Tencent's Q4 2021 performance brief.

CEO Ma Huateng said: "2021 was a challenging year. We actively embraced change and implemented measures to strengthen the company's long-term sustainable development, but it affected revenue growth. Despite the financial impact, we continue to make strategic progress in our business, including popularizing the use of our enterprise software and productivity tools, increasing content creation and viewing on Video Accounts, and expanding our international gaming business. We believe that the internet industry in China is structurally moving towards a healthier model, returning to the core of user value, technological innovation, and social responsibility. We are actively adapting to the new environment, reducing costs, focusing on key strategic areas, and striving for long-term sustainable growth."

The performance growth was dragged down by the online advertising business.
The Q4 2021 revenue of the online advertising business decreased by 13% YoY to RMB 21.5 billion yuan. The YoY decrease in online advertising revenue reflects the weak demand for advertising in industries such as education, gaming, and internet services, partially offset by the advertising revenue brought by the merger with Sogou. Mainly due to the decrease in mobile advertising alliance and WeChat Moments advertising revenue, social and other advertising revenue decreased by 10% to RMB 18.3 billion yuan. Media advertising revenue decreased by 25% to RMB 3.2 billion yuan, reflecting the decrease in advertising revenue from Tencent Video and Tencent News services.

The fast growth of costs outpaced the growth of income, dragging down net profit performance.
In 2021 Q4, the YoY growth of income costs increased by 15% to 86.4 billion yuan, mainly due to the increase in transaction costs generated by the growth of payment-related transaction amounts, the deployment costs of cloud computing service projects, server and bandwidth costs, as well as content costs, which were partially offset by the decrease in channel and distribution costs. When calculated as a percentage of income, income costs increased from 56% in 2020 Q4 to 60% in 2021 Q4, reflecting that the cost growth of some businesses is faster than the income growth and our continued investment in key strategic areas.

The expected impact of measures to protect minors on income will be fully absorbed in the second half of 2022, and we believe that we will benefit from the launch of more new games after the issuance of the new version.

Network advertising is expected to resume growth in the later part of 2022.
We continue to enhance differentiated advertising solutions while adapting to regulatory changes and the evolving macroeconomic environment. In 2021 Q4, the number of daily active advertisers on WeChat increased by over 30% YoY. More than one-third of Moments advertising revenue comes from ads with mini-programs as landing pages and ads that connect users with customer service representatives through Enterprise WeChat. As we adapt to the new environment and further upgrade our advertising solutions, we expect the advertising business to resume growth in the later part of 2022.

In conclusion, by continuously adapting to changes in the regulatory environment, there is hope for a return to growth in the second half of 2022. That's it.

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