in instant messaging, followed by Netease. QQ users were predominantly in the 15-29 age group and often referred to themselves online as the "Q Generation." The service's mascot, an egg-shaped penguin, became an icon in China. A 2011 Bloomberg profile of Tencent stated that the QQ messaging service had "twice as many users as the population of the United States."

On June 16, 2004, Tencent went public on the Hong Kong Stock Exchange. The service still dominated the business; according to a survey by iResearch (Shanghai), for example, almost three-quarters of Chinese people used Tencent's QQ. And the next expansion was already in the works. In 2003, the subsidiary "Tencent Games" was founded, which launched its first series of online games ("QQ Tang") in 2004, with free downloads of QQ software, but with paid game accessories and fee-based subscriptions. To this end, Tencent began licensing so-called massive multiplayer online games (MMOG) such as "Sephiroth" by South Korean developer Imazic. Tencent then continued its foray into online gaming in 2007 and 2008, licensing games like "Dungeon & Fighter" (also from South Korea) and capitalizing on its community base of 300 million active users. At the same time, it began developing its own games and acquiring major development companies.

In 2011, Tencent bought a 93 percent stake in Riot Games, developer of the hit game "League of Legends," for $400 million. In 2015, when Tencent acquired the remaining stake in Riot, "League of Legends exploded as an esport worldwide." In 2012, Tencent invested $330 million in Epic Games, developer of hit games such as Fortnite and Paragon. The merger of Tencent and Epic Games meant that a major games developer could now pivot from console to live service games and benefit from Tencent's huge user base and corresponding reach. In 2018, Tencent was part of a group of investors who helped French game developer Ubisoft fend off a hostile takeover by Vivendi. Afterward, Tencent was able to publish Ubisoft games in the Chinese market. With this strategy, Tencent became the world's largest video game company today. The gaming business was the most lucrative business segment in 2019, with revenue of $18 billion (and accounting for about 40 percent of total revenue).

However, the boom in online gaming has also brought challenges and controversies. Video game content has come under increased official scrutiny in China in recent years, with regulators imposing restrictions on the licensing of new games. The censorship of globally available games for domestic political reasons has sparked sharp international criticism. For example, in November 2018, Ubisoft announced it would remove gory scenes and references to sex and gambling from its popular game "Rainbow Six Siege" in order to adapt to the Chinese market. This sparked a backlash from fans of the game around the world, who accused the company of submitting to Chinese censorship. Given the games' enormous revenue potential, other Chinese companies, including traditional rivals like Netease and upstarts like ByteDance, have also increased competitive pressure on Tencent.

On January 21, 2011, Tencent launched a new messaging app called Weixin, which translates to "micro letters," and would revolutionize the communications landscape in China within a few years. At the time of its launch, the free Weixin (initially for the iPhone) was compared to Canada's Kik and other services, but the wide range of features and platforms found under the app's umbrella would soon distinguish Weixin from other global social media platforms like Facebook. In April 2012, shortly after the launch of the Android version, Weixin was rebranded as WeChat overseas and expanded with a number of features. By August 2012, the service had 100 million users. Building on this immense user base, major international brands like Nike began flocking to the platform. Soon, there were more mobile users than desktop users in China.

While analysts in 2012/2013 were still comparing WeChat to platforms like WhatsApp (which had existed since 2009), it became clear that WeChat was developing its own user universe, something some called a "super app" or "super platform." "The phenomenal thing about the app," says Ben Lamb, a digital marketing specialist from Shanghai, "is that you can use it for so many services, so you're constantly interacting with it." Soon, nothing could be done without WeChat. By the end of 2012, the platform had more than 200 million users.

While WeChat's importance as a commercial tool was growing, this success could not be viewed in isolation from the growing political problems facing China's hugely popular social media platform, Weibo (similar to Twitter, operated by the Sina Corporation, ranked 96th in the current IfM rankings). Just one year after its launch in 2009, Weibo had become a social and political force, an open platform through which many millions of Chinese could discuss current news and other topics. Journalists and intellectuals with millions of followers were gaining more influence than the major newspapers.

By 2012, the Chinese leadership realized that Weibo, even with automated and other controls, was becoming a problem for the Communist Party. In 2013 and 2014, the leadership then took aggressive action to silence the "Big Vs," in particular: Verified members, well-known Weibo users who could influence public opinion. After the government interventions, Weibo became boring for many. They switched to WeChat, which offered a more diverse user experience – with Moments timelines (similar to Facebook), so-called "public accounts" that acted like blogs, and private chat groups (similar to WhatsApp). While Weibo was like a giant banquet hall where everyone could be seen and heard, WeChat was less public.

At least initially, media regulators favored the more insular nature of WeChat, which was a prime area for discussions about breaking news It was much more difficult to attract mass attention. However, WeChat's immense popularity made "information control" necessary. Since 2013, the platform has been widely criticized for censoring the activities of users outside of China by blocking sensitive keywords.

With the implementation of payment services, WeChat became a real super platform in 2013. Competitors such as Alibaba also had success with mobile e-commerceBut the Omnipresence WeChat's use of WeChat proved to be a clear advantage. WeChat had more than one billion monthly active users at the end of 2019, and WeChat Payments can be used for purchases both online and in-store. Tencent's WeChat platform remains "sewn into the lives of the Chinese people," as the Financial Times noted. But like all major Chinese technology and media companies, its success comes at the cost of ever-increasing government vigilance—Tencent must continue to maintain close ties with the state. These, from an outside perspective, can certainly be seen as problematic. Domestically, Chinese authorities have heavily censored WeChat and several other Tencent products, particularly games. Since 2018, several popular games—including Honor of Kings, one of Tencent's most successful games—have been suspended or banned entirely on the grounds that they encourage online gaming addiction among young people. Cooperating with regulators is both a burden for business development and a prerequisite for continuing operations. The government's stance is simple: "If we want to cut off the money tap, we'll cut off the money tap." The censorship of WeChat is blatant; even neutral references to the government from state media are removed. This is reminiscent of the kind of censorship that Sina's Weibo experienced in 2013-2014, which contributed to WeChat's rise in popularity.

Concerns about data espionage have always been a concern for Chinese, internationally expanding technology companies like Tencent. In May 2019, after the Trump administration trade blacklist order After Tencent's CEO Pony Ma published a report on the company's plans for Huawei and telecommunications equipment manufacturer ZTE, Tencent CEO Pony Ma warned that such a "prolonged tech war" could develop between the US and China. In light of these tensions, Ma also expressed concern that China, whose internet development relies largely on the development of application-based products as opposed to the development of high-end products, might not be prepared for such competition. The era of "borrowing," as Ma called it, is over for Chinese companies anyway. "If we don't strive to develop our own infrastructure and core technology, the digital economy in China will be difficult to sustain."

Tencent's advertising business has recently been challenged on two fronts: by the overall slowdown of the Chinese economy since 2018 and by fierce domestic competition, both from emerging companies like ByteDance and traditional rivals like Baidu and Alibaba. In the cloud and fintech sectors, for example, Alibaba is currently the largest domestic competitor.

management

In February 2021, Ma Huateng (known as Pony Ma), born in 1971 and co-founder of Tencent, was the richest man in China, according to Forbes, with a net worth of $73.4 billion, ahead of Alibaba founder Jack Ma ($62.3 billion). Huateng is a respected figure in the Chinese and global tech scene, and at the same time, of particular importance to the Chinese Communist Party and the official narrative of Chinese innovation. Ma is a prime example of the close relationship between the executives of top Chinese companies and the political leadership and is also a delegate to the National People's Congress.

The question of who will succeed him remains open. In January 2020, he sold $260 million worth of Tencent shares "for personal financial reasons." This move, which coincided with Ma's resignation as chairman of the fintech division Tenpay Micro Loan and followed his resignation from Tencent Credit in September 2019, sparked speculation that he might soon withdraw from investments in "non-core businesses."

Lau Chi Ping (Martin Lau), born in 1973, is the current executive director and president of Tencent Holdings, the group's number two, with an estimated net worth of €2 billion. Previously, he worked at Goldman Sachs as Chief Strategy and Investment Officer. He joined Tencent in 2005. Born in Beijing, Lau grew up in Hong Kong and studied in the United States. He led several major acquisitions by Tencent, including the 2016 acquisition of Finnish mobile device developer Supercell for $10.2 billion.

Business Units

       1.  Communication and social media

Weixin (founded in 2011, known outside China as WeChat) remains the heart of Tencent's social media business, with 1.268 billion monthly active users (MAU) reported at the end of 2021. In the comprehensive WeChat universe, users shop, pay, order food, and more. The app has even become the most popular means of exchanging personal and business contacts during face-to-face meetings. Tencent's QQ messaging platform for mobile phones (since February 1999) recorded 552 million MAU in December 2021. In 2005, Tencent founded the QQ-integrated networking/blogging service Qzone, now one of the leading social networks worldwide.

2.  Digital content

Tencent Games: The online gaming business remains the group's most important revenue driver and relies on its huge social media user base. And as for e-sports, the electronic competitive sports game industry, a large portion of this rapidly growing global industry belongs to Tencent. Tencent Esports owns some of the most important games and organizes eSports leagues and tournaments.

Tencent Video was founded in 2011 and offers streaming and video-on-demand services for mobile phones. The international version of the service is called WeTV. And the company's own film production, founded in 2015, is called Tencent PicturesTencent Pictures owns six studios and produces, distributes, and markets films for cinema and television in China, which will soon become the world's largest film market. Tencent Pictures was involved in the Chinese blockbuster "The Eight Hundred," the most successful production worldwide in 2020. "China is challenging Hollywood," according to Der Spiegel on February 5, 2021. WeiShi is the name of the company’s short video platform.

Then Tencent hosts the popular news app Tencent News. Conflicts with censorship authorities regularly arise, for example in January 2019, when the Chinese Cyberspace Administration accused the Tencent app of being "vulgar, negative and harmful" and "damaging the online world."

Tencent Sports (“China's leading internet sports media platform”) owns internet broadcasting rights for headline global Sporting events such as World Cups, Olympic Games, French Open, Formula One, NBA, MLB, NHL, NFL.

Tencent Animation and Comics is the largest anime platform in China with 120 million MAU and 30,000 online anime comics. Since March 2019, WeComics has also been an international version in English and Indonesian.

The Tencent Music Entertainment Group not only owns China's largest music apps (QQ Music, Kugou Music, Kuwo Music, WeSing) with a combined MAU of over 800 million. Tencent has continued to invest billions of dollars in the music market in recent years. This has led to a 20 percent stake in the world's largest music company, Universal Music (part of Vivendi, ranked 27th in the current IfM ranking), as well as a nine percent stake in Spotify (26th in the current IfM ranking), and a two percent stake in Warner Music Group (the third-largest music company worldwide, part of Access Industries, ranked 42nd in the current IfM ranking). Tencent Music has also concluded distribution agreements with international players in recent years, including Warner, YG Entertainment, and Sony.

China Literature Limited operates the leading Chinese literary platform with, as of June 2020, 8.9 million authors and 13.4 million online books in 200 genres. Tencent holds approximately 57 percent.

Finally: As the leading eSports brand worldwide, Tencent Esports with the “Global eSports Arena” (TGA) eight high-quality professional leagues, organizes tournaments and national competition leagues that cover many genres.

3. FinTech Services

Tencent has an expanding fintech business, which, along with business services, accounted for 31 percent of revenue in 2021. Tencent has also pushed ahead with the expansion of its cloud computing business for corporate customers.

Current developments

In the United States, after months of investigations, some antitrust watchdogs are now calling for the breakup of the big tech companies Google, Amazon, Facebook and Apple (they are “overpowering platforms” with a gatekeeper–positionNow Beijing is also "taking tougher action against the Chinese tech industry" (Handelsblatt, January 20, 2021), which for years benefited not least from having blocked its US competitors through the "Great Firewall." Jack Ma, the richest Chinese man and co-founder of Tencent competitor Alibaba, disappeared from the public eye for three months after criticizing the government in a speech in Shanghai at the end of October. Why was he gone after that? Where was he? Unknown. At the end of January 2021, he appeared somewhere in front of a mural and said: "Over the past period, my colleagues and I have learned and reflected, and we have become more determined to devote ourselves to building for the common good."

"China puts Alibaba, Tencent, and Co. on a leash," headlined the Neue Zürcher Zeitung on February 9, 2021. Today, everyday life in China is completely dominated by tech platforms, such as Tencent's all-encompassing WeChat app. The major Chinese tech companies can look back on years of largely unchecked, unregulated growth. This is now set to end. Regulators are issuing stricter rules, particularly with regard to fintech services, and cracking down harder on violations. As in the US, "the era of unchecked tech giants seems to be coming to an end in China, too." (Kai von Carnap, analyst at the Berlin-based China think tank Merics).

At the end of March 2021, for example, the BBC homepage read: "Warner Music signs new China licensing agreement with Tencent." Why is clear. Almost a fifth of the world's population lives in China, yet last year less than three percent of the company's global revenue of $20 billion was generated there. However, it is a rapidly growing market, thanks to the streaming services of Tencent and Alibaba. The two other major labels, Universal and Sony, also have similar deals with Tencent. And while the major US record companies are trying to gain a foothold in China and the Asian region, Tencent, as we have seen, has invested billions of dollars in the Western music market (Universal Music, Spotify, Warner Music).

However, in mid-March 2022, publications around the world reported: "Alibaba Group and Tencent Holdings announced they will lay off thousands of employees this year as economic growth slows due to the COVID-19 pandemic and strict regulations in China." This would be the first major layoffs (up to 15 percent of jobs) since regulators launched an unprecedented campaign to rein in the tech giants in 2020. The layoffs at Tencent are expected to begin in the less profitable business units, such as Tencent Video and Tencent Cloud. At the end of 2021, CEO Pony Ma announced internally: "The company must prepare for a winter."