More than a decade ago, Tencent, which held both traffic and capital, stretched its tentacles into various fields like an octopus and built a huge commercial empire. However, the era of rapid growth of the Internet has passed, and Tencent has recently toned down its expansion while actively withdrawing or downsizing many businesses.

Recently, Tencent announced that its online vocational education platform, Tencent Classroom, which has been in operation for over 10 years, will be shut down on October 1 and all platform services will be completely suspended. With this announcement, another product that carried the memories of a generation will exit the stage of history.

According to an incomplete count by Wall Street News, since 2022, Tencent has closed down or removed more than 50 products, including different business sector products such as XIAOEPINPIN, Huanhe, QQ Video, Kandian Express, Sogou Maps, Tencent WiFi Manager, QQ Tang, QQ Lian Lian Kan, and Tencent To-Do List.

These businesses are all non-core businesses of Tencent, either reaching the end of their life cycle or having an unclear future, still in a loss or low-profit state.

The outmoded will always be phased out without mercy. Against the backdrop of the global economic growth slowdown in recent years, even Tencent, which has deep pockets, needs to reduce its costs and invest more resources in businesses that can last forever.

The phase where the internet giants rely on their resources to compete fiercely has come to an end, and a new era is underway, in which Tencent is finding its best footing again.

The End

In the early days, Tencent Classroom was established in 2014. This year was the beginning of Tencent's foray into the education field, and the curtain had just been raised on China's Internet education.

Tencent Classroom initially relied on QQ's platform resources to provide professional training, language learning, animation design, study abroad, and other learning classes by introducing third-party educational institutions. One year after it was launched, Tencent Classroom released mobile app and H5 pages.

Relying on Tencent's strong resource advantages, Tencent Classroom was once a leader in the online education industry. In March 2020, Tencent Classroom announced that its total online vocational education classes had increased 3.5 times; in the same year, QuestMobile released data showing that Tencent Classroom's average daily users on Sundays ranked first in the education and learning industry in the first quarter of 2020.

For Tencent, the education business is not only an important scenario for exercising its connection advantages, but also an important embodiment of fulfilling the social responsibility of a large enterprise.

Therefore, in addition to Tencent Classroom, Tencent has continuously expanded its education business landscape, including a variety of To-C products such as K12 online education, Tencent Happy Mouse English, and covering B-end solutions such as Tencent's educational cooperation, smart campus, and Tencent Micro-school that cover the entire process from preschool education to adult education in terms of technology, services, and content.

In earlier years, Tencent's education businesses were in a long-term decentralized state, with more than 20 education products dispersed across various business groups.

However, in 2018, with the establishment of the Cloud and Intelligent Industry Group (CSIG), Tencent completed a thorough overhaul of its education business, consolidating all of its education products under Tencent Education for the first time and placing them under the CSIG roof.

However, the good times did not last long. With the implementation of the 'Double Reduction' policy in July 2021, K12 education institutions plunged overnight, and Tencent's related businesses also underwent major adjustments, such as K12 online school, children's English enlightenment product Happy Mouse English, and K12 English assessment tool Tencent English Jun that have been successively shut down or transformed.

Although not in the K12 education field, Tencent Classroom has also had a hard time in the overall economic environment. With the proposal of Ma Huateng to converge and focus on important businesses, Tencent Classroom announced in September last year that its 'Education and Training Communication' will no longer be available.

In the same month, Shi Mei, Vice President of Tencent Cloud and head of Tencent's education industry, publicly announced that Tencent Education will gradually close down its C-side business and focus on B-side business.

Against this backdrop, it was inevitable that Tencent Classroom would 'dismiss its class.'

With a new starting point, although Tencent Education will no longer directly serve C-end users, it faces the trillion-dollar B-end education digital market, covering K12, vocational colleges, lifelong education, and providing intelligent connection, intelligent teaching, intelligent research, and intelligent management products and services for individuals, schools, education institutions, and education management departments.

On the track of digital education, based on the advantages of cloud, AI, and connectivity, Tencent Education has found a new area for development.

Change

Tencent Education's self-restructuring is a reflection of the overall Tencent Cloud and even Tencent Group's transformation in recent years.

As a Chinese Internet giant, Tencent was once criticized by the industry for doing "everything", so since 2013, Tencent has undergone a major strategic shift and hopes to sharpen its focus on its strength in communication and social networking, launching the "Internet+" and "Connect Everything" strategies.

However, at that time, the Internet was still in its golden age of development, and expansion remained Tencent's main theme for a long time. Although it chose not to take on all business, it still invested massive resources when fighting for important markets, while beginning to use external strategic investment as a major expansion measure.

According to IT Orange's statistics of Tencent's investment map, Tencent's investment fields over the years have covered 23 industries, including cultural and entertainment media, games, enterprise services, artificial intelligence, e-commerce and retail, and diversified investment layouts.

From 2012 to 2021, with industry developments and strategic opportunities, Tencent seized the opportunity of the mobile Internet era with social networking and gaming at its core. In the B-end market, it also participated in the industry Internet feast of everything being connected to the cloud, achieving rapid growth in revenue and profits.

However, in 2022, affected by the macroeconomic environment, Internet regulation, and lackluster business growth, Tencent's revenue declined for the first time, down 1% YoY to RMB 554.6 billion.

Feeling the crisis, Tencent launched its latest round of restructuring in 2022, reflected in cost reduction and efficiency improvement, as well as shrinkage of non-core business.

At the end of 2022, at an internal staff meeting held by Tencent, Ma Huateng made "cost reduction and efficiency improvement" the focus of the meeting. At the same time, he sharply pointed out that "there is not much time left for some businesses", and many businesses that are not cost-effective compared to the management costs and energy invested by the company should be cut out.

For CSIG, Ma Huateng also put an end to its development model of large-scale takeover, and supported its strategic focus on self-developed products integration. Ma Huateng believes that it should not be swayed by external voices that rank it behind Huawei Cloud or accuse it of lagging behind, and it should not lose its unique advantages. By the beginning of this year, he had once again demanded that many of CSIG's products, except for particularly important strategic products and basic investment, must be launched as soon as possible.

Regarding the game business, Tencent also began to tighten its belt. As Ma Huateng put it, he hopes that the game business will horizontally penetrate and become solid in software and game R&D, rather than stand at odds with other game companies or hardware vendors in a vertical dimension. The key is to find its main business and focus, which is more promising.

A Tencent game employee told the Wall Street Journal that in the past, the company invested heavily in developing many projects, either terminating development or going offline either because of unclear positioning or no longer meeting audience needs. Now, the company is more cautious in making decisions in the market, and internal review is stricter. It's not as easy to get new projects approved now, and the usual requirement is that these existing projects must be completed and recover costs before new projects can be launched.

In addition to shrinking its own business, Tencent has also slowed down its external investment. Since the end of 2021, Tencent has successively reduced its holdings in several listed companies, such as JD.com, Sea Limited, New Oriental, and Meituan.

In addition, data from IT Orange shows that 2021 was the historical peak of Tencent's external investment, with 301 investments throughout the year, dropping to 95 in 2022 and continuing to shrink to 40 in 2023.

Under the theme of "convergence and focus", Tencent's current investment focuses mainly on artificial intelligence, medical and health, games, cultural and entertainment media, and enterprise services.

These areas can basically work with Tencent's core businesses, such as WeChat video accounts, games, cloud businesses, AI, and more.

In the era of the AI model surge, the world has entered a new era, and the technology enterprise landscape may see another new change at any time. If Tencent wants to hold onto the "iron throne", it must dare to "trim the fat", strengthen its core advantages while seizing the enormous opportunities brought by AI, and promote sustainable growth while nurturing new growth points.

Of course, turning the elephant around is not an easy task, and it is bound to be a challenging transformation.

Editor/Emily