Returning to User Value and Technological Innovation—Large Internet Enterprises Slow Down and Improve Quality
Our reporter Li Hualin
Recently, the 2021 annual reports of Internet companies have entered a period of intensive disclosure, and the performance of several large Internet companies such as Tencent, Alibaba, Baidu, JD.com, and Pinduoduo has attracted much attention.
The annual report shows that the overall growth rate of Internet companies in 2021 will slow down, the proportion of traditional core businesses will decline, new e-commerce models will continue to emerge, and positive structural adjustments will make people’s eyes shine. excitation.
Faced with the gradual narrowing of incremental space and the weak recovery of overseas consumption, Internet companies are actively embracing changes.
slowing growth
In the past year, the growth rate of large Internet companies has slowed down.
Tencent's revenue in 2021 is 560.118 billion yuan, a year-on-year increase of 16%; non-IFRS net profit is 123.788 billion yuan, a year-on-year increase of 1%.
The net income of JD.com in 2021 is 951.6 billion yuan, a year-on-year increase of 27.6%; the annual non-GAAP operating profit is 13.4 billion yuan.
Pinduoduo’s revenue in 2021 is 93.9499 billion yuan, a year-on-year increase of 58%; its net profit is 7.769 billion yuan, turning losses into profits.
Baidu's revenue in 2021 is 124.5 billion yuan, a year-on-year increase of 16%; non-GAAP net profit is 18.830 billion yuan, a year-on-year decrease of 14%.
Experts believe that the slowdown in the performance growth of large Internet companies is not only related to the economic situation at home and abroad, but also to the adjustment of development strategies of the Internet industry. At present, many Internet companies focus on expanding new businesses, and the initial investment is large, which affects profits.
"The decline in online consumption growth and the decline in customer unit prices are also an important factor affecting the performance of some Internet companies." Zhao Ping, deputy director of the Research Institute of the China Council for the Promotion of International Trade, said that factors such as slowing supply innovation and rights protection problems still need to be resolved, which have led to online consumption. The growth rate has declined. In 2021, the online retail sales of physical goods will grow by 14.1%, which is only 1.6 percentage points higher than the 12.5% growth rate of total retail sales of consumer goods in the same period.
Weakness in traditional core businesses also affected performance growth.
Take the advertising business of Tencent and Baidu as an example.
In 2021, Tencent's revenue from online advertising business will be 88.6 billion yuan, an increase of 8% year-on-year, while the year-on-year increase in 2020 is 20%.
Likewise, Baidu's advertising revenue as a percentage of its overall performance declined.
At the same time, the income of large Internet companies has undergone positive structural adjustments, and emerging businesses have made strong efforts.
Tencent's financial technology and enterprise service revenue in 2021 will be 172.2 billion yuan, a year-on-year increase of 34%, accounting for about 30.7% of total revenue; among which, the revenue of the financial technology and enterprise service sector in the fourth quarter of 2021 will increase by 25% year-on-year, reaching 47.958 billion yuan, surpassing the online game segment for the first time and becoming the business segment with the largest revenue contribution of Tencent.
Baidu Smart Cloud’s business will grow rapidly in 2021, with expansion in manufacturing, energy, transportation, automotive and other industries, and the revenue of these vertical industries has doubled.
Focus on innovation
As the Internet industry shifts from high growth to steady growth, large Internet companies focus more on "training internal skills", increase investment in research and development, use their brains in business diversification, and seek a development path for more stable growth.
Tencent has increased investment in the field of independent innovation, striving to achieve domestic substitution, and gradually improve the self-research ecosystem. In 2021, R&D investment will reach a new high, with a year-on-year increase of 33%, reaching 51.8 billion yuan.
In the past five years, JD.com has invested nearly 80 billion yuan in research and development to improve the efficiency of the entire industry chain with technology.
Pinduoduo's R&D expenses in 2021 will reach 8.9926 billion yuan, a year-on-year increase of 30%.
"Pinduoduo has shifted its focus from marketing to research and development in the past, which will lay a solid foundation for the company's long-term development," said Chen Lei, chairman and CEO of Pinduoduo.
In order to cope with the difficulties and challenges facing the current industry, large Internet companies are also actively deploying new businesses and constantly exploring new growth points.
On the one hand, promote the accelerated integration of digital technology and the real economy.
By opening up its own supply chain capabilities, digital operations and integrated marketing capabilities, JD.com has deeply linked offline physical retail formats, and more brand merchants and offline brick-and-mortar stores have accelerated their digital transformation with the help of JD.com's omni-channel capabilities.
In 2021, JD.com's omni-channel merchandise transaction volume will increase by nearly 80% year-on-year.
Tencent actively embraces the industrial Internet, invests heavily in new digital infrastructure, and participates in the construction of "East and West".
On the other hand, deepen the sinking of the market and fully stimulate the consumption potential of rural areas.
In 2021, Pinduoduo will make a new round of investment in the fields of agricultural product brands, agricultural talents, and logistics and warehousing. The platform has generated 61 billion orders, a year-on-year increase of 59%. The increase in agriculture-related orders is particularly significant.
JD.com fully tapped the consumer demand in the sinking market, driving the number of online shopping per capita in rural areas to increase by 4.3 times in two years.
As of December 31, 2021, the number of active purchasing users in the past 12 months was about 570 million, a net increase of nearly 100 million in one year, and 70% of the new users came from the sinking market.
"In the past, the Internet industry was a competition-driven industry with large investments; now, companies are more concerned about long-term business development than short-term gains, and optimize marketing costs, operating costs and labor costs," said Chiping Liu, president of Tencent.
The future can be expected
Looking forward to the future, many Internet companies expressed optimism, believing that it is a temporary shift and slowdown. Through strategic adjustment and business innovation, the future of the industry is still worth looking forward to.
"Faced with industry challenges, we actively embrace changes, reduce costs and increase efficiency, focus on key strategic areas, and achieve strategic progress. We believe that the Internet industry is moving towards a healthier model, returning to user value, technological innovation and social responsibility as the center. The origin of this,” said Ma Huateng, chairman and CEO of Tencent.
Robin Li, chairman and CEO of Baidu, said that this year, Baidu will further improve the safety of L4 autonomous driving, and the effect of investment in artificial intelligence will be more concentrated in 2022.
"Looking forward, JD.com will always focus on creating value for users and partners to build a long-term business development strategy and investment layout." said Xu Lei, president of JD.com.
The continuous growth in the number of active users of large Internet companies also reflects the resilience of the company's development.
As of December 31, 2021, the number of annual active consumers in the Alibaba ecosystem reached 1.28 billion, and consumers in overseas markets exceeded 300 million for the first time.
By the end of 2021, the number of active buyers of Pinduo for many years was 868.7 million, a year-on-year increase of 10%.
In order to boost investor expectations, large Internet companies have launched large-scale repurchase plans in recent times.
On March 22, Alibaba announced a stock repurchase, with the repurchase scale increasing from US$15 billion to US$25 billion, with the highest repurchase scale being nearly one-tenth of the market value, setting a record for the scale of Chinese stock repurchases.
Tencent Holdings repurchased shares for five consecutive trading days from March 25 to 31, with a total of HK$1.5 billion.
"In order for Internet companies to develop healthily and long-term, they need to continuously optimize their business structure." Zhao Ping said that the industry as a whole has entered a period of adjustment, and companies need to sort out their existing businesses, focus on their main business, and highlight their advantages, so as to enhance their core competitiveness .
Our reporter Li Hualin