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Tencent executives: High subsidies for opponents in the payment sector, we plan to follow up

via:网易科技     time:2018/5/17 8:01:48     readed:62

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The following is the main content of this conference call question and answer session:

Morgan Stanley analyst Grace Chen: My question is related to Tencent's game business. At present, Tencent holds an irrevocable leading position in domestic games. We are very interested in Tencent’s overseas expansion strategy. Want to ask whether Tencent will seek the help of a strategic partner when expanding overseas market, or will it complete it independently? How to manage overseas partners? How does Tencent use the e-commerce business opportunities in domestic and overseas markets?

In the past, we believe that our games are only suitable for Chinese players and not suitable for other markets, because each region has its own culture and different consumer behavior. However, according to the performance of Tencent games in the past two years, Chinese domestic games can also be added to the international arena. One of the more successful examples is the battle simulation game. A few months ago, when we were on the West, we got a huge amount of downloads and positive feedback. Our team has gradually established user stickiness in the Western market. As far as we are expanding overseas markets, we are acting alone or seeking cooperation, depending on the geographical situation. For example, in Southeast Asia, Tencent subsidiary Garena successfully released several games in this market. In addition, the content of the game itself must also be considered. Therefore, in the process of expanding overseas markets, we will continue to try to obtain the best strategic plan.

Regarding eSports, as you said, many games such as "League of Legends" are evolving toward e-sport games. However, at present, we still consider e-sports as a way to increase the participation of existing users and attract new users. We believe that e-sports is likely to be a potential source of our future profits. For this reason, we have conducted some experiments, especially on "League of Legends." However, e-sports are still mainly a means of giving back to players and attracting new customers.

JPMorgan analyst Alex Yao: For the quarters after this year, the company's forecast of end-game profit growth? At present, the company mainly increases the number of mobile game users through the e-sport tour. What is the company's business monetization strategy for these games with huge daily active users? What factors currently hinder the commercial realization of the company's survival shooting game?

Liu Zhiping:For end-user profits, we have already talked many times before, and many former end-users gradually shifted more time to mobile games. In the first quarter of this year, the growth of end-user profits was partly due to seasonal factors. In the future, the transfer from end-to-end travel will continue to increase. Because of this, the revenue of the end-user business may go down. At present, we believe that the tactical tournament may be the most promising model in the game industry after the success of the game in the past five years. Through the effective implementation of the mobile game marketing strategy and the support of strategic partners and investors, this model has gained more users for the company. In China's mobile game market, realizing commercial realisation requires the approval of a supervisor, so it will take some time to complete and we will continue to work hard for it. Of course, once we pass the certification, the mobile game business will become an important source of our future revenue.

Paige analyst Karen Chen: The company has already begun the user pre-registration of Fortress Night in China. What is the plan for the promotion of the time? Prior to the company launched a small game in the shortvideoAdvertising, the current business process of realizing this form of business? And the realization of the ads and product purchase links inserted in the mini-games?

Liu Zhiping:The pre-registration of "Fortress Night" has already started, but we still need to wait for the approval of the relevant departments before we can officially launch the game, so for the specific launch time is still uncertain. For the process of commercial liquidation of small games, we are still in the experimental stage. We hope to create a healthy and sustainable ecosystem for small gamesDevelopmentThe people can also profit from it. Therefore, we regard small games as an important development direction in the future. Not only can we create value for us, but it can also make every participant in the ecosystem profitable. However, the current mini-games are mainly limited to the Android environment.

Goldman Sachs analyst Piyush Mubayi: "Dungeon and the Warriors" performed well in the first quarter, while other players were not as good as the game. What is the possible reason?

There are many possible reasons behind this, of course, "Dungeon and the Warriors" is very important to our entire game business, and we are very satisfied with its current performance. However, one of the reasons for the difference in current revenue performance is that game developers tend to publish cash revenue reports on a quarterly basis, and we, as game publishers, report on revenue-earnings amortization, and therefore are inconsistent in timing. The second reason is that we will step up marketing promotion for certain specific games at certain times, and stop artificial promotion investment for the rest of the time, which means that some of our game products are in a “stagnation period” this year. Third, as Mr. Liu said just now, due to the continuous improvement of the quality of mobile games, the growth of the domestic end-game market has gradually become slow. Since the game "Dungeon and Warriors" has been published for ten years now, we are still very satisfied with its performance. The revenue performance of other games will show ups and downs, mainly due to the shift of end-user users to mobile game users.

Merrill Lynch analyst Eddie Leung: My question is about the market competition for mobile news applications. With the constant innovation and change in the mobile news app, what is Tencent's position in this market compared to a year ago? What is the structure of the industry in the future? Will there be more integration or competition in the market in the future? Can management analyze the possible reasons for the drop in operating cash flow from the previous year?

Liu Zhiping:I think your question may be more about the information flow industry. In the past year, the entire industry has undergone many major changes. Prior to this, the main forms of the information flow market were the news mobile client and the WeChat public account. The latter promoted the emergence of a large number of self-media. With the introduction of machine learning technology, information flow content can be communicated to users in a more efficient way. In the beginning, the main content of information flow was text and pictures. In the past few years, this form has brought the peak of daily active users and user participation to Tencent's information flow. Subsequently, the short video was launched as a new form, and the user's browsing time increased accordingly. Later, there was a micro video format again. Short video is usually 1 to 5 minutes, while micro video is only 15 to 30 seconds in vertical video format. We are constantly doing the "goers" in this industry.

Tencent is in the leading position in the entire news media industry. We have news app, WeChat and QQ news plugins. At present, the WeChat public number will still maintain a huge amount of views every day. Information flow is a very important business section for us and can provide our users with a variety of "tailor-made" information and different forms of media. This is why the company is trying to integrate the content of each platform through the news push service. The "spot" APP has successfully achieved this integration. Currently, the number of daily active users has exceeded 80 million and has maintained a very strong growth since last year.

In addition to the construction of the platform, we will continue to build more media formats, such as boosting the amount of short video pushes in watchpoints, mobile browsers, WeChat news, news clients, and newsletters. At the same time, micro video was re-introduced on the micro video platform to provide micro video push for Tencent's social media and browsers. The advantage of micro vision is not only to provide users with PUGC (professional user production content), but also to provide exclusive content for Tencent's long-term video, music, sports and other exclusive content. Therefore, micro-viewing can not only push content on its own platform, but also push micro-video on our other information flow platforms.

Luo Shuoyu:The decrease in operating cash flow during the quarter was mainly affected by the payment business compared with the same period of last year. The payment service will incur a certain amount of fees. Some years are paid at the end of the year when it is in the first quarter. This year our payment was completed in the first quarter because of the drop in operating cash flow.

Citi analyst Alicia Yap: My question is about the ecosystem of applets. More and more companies have expressed that the WeChat applet and WeChat public account have helped them successfully carry out brand promotion and marketing. Will the company worry that more merchants will lead to "crowding" and affect the user experience? In addition, in addition to payment and advertising business, WeChat retail public number have any profit method?

Liu Zhiping:The original design concept of the applet is "light", it can be easily found by the user, it is easy to use, and it disappears from the interface immediately after exiting. It is very user-friendly. You can find that we did not design a fixed location for the WeChat applet, but instead hide it as much as possible on the user interface. In order to provide users with a convenient entrance, we designed a drop-down menu to present applets. Therefore, there is no situation where the applet is too "crowded". We also strive to make each individual WeChat applet have its own way to reach users. A more natural way is to recommend it through social programs.

For the commercial realization of small programs, we currently do not have much consideration, but more attention and how to continuously strengthen the WeChat ecosystem. We are convinced that if the ecosystem of small programs is improved, many realized business segments will benefit, such as payment services, advertising systems, and cloud computing. Finally, applets are a good way to promote applications. For example, mini-games have promoted the download of many domestic games. For many foreign companies and developers, the development of mini-programs can be used as the first step into the Chinese market, after the accumulation of a certain number of users, then go to the localization of the game. This approach can also help us to constantly improve the ecosystem.

Wendy Huang, an analyst at Macquarie, said that the company’s payment industry achieved a three-digit increase in the quarter, while a gross margin of 25% has reached a record high. But will the regulatory system in place on April 1 and competition from Alipay lead to marketing and profitability in the rest of the year? In addition, in terms of e-commerce, the company has more retail partners in the quarter, such as the establishment of the entrance of Mushroom Street and Vipshop in the WeChat wallet. What are the different cooperation strategies in the face of different partners?

Liu Zhiping:For the payment business, we are pleased to see more and more offline merchants begin to accept WeChat payment. At present, we have obtained a sustainable market share. For competition, the pressure from competitors is great and they provide a very high subsidy. We intend to provide users with similar subsidy measures to gain market share, but this will also increase marketing costs and ultimately affect the overall conversion rate of the company to a certain extent. Of course, our subsidies to users will continue because other competitors will continue to subsidize measures. In other words, these subsidy inputs and marketing promotion will help the entire payment market expand, and then benefit all parties. We believe that our special position in the social payment market and the convenience provided to users will give us a competitive advantage.

For WeChat wallet partners, we believe that each company has its own unique market position, such as product categories and product marketing. With WeChat as an entrance, we help these companies gain more unique advantages in the market competition and gain a lot of good reputation on the social platform.

Barclays Bank analyst Gregory Zhao: We see Tencent's many social software such as WeChat, QQ, etc. have gained more and more user time, and added many new features and information flow forms, such as long video and short video, etc. . Can management provide a brief analysis of the dynamic changes in user use time? For example, changes in user usage time in games, video and video services.

Liu Zhiping:First of all, it takes more and more time for everyone to use the Internet. For long video and short video applications, we can observe that, first of all, they are a content-based service and therefore have little impact on the length of our social media users. Second, this kind of content belongs to professional users' production content and user-originated content. Tencent has a strong competitive advantage in the production content of professional users, and it occupies a dominant position in the entire market in news, music, literature, and sports. Under normal circumstances, the impact on the production content of professional video users is very small. In the last quarter, the new page views of our videos increased by 60% year-on-year, and both the number of daily active users and the average time of users increased significantly. (Gui Qin)

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