ChinaJoy 2019: Five Trends in Mobile Gaming

At the latest ChinaJoy, due to time constraints, I only quickly walked around at the venue as a participant. The lively B2B was filled with the music of numerous gaming agents, as well as by overseas companies flocking into China. Behind all this, I also found some very interesting things, which I write down to share with my friends.

Some reflections after browsing the ChinaJoy B2B exhibition:

Chinese version: https://bit.ly/2Km2ebn

1. The Number of Chinese Video Game Companies Using Anime-Style Art Has Increased .

At this event, there was a sudden increase in the number of anime-style video game companies. This is likely connected to the habits of gamers born in the 1990s and 2000s.

I have not done extensive research into the world of anime, but I believe the three factors below are the main reasons for this boom:

1)    Anime video game adaptations of comics and novels have a built in fanbase that can be seamlessly transferred from the original novel or comic to the game. The comparative cost of acquiring a player base is extremely low, because the property has its own means of attracting traffic, and this drastically reduces the game’s advertising costs.

2)    The plots of both comics and novels are already in their later stages. This allows gaming companies to determine late-stage ROI income expectations when designing the game’s levels, and make changes so more players stay until the very end, adjusting the number of levels more precisely.

3)    The number of otaku is increasing. Many people would prefer to interact with anime characters in a 2D world rather than spend time adapting to the increasingly diverse world of human relationships.

The increase in anime-style video games represents a gradual increase in the consumption power of the younger generations born during the 1990s and 2000s.

2. Japanese Anime-Style Mobile Gaming Companies Have Made Huge Inroads Into China

There is still a disparity in the development of Chinese comics and novels compared to the comics, novels, and mobile games from foreign countries. For example, commonly mentioned series such as Slam Dunk, The Avengers, and Hatsune Miku are all foreign products. Although there have been phenomenally successful domestic products in recent years such as Monkey King: Hero is Back, they have been slow to win over true anime fanatics due to their lack of a clear storyline. Clever Japanese anime gaming companies have seized on this business opportunity, and entered China in an attempt to replicate the success of The Avengers.'

For an anime game IP to succeed, it is not enough to enhance the graphics—one must also pay attention to the plot structure.

3. Video Game Advertising Creative Optimization Companies Are Springing Up Like Mushrooms

This is the most obvious and most worthwhile point to ponder: More and more “creative” advertising companies have come into existence. Creative advertising companies from Taiwan, Chengdu, Shanghai, and Fuzhou are constantly bustling about the marketplace. Research indicates that the reason for this is a sharp increase in the purchase price on large channels (FB, Google). Asset optimization is the most important component of advertising and the area where Chinese distributors have the most absolute advantage over overseas distributors: Manpower in the artistic field is relatively cheap, results-oriented and constantly innovating.

This is a very interesting phenomenon: Many Chinese companies do not pay attention to long-term value (LTV) benefits but focus more on short/mid-term ROI. The easiest way to improve short-term ROI and increase the number of app installations is to use creative assets to attract as many users as possible within the bounds of the law. Many agencies have seized this idea, propagating non-stop and establishing creative advertising teams to exclusively meet their clients’ short-term needs.

The outcome of this short-term inducing effect is the banning of advertising accounts on large channels, but there may be a large number of app installations and huge income before such a ban. This outcome can solve short-term problems, but whether or not the effects continue into the future remains to be seen.

4. Even Good Small and Medium-Sized CPs Depend On Big Releases to Survive

While visiting the venue, I could see that there were far fewer small and medium-sized CPs compared to previous years. The reason for this is likely because the entry barrier for overseas distribution has risen. In Europe and the United States, the once ubiquitous $5 download model for semi-casual and hardcore games no longer exists, and retail prices in Southeast Asia, Hong Kong, Macao, and Taiwan have sharply risen. Under these conditions, small and medium-sized CPs must rely on flagship products to survive. However, the flagship products are encountering the same problem. “Overseas distribution costs have increased. The so-called flagship products are increasingly less willing to act as forerunners in promoting unrelated products.” As a result of this vicious cycle, the number of CPs continues to decrease, and the distributors’ hands are also tied, leading to a gradual slowdown in the domestic video game industry.

The indie gaming boom has passed, and in the future, lightly commercialized games will become the prevailing trend.

5. Cloud Games Are Developing Rapidly, But Still in Their Infancy

I believe that for cloud gaming to achieve market readiness it requires both game development engine and hardware support, and this will take at least two years.

The foundation of cloud gaming is now relatively stable, but this “stability” is limited to the operational portion. In terms of computing power requirements and cost, it remains far from the commercialization stage. The question of how to reduce latency and cost will be the biggest commercial bottleneck for cloud gaming. Some people will be willing to carry around a display screen, but no one will be willing to spend 3 CNY an hour to buy a unit of cloud computing power.

The basic principle of cloud gaming is to centralize data on company hardware as opposed to individual hardware. However, if the issues of electricity costs and rental fees cannot be resolved, commercialization will encounter substantial difficulties.

Big companies can make accommodations, but small companies cannot afford to experiment.

In summary:

ChinaJoy B2B is obviously not as hot as it was in previous years. The noisy music played by numerous exhibition booths could not conceal the fact that the video game industry's boom period has ended, and that the industry is now gradually stabilizing and even showing a slight downturn. Currently, there are more overseas channels, more asset creation companies, fewer small and medium-sized CPs, and fewer large-scale events and parties as a result of the gradual saturation of the video game industry.

At the same time, the development of quality games and channels will become the two potential highlights of video game companies in the future. As long as a product is of high quality, the large channels will offer higher prices and compete to release it.

Affiliate networks (channels that function as middlemen between buyers) will gradually be squeezed out by game engine companies such as Unity and Unreal, and change course to develop their own products or focus even more on asset development and creation. Therefore, they will become specialist providers of their own services and will no longer be purely training optimization teams to profit from affiliate rewards. 

Games will tend to be quality and hardcore, and the middle ground will gradually disappear. Quality games will be developed with tools such as Unity and Cocos to capture a large number of low-paying players. Hardcore games such as anime-style games and the Call of Duty series will capture a large section of a precision-marketed audience and make them spend money non-stop, They will also use the tactic of establishing communities to increase late-stage playability.

I hope that the Chinese game development industry will flourish, with more quality products and good games that can be distributed abroad and enjoyed by foreign gamers!

Writer: Alex Chu, GM China. Nanigans.

Nanigans is the world's leading Facebook advertising system, dedicated to ROI optimization of FB ads. Over $800 million USD in advertising budgets are optimized through the Nanigans system annually.