Comment & Opinion

7 reasons why the Chinese mobile games market is a constipated mess for indies

Innovation can not get out

7 reasons why the Chinese mobile games market is a constipated mess for indies

Small amounts of knowledge are dangerous.

Without understanding the full breadth of a subject, it's easy to exaggerate the importance of what you know, or extrapolate it into areas you know nothing about.

I hope this will not be my fate in this article.

For the past 12 months, I've been doing my best as a non-Chinese-based journalist to follow the fascinating and fast-growing Chinese mobile game market.

Indeed, much of that time has been spent throwing away assumptions as I talk to more people about the trends that are defining it.

Bipolar views

To that extent, it's easy to fall into the conclusion either that the Chinese games industry is going to take over the world, sweeping and buying all before it.

On the other hand, there's a temptation to dismiss it as a very unstable ecosystem that could - and perhaps will - endure the sort of shake up that will revolutionise current circumstances.

Personally, while I think there is some truth in the latter statement, what is much more likely is that over time, the Chinese game industry will just become much like any other country - say Japan, Korea or the US.

Because of its particular history, structure and massive userbase, it will be different, but not that much different.

Yet, talking to the small Chinese indie developers, it's seems clear to me that they are suffering from a particular structural problem: one that if it isn't solved has the potential to derail some of the Chinese mobile game market's future growth and more of its future innovation.

And it all starts with the ways that indies have to use if they want to release their games in the highly fragmented Chinese Android ecosystem.

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  • 1 Co-publishing with a big channel

    Most of big Chinese channels don't want to share or sell their traffic to developers directly as Facebook does in the west.

    They only do co-publishing deals, which means your game has to be chosen by them. If you are not chosen, your game will die.

    They also take an additional cut of the revenue.

  • 2 Working with a publisher

    The only different between publisher and big channel that is publisher doesn't have traffic, so they have to build a strong relationship with a big channels, and spend money advertising games on them.

    A publisher will analyse your game metrics (Retention, ARPU etc.), and depending on the results, sort them out into Class S, Class A, Class B depending on the result. They are only interested in Class S games.

    Again, if they publish you, they will take a cut of the revenue.

  • 3 Self-publish

    Most Chinese developers don't have the experience or funding to publish a game by themselves. That's why publishers have such an important role in the Chinese market compared to the western market.

    Even if a developer wants to self-publish, it is still quite difficult, mainly because of the problem of getting enough users. Your game is one of thousands on dozens of Android app stores.

  • 4 No user acquisition channels

    In the western market, there are many channels for user acquisition and you can optimise your ad performance for better ROI and lower CPI.

    You are able to buy downloads from big platforms such as Facebook, Twitter and YouTube. It is an open market. It is very difficult to do the same thing in the Chinese market.

    The big channels consider their users to be their own property so they don't want to sell advertising or their users. They want to co-publish to keep more revenue.

  • 5 Not enough casual game ad inventory

    If you check out the top games on the Chinese App Store, there are quite a few casual games, yet because hardcore games make big money - certainly in terms of ARPU - most developers prefer make hardcore games instead.

    Adverts such as interstitials or videos can be a very important revenue source for casual games, (because of their lower ARPU).

    The problem is there aren't enough casual games in the market so there's not enough money going into advertising within casual games, because most developers and publishers are focused on hardcore games.

    Even in this manner, indies can't generate revenue.

  • 6 Pre-ordering advertising versus RTB

    Although real-time bidding platforms are coming to China, the big channels don't allow them. They focus developers and publishers on pre-ordering adverts and downloads.

    Obviously, this requires a lot of upfront cash that the smaller developers just don't have.

    Interestingly, many of the big publishers also own game websites; Changyou and, for example. This gives them another advantage over the indies, as well as positive coverage for their games. There's little separation between advertising and editorial in China.

    Once again, the big channels and publishers define the app ecosystem in the way that gives them an advantage.

  • 7 No level playing field

    Imagine a world in which Facebook or Twitter didn't allow thirdparty content providers to advertise. Instead, they developed their own games and co-published others.

    This is what is happening in the Chinese mobile game market right now.

    Big channels such as Tencent are generating vast sums of money - $487 million in FY14 Q2 - because they control the market for user acquisition on WeChat/Weixin and because of this, they also control publishing for the best games.

    If Tencent offers you a deal, you don't negotiate. You say 'Yes'.

  • 8 Conclusion

    To outsiders, the Chinese mobile game market is buoyant. It doubled in 2013 and could double again in 2014 to over $4 billion.

    Some companies are generating a lot of money, and even larger amounts of silly money is being spent on crazy acquisitions that won't ever generate a return on investment.

    Yet, at the grassroots levels, the small developers - the developers who are trying to innovate and do something different - can't gain access to the market.

    This is why many of them focus on non-Chinese markets that they can access through the App Store and Google Play.

    The Chinese mobile game market is broken. The question is Can anyone fix it?

Contributing Editor

A Pocket Gamer co-founder, Jon is Contributing Editor at which means he acts like a slightly confused uncle who's forgotten where he's left his glasses. As well as letters and cameras, he likes imaginary numbers and legumes.