Source: Snow Leopard FinanceThe term &#34;corporation&#34; is generally believed to originate from the Latin word &#34;corpus,&#34; meaning body. In other words, the understanding of a corporation is a group of people organized into a single entity capable of unified action.From this perspective, Tencent has not transformed; it has merely grown from small to large, and from large to even larger. However, from the perspective of revenue structure, Tencent stands in the history of China's internet development with a non-linear development posture.Compared to century-old establishments like McDonald's, Apple, and even Nintendo, Tencent, founded in 1998, is considered a &#34;young&#34; company. Yet, the businesses it relies on for profit have undergone several transformations over the past 26 years. The degree of Tencent's transformation is comparable to Gregor's metamorphosis into a bug in Kafka's &#34;Metamorphosis,&#34; but a more vivid description would be the &#34;Ship of Theseus&#34; of China's internet—although every piece of wood has been replaced, this ship is still Tencent.A Brief History of Tencent's TransformationSocial and gaming are keywords that Tencent cannot bypass, but throughout Tencent's 26-year history, it has not been easy to steadily earn money through social and gaming. Tencent has stood on the edge of a cliff several times during its explorations.Founded in 1998, Tencent faced the biggest challenge after securing its initial key investments: how to achieve profitability. In early 2000, when OICQ had not yet been renamed QQ, although the number of simultaneous online accounts had exceeded 100,000, it could not be converted into profit. Therefore, achieving self-sustainability before burning through its cash reserves was Tencent's most urgent task at that time.Fortunately, by imitating the value-added services launched by Japanese telecom operators, Tencent collaborated with China Mobile to launch &#34;Mobile Dream Network&#34; and its derivative businesses. By February 2001, as the &#34;Mobile Dream Network&#34; business entered Beijing, Tencent completed its layout in major markets across the country. In June, Tencent's financial statements achieved monthly breakeven for the first time. At that time, Sina, NetEase, and Sohu, which were listed on NASDAQ, were all mired in losses, making Tencent one of the earliest profitable internet companies in China.<img src="https://pub.pbkrs.com/uploads/2025/c5ad4ac4ce6f8add0c4c28b35f82bd20?x-oss-process=style/lg" alt="" original-src="https://pub.pbkrs.com/uploads/2025/c5ad4ac4ce6f8add0c4c28b35f82bd20"/>As Tencent achieved profitability through the Mobile Dream Network, competitors began to enter the market one after another, gradually increasing the bargaining power of telecom operators in related businesses. In other words, the initial revenue-sharing ratio of &#34;15:85, with Tencent taking the larger share&#34; was destined to be unsustainable in the long term. As the Mobile Dream Network became increasingly profitable, this business also began its countdown.In 2004, China Mobile proposed to negotiate the revenue-sharing ratio, changing it to 5:5. In 2006, China Mobile launched Feixin. Tencent's wireless value-added business suffered an unprecedented blow. However, by this time, Tencent had gradually completed its transformation. Financial reports showed that the proportion of mobile and telecom business in Tencent's total revenue peaked at nearly two-thirds (66%), but by 2006, this proportion had dropped to one-quarter (25%).This was Tencent's first transformation, with QQ as the main character.Through exploration, Tencent launched QQ Show, QQ Pets, QQ Space, QQ Game Hall, and other services, and also released Q Coins. Tencent's internet value-added service revenue grew rapidly from less than one-third in 2003 to 65.2% in 2006, approaching two-thirds of its revenue share, allowing Tencent to break free from the &#34;Mobile Dream Network.&#34;Dependency.This set of services has also built Tencent's advantages in the social field. In 2006, &#34;Internet Weekly&#34; even commented: &#34;In the coming years, Ma Huateng will attempt to take over the online lives of Chinese netizens completely.&#34;If this transformation was driven by profit pressure, a forced &#34;weaning,&#34; then entering the gaming business was Tencent's proactive choice.After the failure of its first agency MMORPG game &#34;Triumph&#34; in 2003, Tencent's confidence in making games was once shaken. However, under Ma Huateng's insistence, Tencent Games gradually found its rhythm, first defeating the industry giant in the board game sector—Lianzhong, which once held an 80% market share—before launching games like &#34;QQ Fantasy&#34; and &#34;QQ Tang.&#34;The year 2008 is referred to as Tencent's &#34;game year.&#34; That year, the games &#34;CrossFire&#34; and &#34;Dungeon &amp; Fighter,&#34; which Tencent represented and published, became hugely popular. Additionally, Tencent made external investments that later had a significant impact, developing the game &#34;League of Legends.&#34; By 2011, Tencent's revenue from online games reached 15.8 billion, accounting for more than half of its total annual revenue.<img src="https://pub.pbkrs.com/uploads/2025/ebf45b6c908606173d84d8d1409e6d58?x-oss-process=style/lg" alt="" original-src="https://pub.pbkrs.com/uploads/2025/ebf45b6c908606173d84d8d1409e6d58"/>After that, Tencent was known for its &#34;QQ + online games&#34; product matrix, but this did not hinder Tencent's continued transformation.In 2010, a cross-platform instant messaging software, Kik, attracted both Lei Jun and Zhang Xiaolong. Soon after, Mi Talk and WeChat were launched, leading to a showdown between the two. However, through rapid iteration and the introduction of features like &#34;People Nearby,&#34; &#34;Drift Bottle,&#34; and &#34;Shake,&#34; the previously indecisive battle gradually became clear, with WeChat securing victory.After that, it was a continuous replication of success, expanding profits in a &#34;repetitive&#34; manner. In the financial reports for several quarters in 2024, WeChat mini-games, video accounts, and WeChat advertising have become important sources of revenue growth for Tencent. The gaming business accounted for less than one-third in 2023. Tencent can no longer be defined by a single business.<img src="https://pub.pbkrs.com/uploads/2025/231d1da267d85d6cd46fb657dd1c19ca?x-oss-process=style/lg" alt="" original-src="https://pub.pbkrs.com/uploads/2025/231d1da267d85d6cd46fb657dd1c19ca"/>Corresponding to Tencent's continuous transformation is its almost frenzied growth rate. It took Tencent eleven years to reach a revenue of 10 billion, and only six years to break through 100 billion. In 2023, Tencent's annual revenue exceeded 600 billion. The average annual revenue growth rate since its listing has been 42%.In this rapid run, the only one that can continuously transform besides Transformers is Tencent.What drives the transformation?In the history of Chinese internet business, there have been waves of people and companies that have seized opportunities, but very few enterprises have truly captured immense wealth. What drives Tencent to continuously transform, and how does each key transformation achieve great success?In &#34;The Tencent Biography,&#34; the author Wu Xiaobo, after years of research on Tencent, gave up answering the question of &#34;the essence of Tencent.&#34; Instead, he summarized the reasons for Tencent's success with several keywords, among which the &#34;horse racing mechanism&#34; has been mentioned more than onceThe horse racing mechanism at Tencent can be understood as a form of internal competition and innovation mechanism, which may be the &#34;first driving force&#34; that allows Tencent to continuously transform. However, this mechanism is not a top-level design based on the foresight of executives like Pony Ma, but rather an enterprise culture that has naturally formed in response to market trends.QQ's profitability is very representative. For a long time after its launch, QQ did not find a suitable profit model. This was not just a problem for Tencent; at that time, both China and the world had not explored better profit models for online instant messaging services. Ultimately, it was not the high-level design of QQ's creators that pulled QQ out of the loss mire, but rather a seemingly mundane job transfer.Xu Liang, who originally applied for another position, accidentally became a &#34;product manager with nothing to do&#34; upon joining. In his idleness, he discovered virtual paid products from a certain community website in South Korea and believed that this profit model could be referenced by QQ. After gaining the approval of Tencent's management, QQ Show was successfully integrated into the QQ system, and within the first six months of its launch, 5 million people purchased the service. QQ Show allowed Tencent to find another profit point beyond its mobile dream network business.However, the success of QQ Show for Tencent had a deeper significance beyond just making money; it established a project-based product manager system. The unwritten rule of &#34;who proposes, who executes&#34; and &#34;once it grows large, it becomes independent&#34; made the &#34;horse racing mechanism&#34; possible. This allowed Tencent to quickly follow up and scale up in the face of rapidly changing markets.In 2010, on the eve of the mobile internet explosion, a foreign instant messaging mobile application—Kik—caught the attention of many domestic teams. We now know that the QQ Mail team led by Zhang Xiaolong defeated Lei Jun's Mi Talk, but at that time, WeChat had more than just Mi Talk as its enemy. Within Tencent, in addition to Zhang Xiaolong's WeChat, there were also QQ and Mobile QQ, with a total of three teams developing simultaneously. Ultimately, WeChat won the competition due to its development speed and excellent product quality.For a long time, games have been Tencent's basic business, and the horse racing in the gaming field has generated substantial profits for Tencent.In 2014, when there were no mature MOBA mobile games on the market, Tencent's TiMi and Photon studios began horse racing in this track. &#34;Honor of Kings&#34; (then called &#34;Hero Battle&#34;) initially lagged behind, receiving fewer resources and less recognition than Photon's &#34;All-Star Battle,&#34; but ultimately won due to its model that did not affect the fairness of the game, helping Tencent establish a competitive advantage in competitive gaming.<img src="https://pub.pbkrs.com/uploads/2025/d09a4661fc231329b4d59abfdb0821e8?x-oss-process=style/lg" alt="" original-src="https://pub.pbkrs.com/uploads/2025/d09a4661fc231329b4d59abfdb0821e8"/>Promotional image for the now-defunct &#34;All-Star Battle&#34;These successful internal horse racing cases share a common point: the products were not developed by Tencent's core combat team at the time. Unlike the mechanism of actively identifying market trends and going all in, the &#34;horse racing mechanism&#34; allows different teams to try different directions, which often enables them to gain an edge over competitors when the tide comesThe other side of the horse racing mechanism is internal friction. However, without the horse racing mechanism, Tencent might lose many possibilities, and within these possibilities lies the secret of Tencent's transformation.Transformation: The Fundamental Skill for Long-lasting SuccessIn the long history of business, constantly transforming during development and growth is not Tencent's exclusive skill. If a company wants to maintain long-lasting success, being brave and adept at transformation is almost a necessary skill.Apple is a prime example.In 1975, the Homebrew Computer Club was established in the United States, with its most famous members being Apple's two founders—Steve Jobs and Steve Wozniak, and its most notable adversary being Bill Gates.The name &#34;Homebrew&#34; indicates that this is a technology enthusiast organization aimed at personal home computers, and the Homebrew Computer Club can be considered the muse that inspired Jobs and Wozniak to start their business. In 1976, Apple began selling the Apple I, thus entering the computer market and securing a place in the market with flagship products like the Mac.<img src="https://pub.pbkrs.com/uploads/2025/dfccf6c3132e9527c527d1d1ace625eb?x-oss-process=style/lg" alt="" original-src="https://pub.pbkrs.com/uploads/2025/dfccf6c3132e9527c527d1d1ace625eb"/>Wozniak hand-crafted the Apple I, which auctioned for over $600,000.By 2001, with the burst of the internet bubble in the United States, Jobs was rethinking Apple's future. He believed that personal computers would not be marginalized but would become the &#34;digital hub&#34; of the home. This digital hub would connect devices including music players, video recorders, cameras, and potentially smartphones.With what Jobs called a &#34;digital lifestyle&#34; vision, Apple continuously developed new products including the iPod, iPhone, and iPad, especially the iPhone released in 2007, which became the starting point of the mobile internet boom. By the fiscal year 2023, iPhone revenue had surpassed half of total revenue, while the once-main product, the Mac computer, accounted for less than 8%.Opposite the romantic and meditative Jobs was the more pragmatic and organized Bill Gates. The two had vastly different temperaments, but they shared a rare consensus on the need for their companies to continuously transform to keep up with or even lead the times.The history of Microsoft is a history of constant transformation.In its early days, Microsoft's main business was developing and selling Basic interpreters and collaborating with IBM to provide the MS-DOS operating system. In 1985, Microsoft released its first visual Windows system. In 1990, Microsoft launched MS Office 1.0. In 1995, by bundling the IE browser with the Windows system, Microsoft gradually gained an advantage in the browser war against Netscape.By the time Bill Gates announced his retirement in 2000, Windows platform revenue was $9.38 billion, down from being the main source of revenue in the late 1980s to accounting for 41% of total revenue that year, while the productivity applications and developer income from the Office component business reached $10.47 billion, accounting for 47%After Bill Gates' retirement, Microsoft did not stop transforming. Even Steve Ballmer, who is known as the &#34;most unsuccessful Microsoft CEO,&#34; planted the seeds for cloud services, while the current CEO Satya Nadella has positioned Microsoft at the forefront of AI.In the fiscal year 2024, the revenue proportion of the personal computing division, where the Windows business resides, further decreased to one-quarter, and the revenue of the productivity and business processes division, which includes Office components, dropped to less than one-third. The hottest business for Microsoft in this fiscal year has shifted to the intelligent cloud business, which accounts for 43%. At the beginning of 2024, Microsoft became the second company after Apple to have a market capitalization exceeding $3 trillion.In the business world, after the invention of the corporate system, achieving longevity has always been the ultimate goal pursued by many enterprises. In traditional Chinese wisdom, there is a saying that &#34;wealth does not last beyond three generations.&#34; In fiercely competitive markets, three generations have become a luxury. However, there are solutions; the examples of Tencent, Apple, and Microsoft prove that companies can navigate through one business cycle after another by continuously transforming.Today, WeChat has become an important driving force for Tencent's growth, but this is likely not the last transformation for Tencent

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In business history, Tencent is not the only company that has continuously "transformed"; many long-standing large companies have undergone transformations, with Apple and Microsoft being among the best examples

- Tencent, founded in 1998, has undergone significant transformations, evolving from a small entity to a major player in China's internet landscape.  
- Initially reliant on its "Mobile Dream Network" for profitability, Tencent diversified its revenue streams through social and gaming services, achieving substantial growth and becoming one of China's earliest profitable internet companies.  
- The company's success is attributed to its internal competition mechanism, allowing rapid adaptation and innovation, ensuring its continued evolution in a fast-changing market.

Tencent's "Metamorphosis"