The landscape of the tech industry is perpetually in flux, and one of the paramount players in this arena is Tencent HoldingsRenowned for its sweeping range of digital products and services, Tencent appears poised for notable transformations particularly in two key domains: its e-commerce initiatives and its integration of artificial intelligence (AI). As we delve into these sectors, it becomes evident that Tencent is at a crucial juncture where strategic repositioning may lead to invigorated growth.

Analyzing its recent third-quarter financial report for 2024, Tencent demonstrated a robust performance indicative of its resilience and ability to withstand market fluctuationsAmidst a backdrop of economic uncertainty and technological advancements, the company’s agility is essential to maintaining its competitive edge in an evolving marketplace.

Looking toward 2025 and beyond, questions abound regarding the sustainability of Tencent's revenue streams and the identification of new growth trajectories

Central to this discourse is the question: can Tencent successfully navigate the complexities of e-commerce through its flagship platform, WeChat?

The Quest for E-Commerce Success with WeChat

For years, Tencent has embarked on various experiments within the e-commerce sector, striving to leverage its immense social network to cultivate a leading online shopping platformWith a staggering 1.3 billion users, the expectation is that Tencent should have a distinct advantage in developing social commerce, yet each previous attempt has met with varying degrees of underperformance for a multitude of reasons.

The paradigm shifted significantly in recent years with the maturation of the WeChat ecosystem, particularly through the emergence of mini-programs and live-streaming commerce via video accounts

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These developments present unique opportunities for Tencent to reassess and refine its e-commerce strategy.

During a performance briefing in the second quarter of 2024, Tencent's leadership discussed a pivotal strategic pivot regarding its video account realm — the intent to redefine its positioning in live-streaming commerce and integrate deeper with other components of the WeChat ecosystem, such as official accounts and mini-programsThis approach aims to create a more cohesive and innovative e-commerce experience, distancing itself from conventional live-streaming models.

By May 2024, a significant organizational reshuffle saw the live-streaming team align with the WeChat Open Platform, facilitating a closer collaboration with product teams linked to transaction-based servicesThis consolidation reflects a deliberate effort to streamline operations and enhance user experiences.

The rebranding of the video account shop to "WeChat Shop" in August, a name originally conceived by Zhang Xiaolong a decade prior, symbolizes a full-circle moment in Tencent's e-commerce evolution

These strategic adjustments signal a clear intention from Tencent to not merely replicate the e-commerce mechanics of rivals like Douyin but to forge a distinct path rooted in its WeChat ecosystem.

In the third quarter's earnings announcement, management elaborated on e-commerce operational strategies: the objective is to craft a singular, reliable platform within WeChat that showcases standardized, easily searchable products and services, aiming to elevate the overall e-commerce experience.

Understanding this Strategic Shift

Historically, Tencent's fragmented approach to e-commerce created several challenges, particularly regarding product quality, customer service, return policies, and order trackingTo remedy these inefficiencies, significant internal restructuring commenced, giving rise to the revamped "WeChat Shop 2.0". The intent is crystal clear: to coalesce the diverse e-commerce functionalities within WeChat into a unified, proficient platform.

On the newly formed e-commerce platform, shoppers can expect an enriched experience characterized by enhanced product quality, streamlined order follow-ups, and efficient return logistics

Concurrently, merchants are presented with new social traffic avenues within the WeChat ecosystem, harnessing features such as chats, groups, and friend circles for targeted marketing, while capitalizing on video and product recommendations to enlarge their customer base.

This latest venture into the e-commerce domain exemplifies Tencent's retention of a product-driven philosophy by amalgamating elements from mainstream competitors such as Taobao, Pinduoduo, Douyin, and Xiaohongshu, thereby prioritizing a less operationally intensive model.

Fundamentally, the WeChat e-commerce platform aligns more closely with the C2C models of Taobao or Pinduoduo, wherein vendors independently list and sell items, shouldering after-sale servicesThe platform's role would predominantly revolve around furnishing infrastructural capabilities and deriving revenues through service fees and advertisements.

The operations of video accounts and live-streaming commerce bear similarities to Douyin and Kuaishou, leveraging the interactive strengths of short-form video and live broadcasts to engage users effectively.

Moreover, the integration of WeChat official accounts mirrors the engaging layout typical of Xiaohongshu, enhancing the appeal of product listings and enriching consumer engagement.

The inherent strength of WeChat e-commerce lies in its social DNA, facilitating seamless connections across various dimensions of the WeChat ecosystem, thus creating a comprehensive platform where merchants can leverage social resources throughout the customer journey — from sparking interest to conversion through a fully integrated sales funnel.

However, management acknowledges that the current iteration of the WeChat e-commerce platform is not without its flaws, necessitating further improvements in foundational functionalities to elevate customer service and enhance user experiences.

Once these core features achieve maturity, WeChat commerce is poised to link its infrastructural capabilities with a rich spectrum of traffic sources, including social and media channels, thereby substantially bolstering product appeal and operational functionality.

Fostering Evergreen Games

2024 marks a watershed year for Tencent's gaming division, which continues to thrive amid an evolving Chinese gaming landscape

The much-anticipated launch of the DNF mobile game garnered significant traction, rapidly climbing the charts and sustaining impressive performance over a prolonged periodAdditionally, in international markets, Supercell rejuvenated its growth trajectory, with titles like Brawl Stars contributing robust revenues for Tencent.

On the regulatory front, the approval of game licenses has returned to a normalized process, showing a significant uptick in issuance over the last two years, with the first ten months of 2024 already eclipsing the total number from 2023.

Notably, Tencent's strategy regarding game development is experiencing a slight pivot; rather than seeking the next breakout title through sheer volume, the emphasis now lies in nurturing premium content and continuously engaging with flagship titles.

During the third-quarter earnings call, management noted favorable growth trajectories for marquee titles like Honor of Kings and Game for Peace, thanks to recent adjustments made to their development teams.

Tencent’s focus will remain steadfast on fostering "evergreen" games, while simultaneously developing potential future blockbusters capable of joining the ranks of established titles.

The company intends to limit its focus to a select number of games, directing substantial market positioning, distinct aesthetics, compelling gameplay, and vast production teams with high production values towards surpassing player expectations and establishing leadership in the market.

Looking to 2025, a few new titles are on the horizon

The first complete year for the DNF mobile game could see it maintaining top positions, significantly contributing to revenue streams in the half-year period of 2025.

The domestic iteration of Valorant has emerged as Tencent's most lucrative PC game by revenue and gross profit in the third quarter, bolstered by the domestic team EDG clinching the world championship titleThis success translated into increased player acquisition and a surge in e-sports merchandise salesAdditionally, Valorant's international revenues saw a year-over-year increase exceeding 30%, signifying its potential for sustained performance in 2025.

Another noteworthy new title, Delta Force, arrived in China in September 2024 and spans both mobile and PC platformsIts performance in terms of user engagement and daily player retention has been encouraging, attracting millions of daily active users (DAUs). In 2025, a single-player campaign mode named Black Hawk Down will be introduced, accompanied by plans for an international release aiming to penetrate overseas markets, positioning it as a high-potential "evergreen" title.

Interestingly, despite high expectations surrounding the party game Starry Dream at its launch in 2023 — backed by extensive promotional efforts — its initial performance lagged behind rivals like Party of Eggs by NetEase

Entering 2024, however, Starry Dream has consistently outperformed the competition in best-seller lists, showcasing Tencent's formidable operational abilities in maintaining game longevity.

Among the most anticipated titles for 2025 is the open-world mobile epic, Honor of Kings: WorldA showcase during Apple's iPhone 16 launch in September 2024 highlighted its features, confirming a 2025 release compatible with the iPhone 16 series, raising expectations for its market entry.

Pioneering AI Technologies in High-Tolerance Scenarios

Artificial intelligence stands out as one of the most promising fields acknowledged globally, yet the challenge lies in its practical applicationObserving global trends, AI has made considerable inroads in areas such as content recommendation and ad generation, which have notably enhanced user engagement and generated revenue growth.

The efficacy of AI currently hinges on its algorithmic capacity, which has yet to attain flawless precision