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Tencent cuts noncore businesses to get through economic downturns

Aron Chen

posted on June 21, 2022 9:30 am

Tencent Holdings has cut noncore businesses to get through economic downturns amid a recent Covid-19 outbreak in China.

The Chinese social media and gaming giant has announced the termination of Kuai Bao, its news aggregator app, by the end of next months.

Users will not be able to log on and use Kuai Bao from July 18, because the app will be removed from domestic online app stores.

Explaining the rationale behind the decision making, Tencent explained the move as part of normal business restructure for its news operating starting in May, adding that Tencent News App will not be affected by the move.

Kuai Bao, which was designed as a competitor of ByteDance-owned news aggregator Jinri Toutiao, leverages algorithm-generated recommendations to provide users with content based on their preference and browsing history.

With Tencent’s two core business of social networks and entertainment, Tencent has competitive advantages to capitalize on news content, which is an important medium for acquiring knowledge, entertainment and shopping,

However, Kuai Bao has failed to leverage Tencent’s ecosystem to remain competitive against its rivals, and it lagged behind its rivals including ByteDance’s Jinri Toutiao, Sina News and NetEase News,

Within the Tencent ecosystem, many of WeChat’s users choose to read news articles through the multipurpose app, rather than read them via the company’s news services.

Tencent reported flat revenue growth for the first quarter, which its slowest revenue growth since going public in 2004.

The Hong Kong-listed internet giant, which runs the world’s largest video gaming business by revenue and China’s largest social media platform, reported revenue of 135.5 billion yuan (US$20 billion) in the quarter, barely up from 135.3 billion yuan a year ago.

The company's core gaming business was lackluster. Domestic game revenue fell 1% year-on-year in the last quarter. According to the company, recent measures to protect young gamers in China had directly or indirectly affected the number of paying users.

Even the international games business, which posted satisfactory growth last quarter, was slowing, with revenue up just 4%.

In order to streamline its operation, Tencent has cut tens of thousands of jobs this year in one of their biggest rounds of layoffs as it implements cost-control initiatives.

The business downsizing follows similar moves by other Chinese tech giants, including ByteDance and Alibaba.

TikTok owner ByteDance last week shut down a Shanghai-based game development studio that it acquired three years ago, cutting more than a hundred jobs as result of it. Over the past year, ByteDance has shut down most of its online tutoring operations, its social networking platform Feiliao and fashion retail app Dmonstudio.