Dear Mr. Ma Huateng, Mr. Liu Chiping, Mr. Ren Yuxi, Mr. Zhang Xiaolong, Senior Manager of Tencent Company, Head of each business group
Editor’s note: This article is from WeChat public account “Internet and Entertainment Strange Group” (ID: TMTphantom), author Yu Pei.
This article only represents the personal views of the head of the thief, and does not represent any unit or organization to which it belongs; in the process of writing this article, the head of the thief has maintained strict neutrality and has not received any foreign Stress or induction. The purpose of this article is to provide Tencent management with some information, opinions and logic that it understands and does not constitute any investment advice.
The respected Mr. Ma Huateng, Mr. Liu Chiping, Mr. Ren Yuxi, Mr. Zhang Xiaolong, the senior management of Tencent, and the heads of each business group:
Hello.
Tencent has always been one of the most watched Internet companies. Recently, there have been a lot of reports and research on Tencent: Is it good to report in the second quarter of 2019? Why is Tencent’s recent revenue growth slower than Ali? Is Tencent missing the next whistle of the Internet? What was the effectiveness of the organizational restructuring in October last year? … too much information, too many views, people’s purpose is not simple: some people are seriously studying and analyzing, some people are taking a glance at it, some people just want to make a big news, and some people are purely making up .
Today, I am writing this letter to you, purely in your personal capacity: an ordinary and active Internet user, an Internet industry enthusiast and researcher, an outsider who is very fond of Tencent and its products. I haven’t worked in Tencent for a day, but I have countless friends in various business groups; I don’t own Tencent’s stock, but I have discussed the future of Tencent with countless investors. Of course, my understanding of Tencent is definitely far from being deep into you; however, the authorities are fascinated, bystanders are clear, maybe I can provide some meaningful arguments and arguments, and help you to a certain extent? That would be great.
Opening the righteousness, let me talk about Tencent’s view today: There is no real crisis, but the storm is gathering in the sky. Now is the time to prepare for the battle. As long as the preparation is good enough, the crisis can be avoided. As Churchill is atAt the beginning of the “Memoirs of the Second World War”, I sighed: If the preparations were prepared, the war can be avoided, and huge losses can not happen. At this moment, the outside world does not doubt the business stability and short-term profitability of Tencent. What they suspect is whether Tencent can stay ahead and keep it for a long time (for example, the next decade). Tencent’s competitors are energetic and clear-cut, and Tencent seems to be a bit slow and embarrassed. It doesn’t matter! As long as changes are made and correct changes are made, Tencent will continue to be great.
Below, let me say a little more. My views can be summarized as: three big problems, nine solutions.
Three big questions:
First of all, “two Tencent” – “Strong Tencent” and “weak Tencent” coexist, and the latter takes up too much resources.
Secondly, the media and content business is dead, inefficient, and can’t keep up with the times.
That again, Tencent’s historical advantage – free and open culture and management – requires some adjustments.
Nine solutions:
1. Completely reorganize all businesses and personnel related to the original OMG (Network Media Group);
2. Strengthen cooperation with fast hands at all costs;
3. As soon as possible, solve the problem of insufficient channels and inefficiency of WeChat small program merchants to obtain traffic;
4. In the financial technology and enterprise service business, give the WeChat team greater authority;
5. Increase long-term investment in the game business, especially in 3A games, console games, interactive narrative products;
6. Accelerate the pace of overseas expansion, in the short term, you can not assess the cost and benefit, only assess the user, strategic significance;
7. Through the acquisition of the entrepreneurial team, etc., a large range of fresh blood will be introduced to promote the department head;
8. Give PR, IR department more resources, higher authority, greater coverage;
The results of the organizational restructuring in October 9.2018 must be inherited, unwavering, and not going back.
The first big question: “Two Tencent” – “Strong Tencent” coexists with “Weak Tencent”, and the latter takes up too much resources.
Tencent is not strong in the end? Depends on what you seeWhich business and which team. The game team (IEG), especially the Tianmei, Photonic Studio group, and the distribution line and operation line, can be said to be very strong; WeChat team (WXG) is strong in all aspects, there is no doubt; mobile QQ team (Subordinate to the original SNG, now PCG) is also very strong, and the foundation among young users is particularly strong. All in all, the aspects related to WeChat, QQ, and games are very strong. In addition, the investment behavior of the strategic investment team in the CDG is remarkable, and it has formed synergy with the main business and should be fully recognized.
However, what about other teams? Tencent News, Daily Express, Now Live, Penguin E-sports, and Micro-vision are all ready-made failures. Even the seemingly powerful Tencent video, Tencent animation, the input-output ratio is not high. At the group level, advertising business has always been a difficult problem, and it is also the problem that investors are most ill. One of my former Tencent friends once spit out: “When the penguin came out, it was discovered that the penguin’s efficiency was so low, it was not what I imagined; later I realized that it was because I was not a strong department of penguins.” Former Tencent partner said more straightforward: “In Tencent, there are a lot of marginalized, stagnant and even decadent teams, where the days are completely ok, and the price is very high.”
It’s not surprising that any company has a strong business and a weak business. In Tencent, this separation is particularly evident, showing the trend of “stronger and stronger, weaker”. In my opinion, this is determined by Tencent’s “federal decentralization” management system and free and open corporate culture. Because the high-level respects the independence and initiative of the business sector, it rarely intervenes drastically, resulting in the accumulation of gaps in various departments and the loss of balance. Should the weak sector be stronger? Not necessarily, but one principle must be clarified: resources should be invested in the most efficient places, and “weak Tencent” should not be allowed to crowd out the resources of “Strong Tencent”. Whoever has a low input-output ratio, whoever loses input is a big principle (of course, can be tolerant in innovative business)!
The second big problem: the media and content business is dead, inefficient, and can’t keep up with the times.
The “weak Tencent” business has one thing in common: they are both media business and pan-entertainment content business, mostly from the original OMG, and a small part from the original SNG. Some people think that Tencent’s media business is not doing well, it is affected by the byte jump; but, assuming that the byte beats this company does not exist at all, is Tencent’s media business good? On the contrary, whenWhen Tencent Weibo lost to Sina Weibo, Tencent Video and iQiyi were struggling, where is the byte beating? If there is no headline today, can Tencent News become the most profitable information flow application in the country? If there is no vibrato, can micro-vision defeat the fast hand, second shot, and small coffee show? As early as two years ago, a friend of Tencent said: “News and video are two shortcomers of Tencent, and it is very difficult to make up.” If you don’t do long video, live broadcast, interest reading, Then you obviously can’t make a short video.
Why is Tencent’s media business so weak? In all fairness, the media platform that emerged in the Web 1.0 era has faced bottlenecks more or less in the era of mobile Internet: Sohu and Netease’s news portals have been marginalized, Sina has transformed through Weibo, and Phoenix has transformed through a little bit of information. Tencent also It is impossible to be an exception. The original OMG was originally a weak business group of Tencent, and the original SNG media business received insufficient attention. In October 2018, most of Tencent’s media business was incorporated into the newly formed PCG; this large-scale integration will take some time to make a real impact. Some people will say: If you save more money and save money, you can always pick up the media business. The question is, which competitor did not save money in this area? Who can save money without restrictions and without focus?
Tencent’s best media business – music, is operated independently. In the field of paid subscriptions and show live broadcasts, Tencent Music is very combative and does not rely entirely on Tencent’s traffic advantage to win. Half of Tencent’s business comes from mergers and acquisitions, and the other half comes from the incubation of the original QQ team. This proves that by introducing external fresh blood, integrating with a strong internal team, and giving enough freedom, you can do a good job in media business. I will discuss this in detail in the subsequent paragraphs.
The third big problem: Tencent’s historical advantage – free and open culture and management needs to be adjusted.
Undoubtedly, Tencent’s corporate culture is free and open, and eclectic; Tencent’s management style is “federal decentralization” and the autonomy of the business team. Tencent never bothered to “brainwash” and did not care about the “mountain” inside. Therefore, in history, Tencent’s management team and even the middle-level backbone have maintained strong stability. Tencent is able to acquire large-scale game companies in Europe and the United States, respect their autonomy, let them continue to develop good products, and maintain good relations with associates and strategic investment targets. At this level, Tencent often reminds me of the United States: it seems that no one is managed at all, but it is a world.A better country managed by the world. It is often suggested that Tencent learns Ali, learns to jump in bytes, and learns to use Xiaomi. This is precisely the hustle and bustle of not knowing history and not understanding culture!
However, everything has both normal and state of emergency. The storms of the day are gathering, and it is necessary for an organization to temporarily sacrifice freedom and exchange for execution. Franklin Roosevelt was one of my most respected historical figures. At the critical moment of World War II, he greatly enhanced the cohesiveness of the United States, mobilized the enormous productivity of the United States, and let the American people wholeheartedly devote themselves to a triumphant war. Roosevelt’s “short-term centralization” did not undermine the US’s “free decentralization” tradition. Tencent should also learn from history, mobilize all departments from top to bottom, improve overall synergy efficiency, and win the war ahead. It must be pointed out that even if Tencent is to “centralize” again, it still respects the independence of each department; and then “cohesion”, it is also not brainwashing or making a statement. I have deep confidence in this.
In terms of foreign investment, Tencent has always been a joint venture and strategic investment in history, and rarely conducts comprehensive mergers and acquisitions; in contrast, Ali and bytebeat are often engaged in mergers and acquisitions. Whether it is a good merger or a joint venture, there is no unified answer to this question. However, at the critical moment of the transition, mergers and acquisitions may have a greater impact – companies that incorporate a consolidated system can share data, technology, traffic, and fresh blood with the parent company to explore new business models. I believe that many unicorn companies do not exclude the acquisition by Tencent, because Tencent has always respected the team’s independence and merits. I have some personal suggestions on M&A targets and will be mentioned in detail below.
Proposing a question is only the beginning, the key is to solve the problem. As an outsider, I can’t come up with a very detailed solution, nor can I familiarize myself with every detail of Tencent’s vast business. I know that as the management of one of the world’s largest Internet companies, you must shoulder the heavy pressure, the schedule must be full, and there must be more things than I think. However, precisely because you have received too much information, perhaps you need the idea of an “outsider” like me, just as adults also need to listen to children’s words.
Must be pointed out: I object to the simple and rude understanding of Tencent’s problems by most media and researchers on the market. I object. I firmly oppose it. For example, there have been many articles on the market that have failed to discuss micro-visions. They are either blamed on executives such as Liu Chiping and Ren Yuxi, or they blame PCG should not be established, or even rise directly to the “enterprise gene” level. The above points can attract attention, but it is completely wrong! One year of accumulationHow can the problem be attributed to the executives who have been in charge of the business group in recent years? How can we negate the organizational restructuring that the company is fully committed to because of the failure of a product? These simple and rude logics are very “floating”, floating in the sky, not grounded, will only disturb the understanding of grassroots employees, not worthy of management’s reference. Let me talk about some immature solutions in my mind.
1. Completely reorganize all businesses and people associated with the original OMG (Network Media Group).
If a business group is often defeated and the input-output ratio is always low, then it must have a big problem. Don’t get me wrong, I know that the original OMG has a lot of talents, but on the whole, it is extremely inefficient and lifeless. In May 2017, OMG made a large-scale internal adjustment; in October 2018, it was integrated into the newly established PCG. However, the problem has not been completely solved – then continue to reform drastically! From the powerful departments inside Tencent, people are introduced, and talents are introduced from the outside, and even the product matrix is completely overthrown. Some people may ask: If you do this, there is still no improvement? Then close the business or sell it! We have to calculate the “opportunity cost” account: the huge purchase cost of Tencent video consumption, the huge amount of traffic consumed by micro-vision, if used in other businesses, the ROI is almost certainly higher.
A few weeks ago, I had a friend who wanted to join a department of Tencent’s original OMG. I helped him find a friend of the department to inquire about the situation. The other party answered quite frankly: “We are not doing well here, we don’t see hope, we don’t recommend him to join.” The problem is in the front line, in the executive team, out Over the years, the suffocating burden has been hard to return! The Internet industry is going to transform the traditional media and content industries, but the original OMG has been “reformed” by traditional media. People say that the byte-hopping media business is doing well, precisely because it avoids the suffocation of traditional media!
The funny thing is that most of the articles on the market that discuss the reasons for the failure of micro-vision and daily express, but blame the other business groups for not cooperating, blame the responsible person in charge, and even what “Tencent lacks technical middle platform” Tencent has no media genes, and so on. The first person I first heard that the food was not prepared was not the cook, but the waiter or lobby manager! The responsibility for shirking is here.
2. Strengthen cooperation with fast hands at all costs.
In the past month, Tencent’s claim to acquire or strategic investment has been widely spread. If thisIt is a fact, I am very much in favor. Fasthand is a vigorous team, which has opened up the gap with the market positioning of Vibrato, has absolute dominance in the sinking market, and moves quickly in application function expansion. The “savage growth” of the fast hand is exactly what Tencent needs most now! The best policy is to fully integrate the fast-hands into Tencent’s system (consolidated), but the quick-hand management team may hardly agree; the Chinese policy is like a lot of work, like the US group, and establish a comprehensive and harmonious cooperation with the fast-handed; the next strategy is to increase some investment. I believe that you will definitely not make a decision.
The quick-handed thing is exactly what Tencent didn’t do well or temporarily do: short video, live broadcast, small store… If they are willing to accept the merger, why not take their team directly into Tencent each Business, fully integrate the products? Even if it is impossible to acquire, the fast traffic pool and content pool of Tencent and Tencent can also spark more sparks. Some people suspect that the fast hand and WeChat, QQ’s tonality is not very consistent, can there be synergy? Really short-sighted! What fast hands are best at is the rapid iteration of the product, and now has a broader product matrix. As long as the fast-handed and Tencent become a family, and maintain the original team’s right to speak, are you afraid that you can’t make achievements? In the face of this fleeting opportunity, cost should not be overestimated – strategic value should always be placed above financial value.
3. As soon as possible, solve the problem of insufficient channels and inefficiency of WeChat small program merchants to obtain traffic.
Last night, I chatted with a WeChat applet operator. He is doing the pet supplies store, and has opened stores in Taobao and WeChat. He said: “We can only rely on ourselves to drain, from WeChat group, WeChat friends, and Taobao. Can you imagine that even if you secretly divert from Taobao, it is cheaper than the internal diversion in WeChat!” I asked: “How? Don’t try the advertising circle of friends and the public?” He exclaimed: “The advertising threshold of the circle of friends is too high, and the conversion rate of the public number is too low. Moreover, WeChat is still continually cracking down on induced forwarding, and it will be closed!” I asked again: “Why don’t you try passive traffic entry?” He smiled bitterly: “Passive traffic can only come from the ‘small program nearby’. Do you think there are several people coming? The newly opened good object circle is no one at all. Use.” His conclusion is: “WeChat is really disappointing to me, mastering huge traffic, no action.”
I believe that the WeChat team must have its own considerations, and Zhang Xiaolong will definitely put the user experience above short-term profit. However, the predicament of the WeChat small program business must be resolved. I have always believed that e-commerce and O2O are the mainstream of the small program in the future, and the most profitable part. To solve the bottleneck of the advertising business, it is not enough to simply add a few advertising spaces. It is necessary to proceed from the form. Establish a perfect small program diversion mechanism to improve the conversion rate from advertising to trading behavior, small program businesses will rush to send money to Tencent advertising. The problem now is that WeChat has no intention of releasing more advertisements and has no intention of conducting centralization and diversion. The conversion rate of existing advertisements is not high. Like, WeimengThe service providers are trying their best to help the small program business to find customers; why can’t Tencent itself do more? This requires the cooperation of WXG and AMS.
4. In the financial technology and enterprise service business, give the WeChat team greater authority.
Since its inception in 2013, WeChat has spent more than five years, becoming the leading third-party payment platform with the highest number of transactions in the country. This is a great achievement. However, the strong battlefield of WeChat is micropayment, offline payment, and social payment. In the lucrative wealth management and loan business, the gap between it and Alipay is still very large. Tencent wants to further enhance the contribution of financial business, it is necessary to strengthen cooperation with financial institutions and enhance understanding of the entire financial industry. Due to historical reasons, Tencent’s financial business is fragmented: the front desk is mainly WeChat payment (and QQ wallet), and the background is mainly FIT (financial technology business line) under CDG. Do the two need further integration? As we all know, WeChat is a powerful and combative team. Can it be allowed to vertically integrate financial services? Of course, Mr. Zhang Xiaolong will not necessarily agree with such integration.
In the Business Services (2B) business segment, WeChat is also an important fulcrum. Under the blessing of small programs, WeChat is absorbing many functions of the mobile app store and even the operating system. Government agencies definitely want to use WeChat to carry out people’s livelihood services, and companies also want to use small programs and WeChat payment to develop their business. Especially in the battlefield of smart retail, the strategic significance of WeChat cannot be overestimated. WeChat is like a “roller”, the action can not be very fast, but the volume is huge, there is no weakness. I know that Mr. Zhang Xiaolong is more inclined to maintain a small and sophisticated WXG; even so, he can still be more active in empowering CSIG. A single CSIG has little chance of winning in front of competitors; CSIG + WXG’s joint offensive can make competitors desperate.
5. Increase long-term investment in the game business, especially in 3A games, console games, interactive narrative products.
The game is the jewel in the crown of Tencent and Tencent’s most efficient business segment. From years of contact, I can feel that Tencent is very serious and crisis-conscious about the game business. There are always some inexplicable remarks that “Internet companies can’t rely on games” or even “games don’t count on the Internet” is simply not worth refuting. I also disapprove of the so-called “game business is close to peaking”The argument. In contrast, 2020 may be the beginning of a new growth in the global gaming market, as the ninth generation of consoles (the next generation of PS, Xbox) will be available, global ray tracing technology will be prevalent, and VR/AR games will be sufficient. Computational support. The game market peaks? The good show is just beginning!
The Tencent game department has a weakness: too much emphasis on income assessment, insufficient preparation for long-term innovation and creativity. In the threshold of the new era, Tencent needs to prepare for the advancement of the geometric progression of next-generation game technology; it needs to prepare for the emergence of “domestic 3A games”; it is necessary to pay attention to console games. Tencent and Nintendo signed a contract with Switch this year, which is a good strategic deployment. At the same time, Tencent’s “Invisible Guardian” can be said to have opened a new page in the interactive narrative game. I have seen many “interactive narrative products” that follow the trend of friends, and most of them are worthless. In this market, we will continue to cut into a large cake in the film industry with the promotion of quality. It is necessary to invest more in these innovative categories, regardless of cost.
6. Accelerate the pace of overseas expansion. In the short term, you can not assess the cost and benefit, and only assess the user and strategic significance.
By the acquisition of Musical.ly, Vibrato gained the fulcrum of overseas expansion, and later officially merged Musical.ly into TikTok. Through the acquisition of BIGO and IMO, the gathering era greatly accelerated the speed of overseas expansion and achieved valuable movement. Social products. In contrast, Tencent is too slow in overseas mergers and acquisitions. Of course, in terms of games, Tencent is doing a good job: it is very wise to acquire Riots, associate Epic Games, buy a majority stake in Supercell, and invest in BlueHole. However, there are so many things to do outside of the game.
Tencent’s market capitalization and cash reserves are comparable to those of global first-tier Internet companies; the valuation of global second-tier Internet companies is generally 1-2 orders of magnitude lower. In other words, Tencent has the financial resources to acquire a number of second-tier Internet companies. Strictly speaking, Tencent has a lot of overseas operations, but it is concentrated in the joint ventures; the joint venture company is bigger, its users can not be counted in the Tencent system, the income can not be consolidated, and it is impossible to completely open the business. Should Tencent consider completely acquiring some overseas affiliates? Although this will take the risk of “unacceptable”, this risk is worth the risk.
7. By acquiring a startup team, etc.