Tencent CEO Pony Ma's speech at the firm's annual staff meeting
Tencent CEO Pony Ma's speech at the firm's annual staff meeting
WeChat, AI, Platform and Content Group, Cloud and Smart Industries Group, and games
Happy New Year! Today, on the third day of the Lunar New Year, I find myself at the New Orleans airport, eagerly awaiting my flight to New York. Halfway through my two-week journey across the United States, I've already reunited with many friends and plan to meet as many more as I can without wearing myself out. Thus, I've chosen Omaha as my next stop after New York (Feb. 12-13) and Washington, D.C. (Feb.14-15) in the coming week, hoping for a bit of rest. If any readers in Omaha are up for a coffee or lunch, don't hesitate to reach out. And if you fancy inviting Warren Buffett to join us, I wouldn't mind at all.
Today's newsletter features a speech by Tencent CEO Pony Ma at the firm's annual meeting at the end of January. I've chosen this piece because, despite Chinese tech companies entering a phase of cost-cutting and efficiency enhancement, shedding some of their former glory, they remain among China's most noteworthy enterprises. As the helmsman of one of these leading firms, Pony Ma's insights into the company's current strategic direction and future planning are particularly deserving of attention. I believe they offer a glimpse into the broader trends within China's internet industry and, by extension, some aspects of the country's current economic landscape.
Please note that the translation of the speech has not been reviewed by Tencent.
Briefing:
Tencent held its annual meeting at the Shenzhen Bay Sports Center on January 29. Pony Ma, Tencent's CEO and chairman of the board, reviewed the development of Tencent's businesses over the past year in detail and put forward plans for the future during his 35-minute speech. At the same time, he also pointed out some internal management problems. Power Plant obtained the transcript of Ma's speech on the day of his presentation.
Ma mentioned that he had toured the country advancing Tencent's transformation since he put forward the "Internet +" in 2015 and "930 Transformation" announcing “Take root in the consumer Internet and embrace the industrial Internet” in 2018. But in the past four years, he's rarely seen in public instead and concentrated on internal management and product development.
With regard to regulating the development of Internet platforms, Ma believes that it can also be regarded as an examination for Tencent, and he hopes that Tencent’s employees can take a moderate position on it. "When problems are found, we must correct them with a positive mindset. Let's be more optimistic, and I'm still very confident in the long-term development of the future." Ma said.”
Ma also said that confidence now is most absent from the political and economic environment. In January 2024, the Beijing Municipal Commission of Planning and Nature’s official website disclosed that Tencent got a plot of land in Haidian District of Beijing for more than 6.4 billion yuan (about 890 million U.S. dollars), which seemed to be an action of confidence boost. But Ma said that getting the land was not only to boost public confidence but also a deliberate decision. “Actually, we’ve deduced before we got the land in Beijing. This plan was ever delayed due to our concerns about our fiscal capacity and risk tolerance when other companies were decreasing cost for profit increase. Billions of investments is not trivial, and we have to think well of the rationality and running direction, or we will bottom out. Until last year, when the overall environment became clear to us and our business has been developing relatively stable, we decided to take the land in need."
Returning to the interior management, Ma once again stressed that each employee of a product-oriented company should spend more time to use and try its own products, it’s the only way to feel the users’ subtle experience. No one can success if he just focuses on development management instead of using and experiencing by himself the products made by his company. “Let all of us return to the product itself, the service, and the details. Think about whether we have tried our best by action or just made polished PPT reports to leaders. It is not enough to just manage up or down. Let all of us be down-to-earth, and no employee can be qualified without using his own products.”
Ma also remarked on business segments:
WeChat: Video Channel lives up to expectations, full development of Live E-commerce 视频号不负众望，全力发展视频号直播电商
This is Tencent's strongest platform for the whole ecosystem with the largest DAU, already 12 years old. The duration from prosperity to decline to the next transformation time for QQ is 12 years as well. Therefore, it may turn out to be a big problem for Wechat, an old tree, to send out new shoots.
Among BAT companies, it seems that we’re the only tree having a chance to send out new shoots while the other young trees thrive, which stresses us out at the same time.
[Note: BAT is the acronym for China's three largest Internet companies: Baidu, Alibaba and Tencent]
A year ago, I said that Video Channel is "the hope of the whole penguin factory (Tencent's nickname)". After development for over a year, it has lived up to our expectations and surprised us so much in the process of its growth. Therefore, we’re geared with effective equipment again after our loss in a short video in the past. The most important thing is that we are not doing the same thing as others, but combining our own characteristics and making short videos of acquaintance socializing.
Although our user group’s consumption power is very strong, the e-commerce knowledge we lack of should be learned by us timely. Therefore, we will fully develop Live E-commerce on Video Channel as E-commerce and advertising are complementary.
In addition, for Wechat, many “new shoots” are about to sprout, such as mini programs, mini games, search and so on. It is worth pondering how to make our products and services evergreen.
Game: Can't lie on the credit of our past success. Game going overseas is our company’s greatest prospect for internationalization 不能躺在功劳簿上，游戏出海是公司国际化最大希望
Game is our ace business and we currently claim to be the world's largest gaming company, as if we are lying on the credit of our past success. However, in the past year, we’ve been greatly challenged by the proliferation of new game companies and their new products, game trend shifting from gameplay to content, which made us a fish out of water suddenly. Actually, we also launched new products, but it wasn’t as good as we expected and seemed like we were not doing anything at that time. In the last two months, to join the market competition, we launched Dream Star, a new leisure party game designed for families. Although we are late to the competition, it’s not only a game for us, but has a social function as well, which is the core of our business so that we must go all out and combine all businesses for joint development.
Game going overseas is indeed our company's greatest hope for our company’s internationalization at present. Over the past few years, we’ve played to our strengths and built up a reputation in mobile games’ research and development and network operation of overseas big IP game companies. We strive to do a thorough and solid job in software and game development instead of being an enemy of other game companies or hardware manufacturers. It is more crucial that we should locate exactly our main business and focus on it so as to have a better chance of thriving.
Now let’s be revitalized and restored to the process where we stepped up from ranking a dozen to the top. Recall the difficult process of entrepreneurship that grants us the will to fight. Keep moving and never lie on the credit of our past success.
Tencent PCG (Platform and Content Group): “Incredibly tough” “特别难”
PCG is a collection of all our classic businesses, it's incredibly tough. Our biggest request to it last year was to survive. I hope that QQ can locate exactly its products in the future including the new test channels, some intelligent bodies maybe, making them widely known. In fact, many of QQ's products and services are good but unknown outside its user group. I suggested we encourage the users to return and lower the threshold so that users can even be login-free as anonymity. Lots of services and content can actually be consumed in QQ. We have to open our minds and be widely known, helping most of our products go global and serve in a different way.
PCG also has a lot of classic businesses, such as long videos (serials). Last year, Tencent Video rose abruptly based on its accumulated strength with three outstanding serials, "The Long Season", "Three Bodies" and "Blossoms Shanghai" making in the past few years. We prefer to make exquisite serials rather than common dramas, even though they costs more but it is worthy, especially for its reputations in public. The key to holding up the whole long video membership is a few big serials at least one per quarter or month. In the past, the common dramas cannot hold up, just serving as a pole to post ads with little value. Now what we need is a product able to hold up and the best product is the channel.
Tencent News has turned loss into profit through transformation and adjustment of organizational structure. At the same time, the browsers, Yingyongbao, Tencent's application download platform, etc. are being adjusted, as well as ReadWrite, Tencent Music, Huya, etc. have decreased cost and increased efficiency actively in the past year. It’s very effective.
Tencent Cloud and Smart Industries Group (CSIG): Projects besides crucial strategic products and basic inputs must deliver solid performance ASAP
除了特别重要的战略性产品和基础性投入，必须尽快上岸、浮出水面
Internet business services are very difficult in the rat race. We haven't even started yet while others are pouring in, including Huawei. Last year, we took the lead in proposing that we do high-quality development instead of low-quality one.
We ranked fourth in revenue and third in profit in the Internet platform business. Many people feel quite frustrated. However, quality and sustainability must come first. It can be the key that we have “new buds”, not the “old leaves”. As a result, we should think about each business of us: firstly, new business is not so easy to plow and we have to consider how to be evergreen in our own field; secondly, consider whether there are any new buds from your own branch, not from others’.
Many friend companies support seven or eight “brothers” and get along well with each other when their businesses run well while conflicts arise and the brothers feel that the money given is less when the businesses run bad. They have not yet woken up and are still spending a lot of money. I heard that Enterprise WeChat has been profitable. Congratulations! To B market is not easy.
Now we still have many products not surfacing, and they must land and surface ASAP besides crucial strategic products and basic inputs, which is an inner pressure at the same time. Now we must focus on our own strengths and productions, catching the gross profit of the three supply chains, SaaS, PaaS, IaaS, to the extreme and doing well in standardization.
We've recently caught a lot of CSIG and PCG's in anti-fraud. Especially CSIG, many of them are going for orders and hospitality, which is inefficient and non-transparent and really not suitable to us. Therefore, we must still focus on productions. We are being integrated while others buy our standard products to sell that our internal management is very clean.
The bigger impact on profits is FinTech Internet, which covers a large scope, the most important of which is payment as a big share of our business. It is the only one of our businesses that we have been asked to reduce our share, but we are also explaining that half of our so-called share inside which is direct debit from bank cards and half of it is transfer, not payment. As a result, we must avoid risk in the future as well as do some transformation on our products to show that we actually are cooperating with the bank. We just serve as a channel only, not a competitor. As for other financial products such as lending, insurance, etc. by Internet are our brand-new businesses. These products are young but I believe that there is a lot of room for development. Of course, we must pay attention to risk as well.
Other industries’ problems will affect our products. We are supposed to underwrite while many people think that we don’t need that legally. I think that obeying laws is important, but we also should shoulder the social responsibilities and obligations that we must be aware of risk. Financial products should compete with each other for safety, definitely not for speed that the faster the more dangerous.
AI: Not the lead, but at least not too far behind 不算最领先，至少没有太落后
Last year, AI was not only a core business for us but also for the whole industry and even the world. We can finally keep up with the first AI array. Although we aren’t the lead, but at least not too far behind. I think that we should also apply our AI big model Tencent Hunyuan to various scenes combined with different senses. There may not be a big pure native AI application born within one or two years, still needing combined with all of our products to enhance efficiency, etc. It is a great opportunity, I think.
After making a conclusion on the main businesses’ development in the past year, Ma returned to the interior management issues again and put forward some requirements and viewpoints on recruitment, layoff, reporting, and anti-fraud.
He thinks that Tencent should attach importance to small team spirit for management because it seemed a little embarrassed as the departure of many employees has brought a great impact on their families in the past for company’s cost reduction and efficiency. Therefore, he asked the managers to be more careful when recruiting because layoff has both advantages and disadvantages which can impact on the employees’ families. It is improper to hire people when the business runs well, then fire them all after two months’ probation period. He thinks it is irresponsible to do so. Recruitment and management should be implemented carefully. Just try in the small team first if it is not considered clearly. Don’t rush.
He also cited an incident at PCG as an example. There were three referral teams in PCG originally, which later merged into one team, including the search team. He also wanted to integrate it with the other search teams in the company. It's important to combine forces to make it work and not just about saving costs. It's about minimizing the moron index, otherwise you'll look like a moron, and that's the biggest insult of them all.
At last, Ma talked about anti-fraud. He said that Tencent announced lots of anti-fraud cases every year, but there were still some people involved in it. Now Fujitani system can half help find the fraud by its digitization ability, which has found half of Tencent's anti-fraud cases by its digital management of various vendors and documents automatically.