CEO Pony Ma acknowledged the challenges in a call with analysts, saying that the entire tech sector had to adapt “to new regulatory and macroeconomic developments,” especially with regard to “the domestic games industries and certain advertiser categories.”
But “we are proactively embracing the new regulatory environment, which we believe should contribute to a more sustainable development path for the industry,” he added.
Tencent has recently rolled out new measures, including upgrading its screening system to identify and clamp down on adult accounts that may be misused by minors, according to the company’s president, Martin Lau.
Its efforts appear to be working: In September, the first month that Tencent’s new measures took effect, users under the age of 18 accounted for just 0.7% of time spent on the company’s games in China. That’s compared with 6.4% in the same period last year, according to Lau.
The ‘new normal’
Tencent — which also owns WeChat, the ubiquitous super app in China that allows users to do everything from send messages to pay bills — has long been one of China’s blue-chip stocks.
He now projects that Tencent’s advertising revenue could see a slowdown in growth, particularly as some of its clients contend with headwinds of their own.
“Major automobile advertisers [have] cut spending because of disruptions in chip supply,” Yang wrote. “[And] real estate, online gaming and online education advertisers continue to cut spending because of [an] uncertain regulatory landscape.”
Tencent shares slipped nearly 3% in Hong Kong on Thursday, before paring some losses to close down 1.2%. The company’s stock has dropped almost 17% so far this year, wiping $117 billion off the company’s market value.
Asked about the prospect of a broader clampdown, Lau said Wednesday that the company believed that “stricter regulation is a new normal for the entire industry.”
“[But] we expect once the industry has really complied with the new regulations, have made all the adjustments … then the impact on the industry will be less and less over time,” he told analysts.
— Diksha Madhok contributed to this article.