WeChat Digs for Gold in Mobile Gaming

3 July 2013 19 h 01 min Comments Off

tencentwechat

(Caijing, Jul 02, 2013) The market for mobile games in 2013 is expected to explode to 9.6 billion yuan from 3.2 billion yuan last year, according to market research data from the China Industry Advisory Network.

To meet the growing demand for mobile gaming content, Tencent Holdings Ltd., China’s largest Internet company by revenue, launched its WeChat Games platform on July 3, following similar launches of other tech companies such as NetEase, Baidu, and 360.CN.

Tencent previously dominated the era of web browser-based games. As China’s most popular mobile networking platform, WeChat’s entry into mobile games is being viewed as the beginning of a shift in the industry’s power balance in the current multi-channel market led by developers.

After experiencing explosive growth over the past year, Chinese companies engaged in mobile games development and distribution now number in the thousands. Among the numerous business models of the mobile Internet, mobile gaming has been the first to realize profitability on a relatively large-scale. As of June this year, between 10-20 mobile games companies had monthly incomes of over 10 million yuan.

Compared to massively multiplayer online role-playing games (MMORPG) which require client downloads and browser games that are played over the Internet using a web browser, mobile games require less investment, and the development and payback periods are shorter. In addition, mobile game users (i.e. smart phone owners) generally have higher purchasing power.

In the United States, the most successful mobile games adopt a paid download model, as U.S. consumers are more willing to pay for software rather than rankings and items within the games. In China, on the other hand, it is just the opposite. For this reason, PunchBox, the developer of the popular mobile game Fishing Joy, adopted a new pricing model which has since been adopted by the majority of Chinese mobile game developers – free downloads with built-in fees (the purchase of gold coins, items in the game, level checkpoints, etc.) and revenue from advertising.

The three major forces in the gaming industry are research and development, operations, and platforms. The interest structure of which is the driving force behind the development of the entire industry chain.

In the web browser era, however, platforms which could amass large user bases drove the market’s development. A game’s success did not depend as much on its quality, but instead relied on platforms that held strong user bases.

In the mobile phone industry, the diversification of channels has weakened the power of single platforms and allowed products to excel based on individual merit. Of the 3.2 billion yuan market for mobile games last year, platform distributors accounted for about 46 percent, agency operators accounted for 14 percent, while developers held a 40 percent share.

PunchBox CEO Chen Haozhi said that four channels have emerged in the Android phone market: Google Play’s official platform market; the three carriers (China Unicom, China Mobile, and China Telecom) market; the preloaded market of Samsung, Xiaomi Technology, and other vendors; and the third-party market, which is the largest of the four. The current leaders of this market are 360.CN and Mobile QQ, in addition to more than 300 other distributors such as 91.com, UC Browser, Baidu, Anzhi.com, AppChina.com, Downjoy, and WanDouJia.com.

With WeChat and its more than 300 million users now joining the fray, big changes may in store for the industry. Renren Games Vice President Cao Xingbang said that if WeChat can hunker down and follow current market rules to divide profits with developers, WeChat Games could account for more than 50 percent of the market by relying on its own user base and attracting a large number of new users.

Moreover, if WeChat Games succeeds, it would be easier for Tencent’s other products to find their way into WeChat, thereby creating an integrated mobile ecosystem.

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