Tencent announced that it will start shifting focus on cloud computing investments as its gaming arm continues to slow down. The announcement has been translated by experts as the gaming giant's way of standing up against archrival Alibaba Group.
Multiple outlets reported on Thursday that Tencent will step up its cloud computing investments this year and beyond. The Shenzhen-based company said it will boost its activities in the data analytics and artificial intelligence (AI) sectors, the South China Morning Post reported.
The firm further explained that its cloud computing operations will promote customized services for various sectors such as healthcare, education, retail, and financial services. "We not only expect the cloud business to contribute to company revenue, but also serve as the platform connecting the consumer internet and industrial internet," Tencent founder, chairman, and chief executive, Pony Ma Huateng, said.
Industry analysts noted that Tencent's move will further heighten its rivalry with Jack Ma's Alibaba Group Holding. One of Alibaba's subsidiaries, Alibaba Cloud, is currently China's largest cloud services provider and is gaining traction worldwide as it plans further expansion in international markets.
Alibaba Cloud is already catching up with some of the world's largest providers including Microsoft Azure and Google Cloud. However, Tencent is looking to run the race as well, with its plans of dominating basic services. In fact, the firm has already seen profits in some of its segments such as finance, advertising, and online payments.
The Chinese gaming behemoth fell from its throne with a 32 percent drop in profits, as stated in its fourth quarter 2018 results. However, the company has acknowledged that cloud computing is the way to move forward.
Tencent's gradual shift to cloud computing is one of its methods in curbing the impact of Beijing's freeze on game approvals. The Chinese government has been filtering gaming content as part of its efforts in controlling violent content from entering China's massive online kingdom.
In its Q4 2018 results, the firm revealed that revenues from its social network arm increased by 25 percent due to increased video and live streaming subscriptions. This particular segment accounted for a total of 22.9 percent in overall revenue. The development in social network growth is attributed to its improvement of original content as it continues to fend off rivals like iQiyi.
Tech Crunch reported that the "others" category, including cloud computing and fintech (financial technology), saw significant progress. These categories ballooned by 71.8 percent, accounting for 28.5 percent of the company's total revenue for the year.
