China's Tencent bets on cloud computing growth abroad as its core video games business takes a beating

China's Tencent bets on cloud computing growth abroad as its core video games business takes a beating

Tencent has faced a number of headwinds in 2022 including a Covid-induced slowdown in the Chinese economy and a tougher market for gaming.

On Thursday, Tencent will host a launch event for cloud products specifically aimed at markets outside of China, including a suite of cloud-based audio and video products.

The move marks a realization that Tencent needs to find new sources of growth abroad as China's economy slows. Besides continued pressure from Covid outbreaks, Chinese tech companies also face a tougher regulatory environment at home.

While there are signs that the gaming crackdown could now be over, Tencent has felt the impact. Domestic online game revenue fell 7% in the third quarter compared with a year ago.

Tencent's second-biggest revenue driver is online gaming, so a slowdown in this segment is a drag on overall growth.

The Shenzhen-headquartered company views cloud computing as an area that could pick up the slack. Tencent's fintech and business services division, which includes its cloud computing division, grew 4% year-on-year in the third quarter.

Now, Tencent is banking on cloud computing. The products released Wednesday focus on audio and visual products such as live streaming for e-commerce or online meetings.

The products are aimed at companies that want such services but don't necessarily want to maintain the infrastructure, such a servers, or build those features themselves.

Tencent's strategy could focus on trying to sign up global firms with a presence in China as well as Chinese companies expanding abroad. Already, companies such as BMW use some of Tencent's cloud products.

Tencent's focus on audio and video products plays to its strengths as one of the world's largest gaming companies and the owner of WeChat, China's most popular messaging app with over 1 billion users.