Fast Plays, Big Pays: Unpacking China’s Mobile Gaming Dominance
By Mariam Ahmad 9 August 2024
China's mobile gaming giant is quietly dominating the global stage. Despite its immense size and rapid growth, not to mention its position as the number two largest online games market in the world, this powerhouse often flies under the radar. Fueled by tech breakthroughs, aggressive global expansion, and clever monetization, China's mobile gaming industry is a force to be reckoned with.
Hot on the heels of ChinaJoy 2024, here’s a closer look at the driving forces behind the booming mobile gaming market in China.
Market dominance and expanding reach
As of 2024, China accounts for over 31% of global mobile gaming revenue, reflecting its significant influence on the industry. This dominance is not just confined to domestic borders; Chinese mobile games are making substantial inroads into international markets, leveraging their strong domestic base to fuel global expansion. The Chinese gaming industry’s revenue is projected to grow from USD 66.13 billion in 2024 to USD 95.51 billion by 2029, at a CAGR of 7.63%. China’s gaming market is also benefiting from a rapidly expanding user base. By the end of June 2024, there were 674 million game users in China, contributing to a domestic gaming market sales volume of 147.27 billion yuan ($20.37 billion). Mobile games, in particular, accounted for 73% of these sales, underscoring their popularity and dominant position within the industry.
While we may not have exact revenue figures, it’s clear that the mobile game market in China has thrived, particularly during and after the COVID-19 pandemic. During that time, gaming became a social activity due to some policies, and this trend has continued into the present. However, the industry now faces fierce competition.
Chinese game developers are increasingly diversifying their offerings. Initially focusing on SLG (Simulation and Strategy) games, they have expanded into battle royale and, more recently, open-world anime-style games. This growing variety demonstrates their ability to break down complex game mechanics to better suit the fragmented mobile platform. Currently, mini-games are trending in the mobile game industry, aligning well with the evolving lifestyle of players.
The primary driver behind this diversification is the intense competition within the domestic mobile game market, with countless new games and companies emerging each year. In such a dynamic environment, several products have also achieved notable success in the global market, it also encourages more studios to expand globally.
The rapid adoption of advanced technologies, such as 5G and cloud computing, is fueling substantial growth in the region. Mobile services have expanded significantly, with 1.22 billion subscribers last year, representing 83% of the population. This rapid growth is underscored by the projection that 52% of Chinese connections will be 5G-enabled by 2025. To support this expansion, operators are investing heavily in 5G, allocating 88% of their expenditure (approximately USD 116.16 billion) between 2020 and 2025. The economic impact is substantial, with mobile technology and services contributing 5.6% to regional GDP, or roughly USD 900 billion, in the past year.
The deployment of 5G technology is enhancing the gaming experience with faster and more reliable internet connections, crucial for high-performance gaming. This includes the modernization of cable networks and the adoption of DOCSIS 3 technology, which enables download speeds of up to 100 Mbps, further supporting the growth of cloud gaming services.
Meta's strategic alliance with Tencent is expected to dramatically boost VR headset sales in China throughout 2024. While currently popular for social interaction and entertainment, VR is steadily penetrating the Chinese gaming market.
China's designation of VR as a "key industry" in its Five-Year Plan heralds a new era of technological advancement, promising exciting opportunities for both gamers and developers. Within this five-year plan, China aims to accelerate the integration of virtual reality into industrial processes. By 2026, the country aims to grow its VR industry, encompassing hardware, software, and applications, to over CNY 350 billion ($48.56 billion).
Tencent drives China’s gaming empire
China's mobile gaming industry reigns supreme, propelled by Tencent Games, a behemoth generating 100 billion yuan ($14.13 billion) in revenue. This gaming giant is one of 52 Chinese companies gracing the top 100 global earners list.
While China's gaming sector is undeniably formidable, its future is clouded with uncertainty. Domestic revenue is dwindling, global competition is fierce, and user acquisition costs are soaring. Moreover, the specter of stringent Chinese government regulations, though currently subdued, looms large.
To conquer international markets, over 60% of surveyed Chinese gaming companies are prioritizing long-term product development, strategic alliances, localized content, and technological innovation. These strategies aim to solidify China's global dominance and unlock further growth opportunities.
Immediate advertising revenue
A recent episode of the "Two and a Half Gamers" podcast, which discussed their visit to ChinaJoy 2024, a premier event in China's gaming industry, explored trends and unique aspects of the mobile gaming sector in the country. The conversation delves into the immediate advertising revenue practices in the Chinese market, which is characterized by its rapid execution and contrasts sharply with the slower pace often experienced in Western markets. In China, advertising revenue can be disbursed on the very first day, often in the form of UA credits, which allows developers to reinvest instantly. This system eliminates the typical 30 to 60-day waiting period seen in the West, facilitating immediate reinvestment and growth.
This approach is particularly evident in WeChat Mini Games, where a trending game can receive substantial financial backing - up to 400k in UA budget - almost instantaneously. This not only reduces bureaucracy but also significantly accelerates the potential for growth and expansion, providing a substantial competitive edge. The discussion highlights how this model is uniquely efficient compared to more complex and data-dependent systems in the West, where upfront payments for estimated revenues require extensive negotiation and data analysis.
The discussion also touched on broader aspects of the gaming industry in China, including a keen interest in Western games and notable performances by major Chinese gaming companies like MiHoYo, Century Games, and Tencent in international markets. The conversation encapsulates a larger trend where immediate financial mechanisms and aggressive market strategies set the Chinese gaming market apart, offering valuable insights into its dynamic nature and operational efficiencies.
The rise of mini-games and social gaming
One of the notable trends in China's mobile gaming market is the rise of mini-games. These games, often embedded within popular social apps like WeChat, have gained immense popularity due to their accessibility and social interaction features. One of the standout trends in the Chinese market is the explosive growth of WeChat mini games. These are lightweight games embedded within the WeChat app, requiring no separate download. According to reports, as of the first half of 2023, the overall MAU of WeChat mini-games has exceeded 400 million, with over 100 mini-games achieving over RMB 10 million in revenue in Q2 2023. The convenience and social interaction capabilities of these mini games make them highly engaging for users.
WeChat mini games operate similarly to HTML5 or instant games, which saw limited success in the West due to download size restrictions. In contrast, WeChat's integrated ecosystem allows seamless access to these games, bypassing the hurdles faced by similar platforms in other regions.
Strategic international expansion
Chinese game developers are increasingly looking to international markets to sustain growth. The export of self-developed games saw a 4.24% year-on-year increase in the first half of 2024, reaching $8.55 billion. Key markets for these exports include the United States, Japan, and South Korea. This international expansion is driven by the high quality of Chinese mobile games and their ability to adapt to different cultural preferences through hyper-localization.
According to SocialPeta's latest report, firstly, Chinese companies place a strong emphasis on global marketing. In the face of increasing competition, more businesses are seeking opportunities in global markets. In fact, among the top 20 global mobile game publishers in the first half of 2024, Chinese companies occupy half of the spots.
Secondly, Chinese companies excel at integrating games with mobile platforms. In today’s world, where people can’t live without their smartphones, the ability to make effective use of fragmented time is crucial. This is reflected in their development of engaging yet slightly complex game mechanics. A prime example of this success is the popularity of Chinese mini-games in global markets, particularly in Japan, South Korea, and Southeast Asia.
In China, LiveOps has become a pivotal component of mobile game monetization strategies, significantly more popular than in many other markets. LiveOps involves continuous updates, in-game events, and real-time player interactions that keep the game fresh and engaging. This approach helps maintain high levels of player retention and monetization through in-app purchases and time-sensitive offers.
Seasonal events, such as holiday-themed promotions and special content updates, are designed to draw players back into the game regularly, enhancing long-term player investment and spending.
The effectiveness of LiveOps is further underscored by its ability to drive substantial revenue through diversified monetization streams. For instance, developers can introduce new purchasable content and special bundles seamlessly during events, which encourages players to spend more on in-game items and enhancements.
It's no secret that LiveOps is a key differentiator in China. Users expect to have their needs met here and now, not within a week or two weeks of play time.
In markets such as the US, games build their monetization more slowly. Chinese games take a different approach, using multiple systems and constant updates to drive player engagement. Chinese games typically have daily events and require a dedicated team to manage, which can be out of scope for many developers in other regions.
Marketers might be turned off by this, but remember that LiveOps don’t have to be in-game only. Before the necessary infrastructure is in place, MVP testing can be carried out in social communities, creating events that boost awareness and build hype.
So, what can the global mobile gaming industry learn from China? Perhaps the lesson lies in the relentless innovation, the agility in monetization strategies, and the bold expansion into new markets. As China's mobile gaming sector continues to evolve and dominate, other markets might find valuable insights by observing the successes and strategies of this dynamic powerhouse.
China’s mobile gaming juggernaut teaches us the power of embracing technology and understanding your audience's needs. They’ve mastered the art of quick, iterative improvements through LiveOps, ensuring games remain engaging and lucrative. Chinese developers don’t shy away from experimenting with diverse genres and monetization formats, tapping into both local and global trends. Their aggressive global expansion strategy shows that it’s not just about creating great games but also about smart marketing, localization, and relentless innovation.
