Tencent Focuses On Cloud Services As Gaming Profits Fade

Chinese technology giant Tencent has turned to overseas cloud services as online gaming profits fade due to stricter regulations in China.

Tencent's cloud services launch is scheduled for Dec. 1 to showcase new cloud products for overseas markets. The products lined up include cloud-based audio and video products.

Tencent already has a cloud system in place and operates its internal businesses on a Tencent-owned cloud model. In August, Tencent completed the transfer of its servers to the company's cloud and announced further investment in cloud technologies.

Daosheng Tang, a senior executive vice president of Tencent, said in a company press release that "the migration of our services to a Tencent-owned cloud not only helps us build a future-oriented IT infrastructure and creative R&D culture, but also refines Tencent Cloud products, technologies, and services capabilities, which will help accelerate the digital upgrade of the industry and the overall development of the real economy."

The move to cloud services wasn't just because of developing technologies but influenced by strict Chinese regulations, COVID outbreaks and a drop in domestic online gaming revenue.

Tencent and other gaming companies in China have faced losses after game approvals were frozen for half a year.

Stricter regulations of online gaming had also been put in place by Beijing in 2021 -- an act that cut off access to a domestic audience.

While the regulations have eased, the gaming and technology sectors were still impacted. Online gaming has been Tencent's second biggest revenue source and the company made the move to cloud computing through its social media company WeChat.

The strategy that seems to be in use is targeting foreign audiences and companies to sign up for cloud services. One such company that already uses Tencent's cloud products is BMW.

Tencent is entering a market dominated by Amazon, Microsoft and even Alibaba, but is aided by WeChat, which is China's most-used messaging app with over 1 billion users worldwide.