After the Hong Kong stock market on November 15, Tencent released its third-quarter results report。Financial data show that Tencent Q3 revenue 1546.2.5 billion yuan (RMB, the same below), up 10% YoY; net profit decreased 9% YoY to 361.8.2 billion yuan, while adjusted net profit increased 39% year-on-year to 449.2.1 billion yuan。

Sub-business looks like:

Value-added service business。As Tencent's pillar business, Tencent's Q3 value-added services revenue grew 4% year-on-year to $75.7 billion。Gaming revenue in the international market rose 14% to $13.3 billion, an increase of 7% after excluding the impact of exchange rate changes.。

The double-digit year-over-year growth in the international gaming market was mainly due to the rebound in revenue from PUBG Mobile, which also contributed to revenue growth from "Victory: Nikki," "VALORANT" and "Triple Match 3D," while revenue from "Fantasy Tower" fell year-over-year compared to the release quarter of the same period last year.。

Thanks to the recent release of "Ark of Destiny" and "Intrepid Contract," as well as the increase in revenue from evergreen games such as "King of Glory" and "DnF," Q3 local market game revenue increased by 5% to 32.7 billion yuan.。Social network revenue remained roughly stable at 29.7 billion yuan, thanks to increased sales of music paid members, small game platform service fees and hand-held virtual props, offset by lower revenue from live music and live game services.。

For games, Tencent executive director Liu Chiping said that throughout the market, Tencent found that people are increasingly interested in casual games, and the plot to the game rekindled interest, although this trend has not had a negative impact on Tencent multiplayer competitive games, but at the same time Tencent also believes that this trend is a new opportunity to seize, and is investing in these trends to benefit from。

In addition, Liu Chiping also said that there are currently nine game products in the planning, in the next few weeks there will be a new release, several others will be released in the next few months, the release of these products will also test the success of the company's strategy。

network advertising business。Online advertising business in Q3 performance bright, data show that Tencent Q3 online advertising business grew 20% year-on-year to 25.7 billion yuan, Tencent said mainly due to strong demand for video numbers, Tencent's mobile advertising alliance and WeChat search advertising, with local services and fast-moving consumer goods industry growth is particularly significant。

In recent years, China's e-commerce industry and the local life industry continue to "fight," intensive promotion and marketing, for the Internet advertising to provide a large number of。At the same time, WeChat, especially video numbers, is becoming more and more commercialized and advertising revenue-generating, which is the main reason for Tencent's rapid growth in advertising business.

Fintech and Corporate Services Business。Tencent's financial technology and enterprise services business Q3 revenue increased 16% year-on-year to 52 billion yuan。Fintech services revenue maintained double-digit year-on-year growth, driven by increased commercial payment activity and growth in wealth management services revenue。Enterprise services revenue grew faster year-over-year than in the second quarter of 2023, thanks to the company's upfront optimization of its cloud services business structure and an increase in video number delivery technology service fees。

For the business, Tencent Chief Strategy Officer James Mitchell (James Mitchell) said on a post-performance conference call that Tencent's corporate services revenue grew by double digits in the third quarter, faster than in the second quarter, and corporate services gross margin increased significantly year-on-year.。

Cloud services revenue growth was driven by prior restructuring and increased spending in industries such as finance and automotive。Video numbers, GMV growth in e-commerce transactions, and technical service fees charged by Tencent from these transactions。

 

WeChat ecological commercialization

 

In addition to the steady growth of its core business, WeChat has gradually grown into a strong driver of Tencent's continued quality revenue.。During the quarter, innovative businesses such as WeChat video numbers, applets, games, and corporate WeChat flourished, contributing a steady stream of high-quality revenue to Tencent.。

Financial data show that WeChat and WeChat (WeChat Overseas Edition) Q3 combined monthly live accounts number 13.3.6 billion, up 2% YoY and 0% QoQ.7%。According to the 2022 Annual Report, the market for WeChat video numbers has surpassed that of friends, and thanks to a thriving community of creators and a growing user mindset, the total number of WeChat video numbers played has increased by more than 50% year-on-year.。

In addition, original content playback is growing strongly and now accounts for the vast majority of total video number playback.。At present, video number has become the main field of WeChat。

Instead, as Tencent's veteran social app, it is currently in a declining phase, with 5 monthly active QQ accounts in the quarter.5.8 billion, down 3% year-on-year and 2% month-on-month, less than half of WeChat's。

Regarding the commercialization of WeChat's ecology, Executive Director Liu Chiping said on a post-performance conference call that the volume of WeChat applets reached 1.5 trillion yuan, mainly including catering retail, transportation, people's livelihood payment and other scenarios of online and offline services.。

As the right-hand man for businesses in the WeChat ecosystem, the applet provides a more flexible and consumer-friendly digital business tool for large-scale small and medium-sized businesses, promoting businesses to achieve both operational efficiency and consumer experience.。Liu Chiping added that as a successful case of vertical application of small programs, small games have become the largest casual game community in China.。

Speaking of video numbers, Liu Chiping said that as an important new member of the WeChat ecosystem, the use of video numbers is growing rapidly.。Video numbers have boosted WeChat's overall usage time, while also generating revenue at a faster rate than Tencent's average。

He also said that the video number's advertising revenue margin is very high, and the marginal cost is relatively low, Tencent also continues to deploy artificial intelligence technology to improve the click-through rate of advertising, so the video number's advertising revenue has a lot of room for growth.。Tencent is also cultivating more high-quality revenue streams within WeChat, such as the applet games mentioned last quarter, which are more profitable than the basic app games。

In addition, Michelle also said for WeChat ecology, WeChat games for the company has brought platform development opportunities, there are already thousands of game companies focused on the development of WeChat games products, we are willing to cultivate this ecosystem, do not want to put pressure on its development.。

 

Over 180 internal services have been connected to the hybrid model.

 

In September of this year, Tencent formally introduced its self-developed universal big language model, the mixed-element big model, at the 2023 Tencent Global Digital Ecology Conference.。

According to the official introduction, Tencent's hybrid model, by Tencent from the first token from zero training, inside the algorithm, framework, platform full link self-research.。In the hybrid model, Tencent has developed its own machine learning framework Angel, which doubles the training speed compared to mainstream frameworks in the industry and increases the inference speed by 1.3 times。The hybrid model has a parameter scale of over 100 billion yuan and a pre-training corpus of over 2 trillion tokens, which makes the model have strong Chinese writing ability, logical reasoning ability in complex contexts, and reliable task execution ability.。

Specifically, Tencent has optimized the pre-training algorithm and strategy to reduce the illusion of the hybrid model by 30% to 50% compared to the mainstream open source model, which can reduce the "nonsense" when answering.。Secondly, through the reinforcement learning method, let the model learn to identify trap problems, and now the rejection rate of the hybrid model in the face of security-induced class problems has increased by 20%.。Furthermore, Tencent has improved the processing effect and performance of the hybrid model for ultra-long texts through position coding optimization, which can generate thousands of words in one breath.。In addition, the hybrid model has stronger logical reasoning ability, and can make reasoning and decision-making in combination with actual application scenarios like people.。

In addition, according to the financial report, through continuous research and development investment, Tencent launched a new general model "Tencent hybrid" in the third quarter.。The model enables full-link self-development from algorithms, machine learning frameworks to artificial intelligence infrastructure, and has been tested in more than 180 Tencent internal businesses.。

On this Q3 conference call, Liu Chiping also answered questions about the mixed yuan and the company's artificial intelligence strategy.。He said that we have actually invested in the hybrid business for a long time and have become one of the leaders in the large language model industry in China, and the scale of the hybrid is expanding, and we are also preparing to launch the next generation of upgraded models that combine more expertise and architecture to improve the performance of the model, and its development also reflects the growth of the company's artificial intelligence business capabilities.。The hybrid model is based on the Transformer architecture and can process huge amounts of training data and large-scale computing clusters, and we have developed more AI applications that are suitable for us in the development process to empower other businesses.。

In terms of text generation, the hybrid element is very good at, in the SaaS (software as a service) application services are also outstanding, such as Tencent meeting users use the hybrid element to generate meeting minutes, if you miss part of the meeting content, the hybrid element model can help users to grasp the meeting dynamics, etc.; for example, the hybrid element can help Tencent document users to use the service more efficiently, we have begun to provide this service to external users.。

In other aspects, the hybrid can also improve the efficiency of customers, including customer service API, many enterprise customers are testing to meet the needs of interaction with their users; in terms of code generation, the hybrid can also show better results, reducing the workload of programmers and improving efficiency; the hybrid also provides assistance in content generation and advertising business, optimizing advertising content for advertisers, achieving accurate delivery and improving click-through rate; the application of the hybrid in the game development process, especially in our art。

Looking to the future, the hybrid will provide more services to corporate customers, improve the efficiency of advertising, and achieve a better integration of advertising and sales processes.。