As Tencent seeks new development opportunities outside its core online video games sector, the China-based firm has announced it will release new cloud computing solutions geared at global markets.
According to CNBC's report, Tencent will introduce cloud audio and video solutions for countries beyond China this coming Thursday, Dec. 1.
Economic Slowdown
Given the downturn of the Chinese economy, Tencent has made the decision to expand its operations overseas.
Chinese technology firms are under increasing domestic regulatory pressure on top of the ongoing threat posed by international Covid outbreaks.
There has been a negative impact on Tencent, particularly from the increased oversight of online gaming.
Tech Times reported last year that Beijing instituted regulations indicating people under 18 could only play online games for a total of three hours a week.
For a few months, authorities also slowed game approvals, making it impossible for businesses like Tencent and competitor NetEase to release and profit from new games.
There may be a truce in the gaming crackdown, but it has not spared Tencent. The third quarter saw a 7% decline in domestic online gaming revenue compared to the same period last year.
The Cloud Computing Sector
Online gaming is Tencent's second largest revenue source. Therefore, any downturn in this industry would be disastrous to the company's financial health.
The company's leaders in Shenzhen see cloud computing as a potential bright spot. The cloud computing segment of Tencent, which is part of its fintech and business services sector, rose by 4% year over year in the third quarter.
For expansion, China's IT giants are not only eyeing new domestic markets but also international ones. Alibaba, a Chinese e-commerce giant, has expanded internationally via the popularity of its AliExpress and Lazada brands, while Tencent has achieved great success with its online gaming.
Reports say Tencent is putting all of its eggs in the cloud computing basket at the moment. Products introduced on Wednesday are mostly audiovisual in nature, such as live streaming for e-commerce or virtual meetings.
Products are designed for businesses that need these services but do not want to deal with the hassle of setting them up or maintaining the requisite infrastructure, such as servers.
Business Strategy
Tencent's approach may center on wooing foreign businesses having a footprint in China, as well as Chinese enterprises going worldwide. Some of Tencent's cloud offerings are already in use by industry heavyweights like BMW.
The Chinese company's international expansion will place it in direct competition with Amazon and Microsoft, two of the most prominent players in the highly competitive cloud computing business.
With regards to cloud computing, Tencent's foreign effort came a few years after competitor Alibaba ventured outside of China.
Alibaba quickly became one of the world's top five cloud computing companies.
As one of the biggest gaming businesses in the world and the owner of WeChat, China's most popular messaging app with over 1 billion users, Tencent is well-positioned to capitalize on the growing demand for audio and video services.
