Entertainment mogul: Starting his business with the internet

Chapter 466 The Emergence of an Empire
Monday, October 1.

With only a dozen days left until the Spring Festival, the festive atmosphere is growing stronger across China, and countless migrant workers, carrying the fruits of their labor throughout the year, are embarking on their journeys home.

What should have been an ordinary day instantly stirred the nerves of the entire internet industry and even the business world because of the release of an announcement.

At 9:00 AM, Tenda Group officially released its 2012 annual financial report on Weibo.

At this moment in Hangzhou, inside the Alibaba Group headquarters, the warm winter sun quietly shines into the offices.

Ma Jieke leaned back in his executive chair, squinting, his expression serious, his gaze fixed on the computer screen.

Across from him, CFO Tsai Chung-hsin was also intently staring at his phone screen, both of them reviewing the newly released annual report of Tengda Group.

Report Summary: Tenda Technology Group achieved leapfrog growth in 2012, further consolidating its position as a leading global internet technology company.

Amid a complex and volatile global economic environment, the Group achieved record highs across all financial indicators, thanks to strong growth in its core businesses, rapid rise of new businesses, and outstanding operational efficiency.

Based on revenue, Tenda Technology Group has become the largest internet technology company in Asia and the third largest in the world.

核心财务数据：2012年度总营收2388亿元，较2011年的1318亿同比增长81.2%；

净利润817亿，较去年的500亿同比增长63.4%；净利率从37.9%下降至34.2%，同比减少3.7个百分点。

"The revenue growth and profit margin are simply outrageous!" Cai Zhongxin couldn't help but exclaim upon seeing the financial data.

As the CFO of a large corporation, he knew better than anyone what a behemoth stood behind those numbers.

Ma Jieke remained silent, but his expression darkened further, his brows furrowed, as he continued scrolling down the page.

The business highlights and performance review section mentions: 1. Social and Communication (WeChat & Weibo)

WeChat: With over 18 billion users worldwide, it has become the most used mobile application globally. Its innovative features, such as voice messaging, Moments, and Official Accounts, have profoundly changed the communication and lifestyles of users worldwide.

Significant progress has been made in overseas market expansion (especially the WeChat brand), with user stickiness and activity continuing to improve, building a strong user base and ecosystem entry point for the group.

Weibo, with 10 billion users worldwide, is China's leading social media platform, continuously expanding its influence and playing a core role in information dissemination, public discussion, and brand marketing. Positive progress has been made in commercialization explorations such as feed advertising and the fan economy.

2. Interactive Entertainment (TD Game Platform & Digital Entertainment)
TD Game Platform: As the world's largest digital game distribution platform, it performed brilliantly in 2012, with annual revenue of approximately RMB 440 billion (approximately US$70.2 billion), successfully surpassing Sony and Nintendo in revenue to become the world's largest game company.

The platform's powerful distribution capabilities, rich game library (including self-developed and third-party masterpieces), and mature microtransaction system are the keys to its success.

In the entertainment sector, Tengda Culture continues to invest in film and television production, variety shows, and music copyright, producing many phenomenal works and its content ecosystem is becoming increasingly complete.

Southern Cinemas: Leveraging the group's resources, it continues to expand its scale and optimize the movie-watching experience, resulting in steady growth in box office revenue.

Toutiao Video: As an emerging long-form video and online video platform, it has rapidly expanded its user base and continuously innovated its content formats, becoming an important traffic portal and advertising platform.

. . .

7. Cloud Computing: Tenda Cloud achieved a milestone breakthrough in 2012, surpassing Microsoft in market share for the first time to become the world's second-largest cloud service provider, with a market share of approximately 28%, second only to Amazon.

This growth is attributed to strong demand for digital transformation in China and the Asia-Pacific market, the technical support of the Group's massive business, and continuous investment in infrastructure construction and product innovation (IaaS, PaaS, SaaS).

Cloud services have become an important growth engine for the group and a core manifestation of its B2B service capabilities.

Upon seeing this, Ma Jieke's pupils contracted, his face filled with disbelief: "Tengda's cloud computing is so powerful, it has already surpassed Microsoft!"

This reminds me of the IT Leaders Summit years ago, where He Songci strongly supported cloud computing, creating a two-on-two standoff with Li Yanhong and Ma Boli who opposed it.

Now that Tenda has released its annual report, it is undoubtedly a resounding slap in the face to those who looked down on the cloud computing business back then.

Cai Zhongxin chimed in, "Tengda started building a large-scale cloud computing center in Donghai as early as 2006. It was an early move, so it's no surprise that it has achieved such success today."

Ma Jie nodded, his resolve strengthened: the world's leading internet companies are all heavily investing in cloud computing, and Alibaba's approach is correct!
With a sigh, he continued to review the report item by item.

The section on industry position and outlook mentions:
With annual revenue of RMB 2388 billion (approximately USD 381 billion, estimated at the average exchange rate in 2012), Tenda Technology Group firmly holds the position of Asia's largest internet technology company and has become the world's third largest internet technology company (after Amazon and Google).

It holds a leading global position in several key areas: it owns the world's largest social application (WeChat), the world's largest gaming company (TD platform), and the world's second-largest cloud service provider.

. . .

Risks and challenges:
Global and regional economic uncertainties exist; competition in the internet industry is becoming increasingly fierce (covering both domestic and international markets); rapid technological iteration brings pressure to innovate;
Regulatory requirements for data security and user privacy protection continue to increase; continued investment in new businesses (such as cloud computing and internationalization) brings short-term profit pressure; and the content regulation policy environment is changing.

Conclusion: ... Tenda Technology is committed to connecting everything, empowering industries, creating greater social and commercial value, and bringing long-term returns to shareholders and partners.

Ma Jieke read the lengthy financial report, which was over 10,000 words long, very carefully. He pondered it repeatedly and occasionally discussed it with Cai Zhongxin. It took him a full hour to finish reading it.

"Tengda's annual report is truly a valuable lesson," Ma Jieke murmured, slowly shifting his gaze away from the screen.

"The summary of risks and challenges, in particular, is very insightful. These are not only the problems that Tenda will have to deal with in the future, but also the dilemmas that Alibaba will inevitably face in the future!"

Cai Zhongxin adjusted his glasses, his gaze deep: "Jack, we can't delay any longer. Tengda is growing stronger every day, showing a strong momentum to swallow up the entire Internet industry, and besides, Song Ci has no internal constraints."

We must speed things up and finalize the partnership system as soon as possible to firmly grasp management's control over the company.

Upon hearing this, Ma Jie felt a surge of urgency and nodded emphatically: "Give me some time to consider this carefully. At the latest, the list of partners will be finalized and announced to the public by the end of the month."

To resolve the control crisis faced by management after Yahoo's investment, Alibaba Group began implementing the "Lakeside Partner" system in 2010.

Partners have the right to nominate more than half of the board members, and any amendment to this system requires approval by more than 95% of shareholders. This means that as long as management holds more than 5% of the shares, the system can be locked in.

As permanent partners, Ma Jieke and Cai Zhongxin are not subject to retirement restrictions, a system that greatly protects their control over Alibaba.

Cai Zhongxin said no more. Becoming a partner would grant multiple benefits beyond equity, but while the system was easy to design, controlling people's hearts was difficult, and the selection of who to include must be extremely careful. "Zhongxin, after reading this financial report, I've gained some insights," Ma Jieke said thoughtfully, his tone serious. "The group's current seven business groups are too cumbersome, and the efficiency of resource allocation is too low."

I think it would be better to break them down into more than twenty business units, adopting a "small but beautiful" management approach. This would fully unleash the potential of each business, increase the valuation's potential, and attract the capital market's attention to the potential of those niche areas.

Cai Zhongxin pondered for a moment: "You mean, we should broaden our reach in vertical fields and thin out our platforms, learning from Tenda's approach of building an ecosystem together?"

“Yes.” Ma Jieke echoed, “We need to maintain a loose but not disorganized approach. All business units need to coordinate well in areas such as logistics and payment. We can no longer rely on single-point growth.”

Cai Zhongxin looked troubled: "But in that case, we need a department that can provide a safety net. Tengda has WeChat to 'connect everything,' which serves as the core. But our Taobao and Alipay don't have that capability."

"Socializing, huh? You still have to rely on socializing!" Ma Jieke sighed.

His ideal framework has always been "social + e-commerce". However, in the social field, there was QQ in the PC era, and in the mobile internet era, there is the even more powerful WeChat blocking the way.

"Then we will build an independent data platform, information platform, and cloud OS to implement unified data management for all other departments."

“This method is feasible.” Cai Zhongxin thought for a moment and nodded in agreement. “This matter cannot be left to President Lu to take the lead.”

“That’s exactly what I was thinking too.” Ma Jieke smiled slightly; their thoughts were surprisingly aligned.

After finalizing the appointment of the president of the data platform, Ma Jieke continued, "Tengda has been quite successful in the digital entertainment sector. Alibaba also needs to accelerate its pace and systematically build a digital entertainment ecosystem. Fortunately, the digital entertainment industry is content-driven, and latecomers also have the opportunity to overtake others."

Since he had been leading the preparations for Alibaba's Digital Media and Entertainment Group, Cai Zhongxin took the opportunity to report: "The preliminary preparations for the various sub-businesses in the Digital Media and Entertainment Group are basically complete."

In the music sector, the group just completed the acquisition of Xiami Music in the middle of the month, and its next target is Tiantian Dongting.

In this way, Alibaba Music can quickly fill its user base on mobile devices after entering the digital music market.

In the film and television industry, negotiations are underway with Cultural China, but the other party's asking price is too high, and the negotiations are still ongoing.

In the literature sector, the plan is to integrate Taobao Reading and Shuqi Novels to establish Alibaba Literature, providing IP sources for film, television, and gaming businesses.

As for the strategy for video platforms, that's a decision for you, Jack.

After a moment of contemplation, Ma Jieke shook his head helplessly, thinking about the "one dominant player and two strong contenders" pattern in the domestic long-form video industry: "There are indeed not many targets to choose from right now."

Sohu and Tencent are backed by giants, so LeEco obviously won't accept our acquisition, and iQiyi has already been targeted by Baidu.

The remaining video websites like Baofeng and Fengxing have too shallow a foundation and a thin copyright library, so acquiring them wouldn't make much sense. It seems the only option left is to target Youku Tudou.

Although the acquisition will be difficult, if successful, Alibaba will control the second-largest video platform in China, instantly revitalizing its digital entertainment sector.

“Okay, I will focus on liaising with Youku Tudou’s shareholders.” Cai Zhongxin agreed, then discussed a few more words with Ma Jieke. Just as he was about to get up and leave, Ma Jieke suddenly spoke up: “Zhongxin, do you think the game business has potential?”

Cai Zhongxin was taken aback. He hadn't expected Ma Jieke to bring this up suddenly, especially since Ma Jieke had publicly stated several times that Alibaba would never get involved in the gaming industry.

He quickly regained his composure and analyzed, "Taobao itself is the second largest virtual item trading platform after Tengda TD platform. With such a foundation, it has great potential to enter the gaming field."

Furthermore, I believe we can start with mobile games. Tengda's annual report shows that mobile games are incredibly profitable, comparable to PC games, and offer shorter development cycles and faster returns.

“Then let’s make mobile games!” Ma Jieke took a deep breath and immediately made the decision.

He then added, somewhat embarrassed, "Our game development is different from Tenda's. Our main goal isn't to make money; I want to change the domestic gaming environment."

Cai Zhongxin opened his mouth, but swallowed the words that were about to come out. He thought to himself: Making money, of course, isn't that something to be ashamed of!
Donghai, Tangren Media.

Liu Shishi sat in front of her computer, browsing netizens' comments about "Tengda earning 817 billion yuan a year" with great interest.

"Just finished calculating: Tenda earns 2.24 million yuan a day, which is approximately 2580 yuan per second. The one second it takes you to browse this Weibo post is enough for Mr. Song to buy an iPhone!"

"TD platform's revenue was 44 billion last year? Players of 'Immortal Romance', raise your hands! I contributed three 648s, now I want to cut off my hands."

"Wow, their gaming business has actually surpassed Sony and Nintendo!"

"Incredible! WeChat has 18 billion users, making it the world's number one app in terms of user base. Tenda has truly become a social media empire!"

"Knock knock knock." Jiang Yuanyuan knocked on the door and entered the office: "Shishi, the studio has sent out the congratulatory poster for 'Lost in Thailand'."

"Oh," Liu Shishi replied, and immediately opened the studio's Weibo homepage, where she indeed saw a new post.

Liu Shishi Studio v: [Gift] After more than 300 days of guarding the throne, the crown of Chinese-language cinema is now handed over to the brave on a new journey.

Congratulations to @Tengda Culture, @Filmmaker Xu Zheng, and the official account of the movie "Lost in Thailand"! 10 billion is just the beginning; Chinese filmmakers should work together to overcome all obstacles.

The accompanying images are exquisitely designed:

Against a backdrop of crimson cloud patterns, two golden peaks stand proudly. The digital inscription "10.54 billion" on the left peak forms a crystal crown, carried by auspicious clouds and slowly ascended to the higher mountain peak on the right.

Golden characters appeared on the ridgeline: "After this crown, the Milky Way shines brightly."

Congratulations from the entire team of the film "Goodbye Mr. Loser"

"Well done!" Liu Shishi praised.

The box office of "Lost in Thailand" has surpassed that of "Goodbye Mr. Loser" (10.54 billion yuan), becoming the new Chinese-language film box office champion.

Two days ago, at the celebration banquet, everyone came up with this "box office champion handover ceremony," which can be considered as adding fuel to the fire of "Lost in Thailand."

(End of this chapter)