What's going on?

Tencent reported worse-than-expected quarterly results on Wednesday, as China�s regulators make it nearly impossible for the tech powerhouse to start a new game.

What does this mean?

China�s making life tough for the gaming industry. For one, it�s restricted under-18s to just a few hours of gaming a week, which means less spending on in-game purchases. And for another, studios haven�t been able to get new games off the ground, with regulators having refused to give studios the green light in nearly eight months. That�s taken its toll on Tencent: the League of Legends-owner�s domestic gaming revenue barely grew at all last quarter from the same time the year before.

Tencent�s advertising business has been struggling with crackdowns too, which have pushed companies in a variety of industries to slash their marketing budgets. The company, then, saw its online advertising revenue drop 13% last quarter, meaning its overall revenue rose just 8% � the slowest since it listed on the stock market in 2004.

Why should I care?

Zooming in: Two-stop shop.
Those crackdowns have played a part in wiping nearly $500 billion off Tencent�s market value since it peaked last year, and worse could be to come: the Chinese government is reportedly thinking about forcing Tencent to spin off WeChat Pay � part of Tencent�s WeChat messaging platform � into a separate financial company. Thing is, a big part of WeChat�s appeal is the fact it�s a one-stop shop, and breaking it up risks pushing its 1 billion-plus users away.

The bigger picture: Tencent eyes the metaverse.
Tencent�s back is up against the wall in China, so it�s branching out elsewhere: the company�s already partnered up with EA to help turn much-loved franchises into mobile formats, and it�s even launched a whole new international gaming publishing division. And if that doesn�t work, maybe this will: Tencent�s been registering trademarks and hiring developers to prepare for business in the metaverse.