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Tencent released its third quarter results for 2014 yesterday and, as analysts predicted, its growth in mobile games has slowed. In fact at RMB 2.6 billion (US$424 million) this quarter’s mobile gaming revenue is actually down compared last quarter, although Tencent blames that mostly on “delayed launches of upgrades.”
I’ve written quite a bit about why I think the mobile gaming market in Asia is overhyped, so I don’t want to rehash any of those arguments here. There is, however, another reason that Tencent and companies like it are struggling to make a killing even when they have a hit mobile game, and it has to do with user habits.
In China, as elsewhere in Asia for the most part, the PC gaming market is pretty static. If you have a hit, you can count on milking that cow for years. Check out the hottest PC games in China as of this September, for example. Of the four most popular games, World of Warcraft is a decade old, CrossFire is seven years old, Dungeon & Fighter is nine years old, and League of Legends is three years old (in China, anyway). There are some newer games on the top ten list, too, but the most popular games have serious staying power. In fact, the top three games haven’t changed at all since I started tracking them a couple of years ago.
For Tencent, monetizing games like that is pretty easy. Although it didn’t develop any of them, Tencent is the China publisher for three out of the four top four games, so all the company had to do was identify a promising game from overseas and become its publisher to ensure itself years of solid revenue as that game’s Chinese player base exploded. That’s because China’s PC gamers tend to stick around when they find a game they like. Many guys playing Dungeon & Fighter in China now have been playing it for years, and they’re not showing any signs of stopping.
But China’s mobile gaming market is pretty much the complete opposite of that. While PC gamers stick with games for years, statistics show that China’s mobile gamers aren’t likely to even keep a game installed on their phones for more than a couple of months. Even the folks who spend lots of time gaming on their phones tend to move from game to game relatively quickly compared to their PC brethren.
See: Why winter is coming to China’s mobile gaming scene
For a publisher like Tencent, that makes monetizing mobile gaming difficult. Since so few mobile games are profitable, the company has to produce or license a large number of games to ensure that at least of couple of them will be hits. But even when it does get its hands on a popular game, it generally has just a few months to wring profits out of the game’s player base before most users have gotten tired of it and moved on to the next mobile hit. And since most mobile games enjoy only a short time in the sun – so to speak – developers and publishers can be tempted to overdo things when it comes to monetization, and implement systems that are off-putting to gamers.
Tencent says the recent slowing in its mobile gaming growth is due in part to a strategic shift – a focus on improving user experience rather than increasing revenues. But if the company’s mobile gaming arm is ever going to bring in revenue numbers comparable to what its PC games bring in, Tencent will need to find a way to account for the vast differences in user habits across the platforms, and figure out how to monetize hit mobile games quickly without driving gamers away.
This post Why Tencent is having trouble monetizing mobile games appeared first on Tech in Asia.
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