🎙️ Tencent vs. NetEase: The Battle of Chinese Gaming Giants
🎙️ Tencent vs. NetEase: The Battle of Chinese Gaming Giants
Two of the biggest gaming companies in the world: business deconstruction and future outlook
Yo!
The Pixel brothers, Matthew Kanterman and Brian Peganoff, are back to discuss two of the world's biggest gaming giants: Tencent and Netease.
Understanding these two giants is essential to understanding the context of the global gaming market.
Learn more about their business success, financials, strategy, and future outlook. Further, we reveal the secrets, including anecdotes from our experiences.
Check it out below!
🎧 Listen on Spotify, Apple Podcasts, or Anchor
Speakers:
Joseph Kim. CEO at Lila Games.
Brian Peganoff. Founder at Timber Advisors.
Matthew Kanterman. Director of Research at Blue River Financial Group.
Tencent vs. NetEase: The Battle of Chinese Gaming Giants
The global gaming landscape is increasingly dominated by Chinese companies, with Tencent and NetEase leading the charge. Both are titans in the industry, but how do they stack against each other? Let’s dive into the key insights and takeaways from the discussion on these two powerhouses.
Tencent: The Global Juggernaut
Tencent isn’t just a gaming company; it’s a tech behemoth with fingers in almost every major gaming company globally.
Core Business: While Tencent has a vast portfolio, its gaming division is the crown jewel, contributing about 60-65% of its value-added services (VAS) revenue. This includes domestic and international games, with domestic games alone making up a significant portion of its consolidated revenue.
Studios and Titles: Tencent owns some of the most successful game studios globally, including TiMi Studios (known for Honor of Kings and Call of Duty Mobile), Lightspeed & Quantum Studios (PUBG Mobile), and Riot Games (League of Legends). These studios are not just successful; they’re at the forefront of technical innovation and game development.
Investment Strategy: Tencent’s approach has been to own or invest in top gaming companies globally across every major game genre and platform. This gives Tencent a unique information advantage, as they have access to vast amounts of data and insights from their investments in companies like Epic Games, Supercell, and Ubisoft.
User Acquisition Mastery: Tencent’s user acquisition (UA) expertise is unmatched. They understand the importance of a strong launch and have unique experience with launching games at massive scale.
NetEase: The Focused Contender
While Tencent is a diversified conglomerate, NetEase is more of a pure-play gaming company, and it shows in their focused strategy and deep understanding of the gaming market.
Gaming-First: Around 80% of NetEase’s revenue and almost 90% of its gross profit come from gaming. This includes both mobile and PC/console games, with a stronger emphasis on mobile gaming.
Franchise Success: NetEase has built some of the longest-lasting and most profitable game franchises in China, like the Fantasy Westward Journey series, which continues to perform well in the top-grossing charts years after its release.
International Expansion: NetEase has been expanding its global footprint, aiming to bring its successful games to international markets. It has also been making strategic investments and acquisitions to strengthen its global presence.
Challenges: Like Tencent, NetEase faces significant challenges, especially navigating the highly regulated Chinese market. Additionally, competition from emerging giants like MiHoYo and Lilith Games adds pressure.
Key Takeaways
Tencent’s Strengths:
Dominance in both domestic and international gaming markets.
Ownership of world-class studios and IPs.
Unparalleled expertise in user acquisition and data-driven decision-making.
NetEase’s Strengths:
Focused on gaming with a strong portfolio of long-lasting franchises.
Effective in monetizing mobile games and expanding internationally.
Challenges Ahead
Both companies face several challenges, including:
Regulation: The Chinese government’s restrictions on gaming, especially for minors, could impact growth.
Geopolitical Tensions: Ongoing tensions between China and Western countries could affect both companies' international strategies.
Market Saturation: The Chinese gaming market is highly saturated, and with new competitors emerging, maintaining dominance will be tough.
Conclusion: The Battle Continues
Tencent and NetEase are juggernauts, but their strategies and market positions differ. Tencent’s broad, diversified approach gives it a unique advantage in information and global reach, while NetEase’s focused gaming strategy makes it a formidable competitor in its own right. As the gaming industry continues to evolve, these two companies will likely remain at the forefront, pushing the other to new heights.