The fight between China’s tech giants Tencent and Alibaba today has never been fiercer.
While Alibaba has an absolute advantage in online retail, Tencent has established an unchallengeable dominance in the games market.
Today, mobile revenue still relies heavily on the games industry. According to the recent report released by China Culture and Entertainment Industry Association (CCEA), more than 70 per cent of APP income was generated by games players.
Since 2014, China experienced an explosive growth in game market. AppBi research shows the total revenue had jumped almost four times from 2014 to 2017. In 2018 Q1, China mobile game revenue reached $2.3 billion, equivalent to the total in 2014.
The rapid growth of China's games market and enthusiast players makes Tencent one of the biggest beneficiaries.
While many overseas learned about the company through its instant messaging app WeChat, which is a combination of Facebook, Whatsapp, and Groupon, Tencent’s biggest revenue generator was in fact, games - based on data monitored by AppBi.
The unbreakable game publisher
Among all games listed on the 'top 20 paid games' chart from 2014 to 2018 Q1, Tencent constitutes 50 per cent of the total.
While NetEase remains second, it only has 18 per cent of titles ranked on the prestigious list. Since 2016, iQiyi and several other companies began to invest heavily in games development, but they take only a very small portion of the market share.
Tencent's annual report shows one of the most profiting game is the Honor of Kings (Arena of Valor), the so-called local version of League of Legends, which maintains a two-digit daily user growth rate.
While Tencent’s profits jumped 61 per cent in Q1 2018, it could not have done so without the strong performance of its games division.
Honor of Kings didn’t get all the glory
AppBi discovered some new trends from previous data. In 2016, Honor of Kings reached its peak with a growth rate of 29 per cent, but the game's popularity started to gradually drop after policy restrictions and growing competition.
Similar to NetEase’s star product Fantasy Westward Journey, the game even had a negative growth rate in profit this year.
In 2018 Q1, NetEase’s game topped the fastest growing category, whereas QQ Speed rose to become the new star of the Tencent family.
Compared to previous years where Tencent and NetEase carved up most of the profits, several start-ups grew to become the budding publishers in China’s game arena.
Rising profits, shrinking quality
AppBi studied every year’s 'top 20 games grossing' chart on iOS store and discovered some astounding conclusions.
Most of the top publishers are either injected by Baidu, Tencent, and Alibaba, or BAT itself. As the competitions grew fiercer and acquisition of game brands became more aggressive among China’s three largest internet giants, small start-ups are find it's increasingly difficulty to survive or stay independent.
From 2016 to Q1 2018, most of the yop 20 profitable games are well-established IP or in the Chinese fantasy category, which have proven to be very popular among Chinese consumers.
To survive in one of the toughest markets, many publishers tend to invest more in games that have a proven track record of being popular in China.
Compared to complete originality, many companies adopted more efficient ways, such as utilising IP and/or reworking previous games. There was a significant lack in creativity and innovation.
With more players generated by games like the Honor of Kings, China mobile users are expected to exceed 550 million, according to CCEA. However, the games market still requires more originality, talent and better data-driven marketing strategies.
In 2018, Apple indicated it will continue to invest more in Search Ads, a rising marketing tool that could help hundreds and thousands of games developers promote their titles better.
AppBi provides search optimisation services and has a promising track record of helping clients.
With more small to mid-size game companies seeking opportunities domestically and overseas, AppBi could be an engine to drive the growth of China’s games market.