When a company is relying too much on a core product or service, negative impact on its value is not a matter of “if”, it’s the matter of “when”.
Tencent is massive in online gaming. With revenues of $11 billion and 47% gross profits, it is one of the world’s largest companies by market value. It has tried food delivery and online payments in China, 80% of its profits come from gaming.
Tencent is really good at creating new games that keep players glued to their screens. Profits roll in when players buy in-game products like weapons or shields etc.
But that came to a sudden halt when Chinese govt decided that children are staring at their screens for too long. So it stopped approving new games.
Suddenly, the company’s enterprise value plummeted. It is already down 30% in the last 6 months.
Here is a lesson – companies relying on a single point of failure are walking on thin ice.
